U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 40-F/A

(Amendment No. 2)

 

☒ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

 

or

 

☐ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

 

  For the fiscal year ended    
       
  Commission File Number    

 

DEFI TECHNOLOGIES INC.

 

(Exact name of Registrant as specified in its charter)

 

Canada   7379   N/A
(Province or other jurisdiction of incorporation or organization)   (Primary Standard Industrial Classification Code Number (if applicable))   (I.R.S. Employer
Identification Number)

 

Suite 2400, 333 Bay Street,

Toronto, ON M5H 2T6

(Address and telephone number of Registrant’s principal executive offices)

 

Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168

(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)

 

Copies to:

 

Kenny Choi   Ethan L. Silver

Defi Technologies Inc.

Suite 2400, 333 Bay Street,

Toronto, ON

M5H 2T6

 

Lowenstein Sandler LLP
1251 Avenue of the Americas

New York, New York 10020

Tel: (973) 597-2500

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Shares   DEFT   The Nasdaq Stock Market LLC

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

 

For annual reports, indicate by check mark the information filed with this Form:

☐ Annual information form                  ☐ Audited annual financial statements

 

 

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: N/A.

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☐     No ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☐     No ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

 

Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

 

Yes ☐     No ☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

 

 

 

 

 

SUMMARY

 

The following summary highlights, and should be read in conjunction with, the more detailed information contained elsewhere in this registration statement, and the documents filed as exhibits hereto. You should read carefully the entire document, including our financial statements and related notes and other exhibits, to understand our business, and the common shares which are being registered hereby. You should pay special attention to the “Risk Factors” sections below and in our Annual Information Form, filed as Exhibit 99.98 hereto. Unless the context otherwise requires, the terms “DeFi Technologies,” the “Company”, “we” or “our” and similar references in this prospectus refer to Defi Technologies Inc., including its wholly owned subsidiaries.

 

Our Company

 

We are a publicly listed technology company on the Cboe Canada Exchange in Canada that bridges the gap between traditional capital markets and decentralized finance through five business lines:

 

● Asset Management – Through our wholly-owned subsidiary, Valour Inc. (“Valour Cayman”), and Valour Digital Securities Limited (“VDSL”, and together with Valour Cayman, “Valour”), we develop and list Exchange Traded Products (“ETPs”) on traditional exchanges in Europe and the United Kingdom that provide indirect exposure to underlying digital assets, digital asset indexes, or other decentralized finance instruments;

 

●Ventures – We make early-stage investments in companies, banks and foundations in the digital asset space;

 

●DeFi Alpha – We operate a specialized arbitrage trading desk based in Switzerland that focuses on identifying and capitalizing on low-risk arbitrage opportunities within the digital asset market; and

 

● Reflexivity Research – We acquired Reflexivity Research LLC (“Reflexivity”) a digital asset research firm that specializes in producing research reports on digital assets.

 

●Stillman Digital – We acquired Stillman Digital Inc. and Stillman Digital Bermuda Ltd. (together “Stillman Digital”), an OTC desk and digital asset liquidity provider, in October 2024.

 

“Decentralized finance” or “DeFi” refers to a financial system that seeks to operate as an alternative to the traditional financial system. DeFi seeks to allow people and companies to effect transactions on a “peer to peer” basis, typically employing blockchain or other distributed ledger technology to allow participants to interact with one another directly between each other. Because transactions are effected peer to peer, DeFi does not rely on traditional intermediaries such as banks, brokerages, and stock exchange, so transactions can be completed on a more timely basis and without the fees typically charged by intermediaries.

 

Asset Management

 

Valour ETPs

 

The Company’s wholly owned subsidiary Valour Cayman develops and lists ETPs on regulated stock exchanges and multilateral trading facilities in Europe. These ETPs synthetically track the value of digital assets, or an index or basket thereof. ETPs simplify the ability for retail and institutional investors to gain exposure to digital assets and decentralized finance as they remove the need to manage wallets, various logins, custody and other intricacies that are linked to managing a digital asset portfolio. Rather, retail and institutional investors can simply purchase the ETP associated with the digital asset they wish to gain exposure to through a bank or brokerage account with access to the relevant stock exchanges and multilateral trading facilities.

 

1

 

 

As of the date hereof, Valour Cayman has the following ETPs listed on the exchanges indicated:

 

Name of ETP (Currency)   Listing Exchange(s)   ISIN No.
Valour ASI SEK   Spotlight Stock Market (“Spotlight Exchange”)   CH1108679270
Valour Aave SEK   Spotlight Exchange   CH1108679338
Valour Aerodrome SEK   Spotlight Exchange   CH1108679296
Valour Akash SEK   Spotlight Exchange   CH1108679437
Valour Aptos   Borse Frankfurt Zertifikate AG (the “Frankfurt Exchange”); Lang & Schwarz Exchange (“LSX”)   CH1108679775
Valour Aptos SEK   Spotlight Exchange   CH1108679262
Valour Arweave SEK   Spotlight Exchange   CH1108679304
Valour Avalanche (AVAX) ETP (EUR)   Frankfurt Exchange   CH1149139615
Valour Avalanche (AVAX) ETP (SEK)   Spotlight Exchange   CH1114178788
Valour Binance (BNB) (EUR)   Frankfurt Exchange   CH1149139672
Valour Binance (BNB) (SEK)   Spotlight Exchange   CH1149139698
Valour Bitcoin Carbon Neutral (EUR)   Frankfurt Exchange   CH1149139706
Valour Bitcoin Staking   Frankfurt Exchange   CH1213604544
Valour Bitcoin Staking (SEK)   Spotlight Exchange   CH1213604536
Valour Bitcoin Zero (EUR)   Spotlight Exchange, Frankfurt Exchange, Euronext Amsterdam and Euronext Paris   CH0573883474
Valour Bitcoin Zero (SEK)   Spotlight Exchange   CH0585378661
Valour Bittensor SEK   Spotlight Exchange   CH1213604619
Valour Cardano (EUR)   Frankfurt Exchange, Euronext Amsterdam and Euronext Paris   CH1114178820
Valour Cardano (SEK)   Spotlight Exchange   CH1114178796
Valour Chainlink (SEK)   Spotlight Exchange   CH1161139592
Valour Core SEK   Spotlight Exchange   CH1213604593
Valour Cosmos (ATOM) (EUR)   Frankfurt Exchange   CH1149139664
Valour Digital Asset Basket 10 (VDAB10) (EUR)   Spotlight Exchange and Frankfurt Exchange   CH1149139623
Valour Digital Asset Basket 10 (VDAB10) (SEK)   Spotlight Exchange   CH1161139568
Valour Dogecoin SEK   Spotlight Exchange   CH1108679320
Valour Enjin (ENJ) ETP (EUR)   Frankfurt Exchange   CH1149139656
Valour Ethereum Zero (EUR)    Frankfurt Exchange, Euronext Amsterdam and Euronext Paris   CH0585378752
Valour Ethereum Zero (SEK)   Spotlight Exchange   CH1104954362
Valour Hedera   Frankfurt Exchange   CH1213604528
Valour Hedera (SEK)   Spotlight Exchange   CH1213604585
Valour Injective SEK   Spotlight Exchange   CH1108679312
Valour Internet Computer (SEK)   Spotlight Exchange   CH1213604510
Valour Jupiter SEK   Spotlight Exchange   CH1108679395
Valour Kaspa SEK   Spotlight Exchange   CH1108679379
Valour Lido DAO SEK   Spotlight Exchange   CH1108679403
Valour Near (SEK)   Spotlight Exchange   CH1213604577
Valour Pendle SEK   Spotlight Exchange   CH1108679346
Valour Polkadot ETP (EUR)   Frankfurt Exchange, Euronext Amsterdam and Euronext Paris   CH1114178812
Valour Polkadot ETP (SEK)   Spotlight Exchange   CH1114178770
Valour Pyth Network SEK   Spotlight Exchange   CH1108679387
Valour Render SEK   Spotlight Exchange   CH1108679288
Valour Ripple (XRP) (SEK)   Spotlight Exchange   CH1161139584
Valour Sei SEK   Spotlight Exchange   CH1108679247
Valour Short Bitcoin (SBTC) SEK   Spotlight Exchange   CH1149139649
Valour Solana ETP (EUR)   Frankfurt Exchange, Euronext Amsterdam and Euronext Paris   CH1114178838
Valour Solana ETP (SEK)   Spotlight Exchange   CH1114178762
Valour Sonic SEK   Spotlight Exchange   CH1108679353
Valour Starknet SEK   Spotlight Exchange   CH1108679049
Valour Sui   Frankfurt Exchange; LSX   CH1108679080
Valour Sui SEK   Spotlight Exchange   CH1213604601
Valour THORChain SEK   Spotlight Exchange   CH1108679429
Valour Toncoin (SEK)   Spotlight Exchange   CH1161139600
Valour Uniswap ETP (EUR)   Frankfurt Exchange, Euronext Amsterdam and Euronext Paris   CH1114178846
Valour Uniswap ETP (SEK)   Spotlight Exchange   CH1114178754
Valour Worldcoin SEK   Spotlight Exchange   CH1108679254
Valour Wormhole SEK   Spotlight Exchange   CH1108679411

2

 

 

Products and Services

 

Valour Cayman’s ETPs are issued under a base prospectus dated March 16, 2021 (as amended and updated to the date hereof, the “Base Prospectus”), as supplemented by supplements or final terms from time to time (“Final Terms”), which together govern the ETP program (the “Program”). The Base Prospectus has been approved by the SFSA, the Swedish financial authority, and is passport eligible in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway and Spain and/or, subject to completion of relevant notification measures, any other member state within the European Economic Area (“EEA”).

 

Valour Cayman’s current ETPs are all open-ended certificates that provide exposure to either a single digital asset, or an index or a basket thereof, as specified in the relevant Final Terms. Valour Cayman is the issuer of the ETPs offered under the Program and also acts as calculation agent.

 

Valour Cayman’s policy is always to hedge substantially 100% of the market risk in the underlying asset. Hedging is primarily done continuously through an in-housed developed auto-hedger and in direct correspondence to the issuance of ETPs to investors, although Valour Cayman may elect to utilize other hedging methods it deems appropriate. In order to hedge its exposure to each digital asset, Valour Cayman relies on digital asset exchanges and counterparties to be able to buy and sell the digital assets, or interests in funds that hold digital assets, which the ETPs track.

 

For its Bitcoin Zero and Ethereum Zero products, Valour Cayman charges zero management fees. For all other products, a management fee of 1.9% to 2.5% applies.

 

Valour Digital Securities Limited (“VDSL”) ETPs

 

VDSL is a special purpose vehicle incorporated as a public limited liability company under the laws of Jersey. VDSL is owned by the charitable trust VLR Charitable Trust in Jersey. In April 2023, VDSL obtained all regulatory approvals by the Swedish and Jersey regulators for an EU-wide offering of physically backed ETPs to investors domiciled in Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Malta, Poland, Portugal, Romania, Slovakia and Spain. Valour Cayman acts as arranger for all ETPs issued by VDSL.

 

As of the date hereof, VDSL has listed the following ETPs:

 

Name of ETP (Currency)   Exchange Listings   ISIN No.
1Valour Physical Bitcoin Carbon Neutral (SEK)   Deutsche Börse Xetra, Gettex Exchange, and Frankfurt Exchange   GB00BQ991Q22
1Valour Bitcoin Physical Staking   Deutsche Börse Xetra   GB00BRBV3124
1Valour Ethereum Physical Staking   Deutsche Börse Xetra, Gettex Exchange, Frankfurt Exchange and London Stock Exchange   GB00BRBMZ190
1Valour Hedera Physical Staking   Euronext Amsterdam and Euronext Paris   GB00BRC6JM9
1Valour Internet Computer Physical Staking (EUR)   Deutsche Börse Xetra and Gettex Exchange   GB00BS2BDN04
1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip   Deutsche Börse Xetra, Gettex Exchange and Frankfurt Exchange   GB00BPDX1969

 

3

 

 

Products and Services

 

VDSL ETPs are issued under a base prospectus dated April 24, 2024 ( the “VDSL Base Prospectus”), as supplemented by supplements or final terms from time to time (“VDSL Final Terms”), which together govern the VDSL ETP program (the “VDSL Program”). The VDSL Base Prospectus has been approved by the SFSA, the Swedish financial authority, and is passport eligible in Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Malta, Poland, Portugal, Romania, Slovakia and Spain. VDSL may also request the SFSA to publicize the approval of the VDSL Base Prospectus to other EEA states in accordance with Regulation (EU) 2017/1129. In addition, VDSL may decide to register this VDSL Base Prospectus in Switzerland with the reviewing body SIX Exchange Regulation AG or another FINMA approved reviewing body, as a foreign prospectus that is also deemed to be approved in Switzerland pursuant to Article 54 paragraph 2 FinSA, for the purposes of making a public offer of VDSL ETPs in Switzerland or admission to trading of all or a series of VDSL ETPs on a regulated stock exchange in Switzerland.

 

The VDSL Program permits VDSL to issue VDSL ETPs related to any one of 124 underlying digital currencies (“Digital Currencies”) (or more subject to supplements to the VDSL Base Prospectus), to a “basket” comprising two or more of such Digital Currencies or to an index linked to Digital Currencies, as specified in the relevant VDSL Final Terms. The VDSL ETPs are designed to offer investors a means of investing in Digital Currencies without having to acquire digital assets themselves and to enable investors to buy and sell that interest through the trading of a security on a stock exchange.

 

Each VDSL ETP is an undated secured limited recourse debt obligation of VDSL, which ranks equally with all other VDSL ETPs of the same class. VDSL ETP holders only have recourse to the assets of the class of VDSL ETP of which they are a holder. If the net proceeds are insufficient for VDSL to make all payments due, neither the trustee nor any person acting on behalf of the trustee will be entitled to take any further steps against the VDSL, and no debt shall be owed by the VDSL in respect of such further sum.

 

The underlying assets for the VDSL ETP of each class, by which they are backed and on which they are secured, comprise private keys evidencing ownership of Digital Currencies. These private keys are held in the name of VDSL in secure vaults at the premises of the relevant custodian of VDSL (“VDSL Custodian”) and are not fungible with other digital assets held by the relevant VDSL Custodian.

 

The VDSL ETPs are constituted under the trust instrument dated April 5, 2023 between VDSL and The Law Debenture Trust Corporation p.l.c. as trustee (the “Trustee”) for the holders of VDSL ETPs (“VDSL ETP Holders”) (the “Trust Instrument”). The Trustee holds all rights and entitlements under the Trust Instrument on trust for VDSL ETP Holders. In addition, VDSL and the Trustee have entered into a single security deed (the “Security Deed”) in respect of all pools of VDSP ETPs (“Pools”). The rights and entitlements held by the Trustee under the Security Deed, to the extent attributable to a Pool, are held by the Trustee on trust for the VDSL ETP Holders of that particular class of VDSL ETP. Under the terms of the Security Deed, VDSL has charged to the Trustee for the benefit of the Trustee and the relevant VDSL ETP Holders by way of first fixed charge the Digital Currencies held in custody attributable to the relevant class of VDSL ETP and all rights of VDSP in respect of the respective custody accounts to the extent attributable to the relevant Pool. VDSL has also, under the terms of the Security Deed, assigned to the Trustee by way of security the contractual rights of the issuer relating to such class under the custody agreements entered into by VDSL and has granted a first-ranking floating charge in favour of the Trustee over all of VDSL’s rights in relation to the secured property attributable to the applicable Pool, including but not limited to its rights under the custody agreements and the custody accounts attributable to that Pool.

 

VDSL charges management fees ranging from 1.9% to 2.5% on the VDSL ETPs.

  

4

 

 

Venture

 

The Company, whether by itself or through its subsidiaries, invests in various companies and leading protocols across the DeFi ecosystem to build a diversified portfolio of digital assets and venture investments, predominantly at Seed or Series A stage. As of December 31, 2024, the Company has participated in equity or token raises from the following ventures:

 

  ● 3iQ Corp., a Bitcoin and digital asset fund manager that offers digital asset investment products;
     
  ● AMINA Bank, one of the first FINMA-regulated institutions to provide crypto banking services, operating globally from its regulated hubs of Switzerland, Abu Dhabi and Hong Kong to offer fiat and crypto services to progressive investors, traditional and crypto-native alike, whether individuals, corporates or institutions;
     
  ● Luxor Technologies, which provides a range of solutions for scaling blockchain infrastructure including a globally distributed mining pool, a hashrate network-switching engine, and a wide variety of blockchain related software;
     
  ● Neuronomics AG, a Swiss asset management firm specializing in quantitative trading strategies powered by artificial intelligence, computational neuroscience, and quantitative finance;
     
  ● ZKP Corporation, a cloud platform dedicated to efficient zero-knowledge proof generation;
     
  ● Blocto, a UX-focused interoperable ecosystem that enables users to easily access dApps, crypto and NFTs cross-chain;
     
  ● Clover. a substrate-based smart contracts platform with Ethereum Virtual Machine (EVM) compatibility, providing cross-chain infrastructure for scaling decentralised applications (dApps);
     
  ● Sovyrn, which provides DeFi infrastructure for Bitcoin via a non-custodial and permissionless smart contract based system that enables lending, borrowing and margin trading;
     
  ● Saffron Finance, a peer-to-peer (P2P) risk exchange and decentralised marketplace for risk arbitrage, built on Ethereum;
     
  ● Oxygen Protocol, a Solana based DeFi prime brokerage service that democratises borrowing, lending, and leverage trading; and

 

  ● Wilder World, the first full-scale, immersive 5D Metaverse being built on Ethereum with full augmented reality (AR) and virtual reality (VR) integration.

 

5

 

 

Each of these ventures were selected for their innovative potential, high quality teams, growing and / or potential user bases and unique position in the market or market share, cutting edge technology, and/or leading investors. The ventures respective use cases include borrowing and lending, decentralized exchanges, derivatives and asset management, amongst others.

 

Reflexivity Research

 

Reflexivity Research is a digital asset research firm seeking to bridge traditional finance into the ever-evolving world of digital assets. Reflexivity Research distributes newsletters for free to the general public, with portions of the content sponsored by corporate clients. Furthermore, Reflexivity Research produces commissioned reports and organizes thematic conferences. Furthermore, Reflexivity Research produces commissioned reports. Furthermore, Reflexivity Research does not produce research reports on any equity securities. Additionally, Reflexivity Research holds conferences in the digital asset sector, such as Bitcoin Investor Day held in New York on March 22, 2024 and Crypto Investor Day held on October 25, 2024, bringing together institutional investors, capital allocators, and entrepreneurs.

 

DeFi Alpha

 

In Q2 2024, the Company formed DeFi Alpha, a specialized arbitrage trading desk [based in Switzerland] designed to identify and capitalize on low-risk arbitrage opportunities within the digital asset market. Utilizing sophisticated algorithmic strategies and comprehensive market analysis, DeFi Alpha targets inefficiencies and discrepancies in digital asset pricing. Since its inception in 2024, DeFi Alpha has generated over C$133.1 million (US$97.5 million) in cash and digital asset equivalents.

 

Stillman Digital

 

Stillman Digital is a non-custodial, spot digital asset OTC desk and digital asset liquidity provider. With over US$15 billion in trade volume since 2021, Stillman Digital has built a strong reputation for OTC on/off ramp tradeflow, block trading, and market-making services.

 

Stillman Digital’s core products and services are:

 

● Electronic Trade Execution: Stillman Digital generates over US$500 million in monthly volume with 24/7 streaming prices, providing deep liquidity across available assets. Clients can execute trades via the Web Portal or API, with price feeds aggregated from over 30 global exchanges and trading firms.

 

● OTC Block Trading: Stillman Digital processes an average trade size of $2 million+, offering a high-touch concierge service for large block trades. Trades are conducted via voice or chat, with manual trade confirmations handled by the back office. Acting as a global on/off ramp into the crypto markets, Stillman on-ramps US$40-80 million daily and processes over US$1 billion+ in monthly trade volumes.

 

● Market-Making: Stillman Digital provides liquidity to central limit order book products through strategic partnerships and exchanges, currently handling US$400 million in monthly volume and experiencing rapid growth.

 

6

 

 

Summary of Risk Factors

 

Our business is subject to numerous risks, as more fully described in the section titled “Risk Factors.” You should read these risks before you invest in our common stock. In particular, risks associated with our business include, but are not limited to, the following:

 

●There are regulatory risks related to the digital assets industry, and ongoing and future regulatory actions may materially alter our ability to operate;

 

● Digital asset and DeFi Protocol exchanges and other trading venues are relatively new;

 

●We face risks from our staking and lending of digital assets;

 

●There are material risks and uncertainties associated with custodians of digital assets;

 

●

We face risks related to the potential designation of particular digital assets status as “securities” by the United States Securities and Exchange Commission (the “SEC”) ;

 

● If we are deemed by the SEC to be an “investment company” subject to regulation under the Investment Company Act of 1940, the law’s restrictions could make it impractical for us to continue our business as contemplated, which would have a material adverse effect on our business;

 

●Banks may cut off banking services to businesses that provide digital asset-related services;

 

●Digital assets are especially susceptible to the impacts of geopolitical events;

 

● Our digital assets are subject to price volatility and inflation;

 

●We may be adversely affected by fluctuations in the market price of digital assets;

 

●Further development and acceptance of digital assets is uncertain;

 

●Digital asset networks might not continue to be maintained;

 

●There is the possibility that blockchain could be manipulated;

 

●Our line of business makes us susceptible to security breaches; and

 

●We lack meaningful historical financial data due to our limited operating history.

 

7

 

 

EXPLANATORY NOTE - INTRODUCTORY INFORMATION

 

We are a Canadian issuer eligible to prepare and file this registration statement pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the U.S.-Canadian multi-jurisdictional disclosure system. We are a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. Our equity securities are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3. We are filing this Form 40-F registration statement with the SEC to register its class of common shares under Section 12(b) of the Exchange Act.

 

Previous Form 40-F

 

On November 10, 2021, we filed a Form 40-F to register our common shares under Section 12(b) of the Exchange Act, which was subsequently amended on February 25, 2022, April 11, 2022 and June 07, 2022 after receiving, and subsequently responding to, comments from the staff of the SEC. On September 11, 2024 we voluntarily withdrew that Form 40-F filed with the SEC.

 

On September 16, 2024, we filed a new Registration Statement on Form 40-F (the “September 16 Form 40-F”). On January 17, 2024, we filed an amendment to the September 16 Form 40-F (“Amendment No. 1”) to provide further updates to our disclosure and to file additional exhibits. We are filing this Amendment No.2 to the September 16 Form 40-F to provide further updates to our disclosure and to file additional exhibits.

 

FORWARD-LOOKING STATEMENTS

 

This registration statement and the Exhibits incorporated by reference into this registration statement contain forward-looking statements within the meaning of applicable securities laws that reflect management’s expectations with respect to future events, our financial performance and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated or implied in such forward-looking statements, including, without limitation, those described in the Company’s Annual Information Form for the financial year ended December 31, 2024 filed as Exhibit 99.126 to this registration statement. No assurance can be given that these expectations will prove to be correct and such forward-looking statements in the Exhibits incorporated by reference into this registration statement should not be unduly relied upon. Our forward-looking statements contained in the Exhibits incorporated by reference into this registration statement are made as of the respective dates set forth in such Exhibits. Such forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made. In preparing this registration statement, we have not updated such forward-looking statements to reflect any change in circumstances or in management’s beliefs, expectations or opinions that may have occurred prior to the date hereof. Nor do we assume any obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

 

8

 

 

RISK FACTORS

 

Our business, operations, financial results and prospects are subject to the normal risks of our industry and are subject to various factors which are beyond our control. Certain of these risk factors are described below. The risks described below are not the only ones we are facing. Additional risks not currently known to us, or that we currently consider immaterial, may also adversely impact our business, operations, financial results or prospects, should any such other events occur.

 

Risks Relating to Our Business and Industry

 

There are regulatory risks related to the digital asset industry, and ongoing and future regulatory actions may materially alter our ability to operate.

 

As digital assets have grown in both popularity and market size, governments around the world have reacted differently to digital assets with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, our ability to continue to operate. The effect of any future regulatory change on us or on any digital asset that we may invest in is difficult to predict, but such change could be materially adverse to both us and the digital asset industry as a whole.

 

Governments may, in the future, restrict or prohibit the acquisition, use or redemption of digital assets. Ownership of, holding or trading in digital assets may then be considered illegal and subject to sanctions. Governments may also take regulatory actions that may increase the cost and/or subject companies in the digital asset industry to additional regulations.

 

Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade digital assets or to exchange digital assets for fiat currency. By extension, similar actions by other governments may result in the restriction of the acquisition, ownership, holding, selling, use or trading of our common shares. Such a restriction could result in us liquidating our digital asset investments at unfavorable prices and may adversely affect our shareholders.

 

There are regulatory risks associated with the Valour products.

 

The Company has not received any exemptive relief from regulators in Canada. The Company discusses regulatory compliance with its external legal counsel on a regular basis. With respect to Valour, investments in the ETPs in the light of their exposure to digital assets must always be assessed by every investor based on the circumstances and legal and regulatory conditions applicable to that investor. An investor governed by such conditions may be subject to limited possibilities to invest in the ETPs and/or experience unforeseeable consequences of a holding in the ETPs. The combination of the nature of Valour’s activities, the markets to which it is exposed, the institutions with which it does business and the securities which it issues makes it particularly exposed to national, international and supranational regulatory action and taxation changes. The scope and requirements of regulation and taxation applicable to the Company continues to change and evolve and there is a risk that as a result it may prove more difficult or impossible, or more expensive, for Valour to continue to carry on their functions in the manner currently contemplated. This may require that changes are made in the future to the agreements applicable to Valour and may result in changes to the commercial terms of the ETPs and/or the inability to apply for and redeem ETPs and/or compulsory redemption of some or all of the ETPs and/or disruption to the pricing thereof.

 

Valour’ Cayman and VDSL are companies which are regulated by various laws and regulations of the Cayman Islands and Jersey, respectively. Furthermore, the ETPs issued by Valour are subject to the rules and regulations of the exchanges such ETPs are listed on and of the countries under which the relevant prospectuses are qualified in. Valour Cayman and VDSL cannot fully anticipate all changes that in the future may be made to laws and regulations to which Valour Cayman, VDSL and their ETPs are subject to in the future, nor the possible impact of all such changes. Valour Cayman and VDSL’s ability to conduct its business is dependent on the ability to comply with rules and regulations.

 

9

 

 

If the Company was found to be in breach of regulations applicable to Valour Cayman or VDSL, it could result in fines or adverse publicity which could have a material adverse effect on the business which in turn may lead to decreased results of operations and the company’s financial condition.

 

Valour Cayman or VDSL’s involvement in such proceedings or settlements as well as potential new legislation or regulations, decisions by public authorities or changes regarding the application of or interpretation of existing legislation, regulations or decisions by public authorities applicable to Valour Cayman or VDSL’s operations, the ETPs and/or the underlying assets, may adversely affect Valour Cayman or VDSL’s business or an investment in the ETPs.

 

The impact of any detrimental developments in the underlying digital asset’s regulation on Valour Cayman and VDSL’s ETPs becomes evident by considering an ETP’s product nature: An Exchange Traded Product is a financial instrument traded – like a share - on a stock exchange whereby typically the aim is to provide the same return as a specified benchmark or asset (before fees). Although ETPs can take a number of forms (ETFs/ETCs/ETNs), they share some common characteristics. ETPs are designed to replicate the return of an underlying benchmark or asset, with the easy access and tradability of a share or digital asset (that otherwise may only be bought via a decentralized exchange wallet-setup). Investors can benefit from the broad diversification of a benchmark, gaining exposure to hundreds or thousands of individual underlying securities – or digital assets - in a single transaction. Additionally, the wide range of asset classes covered by ETPs opens up more exotic investment areas which historically could only be accessed by institutional investors (such as individual commodities, emerging markets or digital assets). ETPs generally do all this with a lower fee than actively managed funds and therefore compete with traditional index funds on cost.

 

Valour Cayman’s ETPs are non-interest-bearing debt securities that are designed to track the return of an underlying digital/digital asset. While VDSL’s ETPs are collateralized, the current Valour Cayman ETP program in place does not provide that those securities are collateralised. Although their yield references an underlying benchmark or asset, the Valour Cayman ETPs are similar to unsecured, listed bonds. As such, Valour Cayman’s ETPs are entirely reliant on the creditworthiness of Valour as issuing entity. Hence, generally a change in that creditworthiness might negatively impact the value of the ETP, irrespective of the performance of the underlying benchmark or digital/digital asset.

 

However, the primary appeal of these types of ETPs is that they guarantee exposure to a benchmark or an asset’s return (minus fees) even when the underlying markets or sectors suffer from liquidity shortages. The return is guaranteed by the issuing entity and not reliant on the access (direct or via a directive) to the underlying assets. Unlike physical replication, a synthetic ETP does not hold the underlying assets the product is designed to track. Instead, an ETP issuer like Valour enters into hedging transactions thereby directly or indirectly trading in the underlying assets, entering swap agreements, making investment in funds dedicated to holding the underlying digital assets etc. with a range of counterparties to provide the return of the underlying assets. Consequently, a negative change of regulation (tightening/restriction/prohibition) can have a direct impact on Valour’s issuer activity or – indirectly – by affecting its contractual counterparties. Restrictive and prohibitive regulation may lead to counterparty default, known as counterparty risk. If a counterparty defaults on its obligations under the hedging transactions described above, the ETP would not provide the return of the asset it is designed to track which could also expose investors to losses.

 

Our DeFi Alpha business line is nascent, unproven and subject to material legal, regulatory, operational, reputational, tax and other risks in every jurisdiction and are not assured to be profitable.

 

Our Switzerland-based DeFi Alpha trading business (our “trading business”) began operations in 2024. The focus is on arbitrage trading opportunities in the digital asset space with low risk in both centralized and decentralized markets (with minimal market or protocol exposure), thereby minimizing downside revenue volatility. Our trading business is nascent, unproven and subject to material legal, regulatory, operational, reputational, tax and other risks in every jurisdiction and is not assured to be profitable. Our trading business is therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues, any of which could have a material adverse effect on us and may force us to reduce or curtail operations.

 

Our DeFi Alpha trading business model has not been fully proven, and we have limited financial data that can be used to evaluate our current trading business and future prospects, which subjects us to a number of uncertainties, including our ability to plan for, model and manage future growth and risks. Our historical revenue growth should not be considered indicative of our future performance. There is no assurance that we will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of the early stage of operations. Even if we accomplish these objectives, we may not generate the anticipated positive cash flows or profits. No assurance can be given that we will ever be successful in our operations and operate profitably. We may fail to be able to implement our investment or trading strategies, achieve our investment objectives or produce a return for our investors.

 

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We may fail to develop and execute successful investment or trading strategies.

 

The success of our investment and trading activities will depend on the ability of the investment team to identify overvalued and undervalued investment opportunities and to exploit price discrepancies. This process involves a high degree of uncertainty. No assurance can be given that we will be able to identify suitable or profitable investment opportunities in which to deploy our capital. The success of the trading activities also depends on our ability to remain competitive with other over-the-counter traders and liquidity providers. Competition in trading is based on price, offerings, level of service, technology, relationships and market intelligence. The success of investment activities depends on our ability to source deals and obtain favorable terms. Competition in investment activities is based on relationships, the ability to offer strategic advice to portfolio companies and reputation. The barrier to entry in each of these businesses is very low and competitors can easily and will likely provide similar services in the near future. The success of our venture investments and trading business could suffer if we are not able to remain competitive.

 

We may make, or otherwise be subject to, trade errors.

 

Errors may occur with respect to trades executed on our behalf. Trade errors can result from a variety of situations, including, for example, when the wrong investment is purchased or sold or when the wrong quantity is purchased or sold. Trade errors frequently result in losses, which could be material. To the extent that an error is caused by a third party, we may seek to recover any losses associated with the error, although there may be contractual limitations on any third party’s liability with respect to such error.

 

Our trading orders may not be timely executed.

 

Our investment and trading strategies depend on the ability to establish and maintain an overall market position in a combination of financial instruments. Our trading orders may not be executed in a timely and efficient manner because of various circumstances, including, for example, trading volume surges or systems failures attributable to us or our counterparties, brokers, dealers, agents or other service providers. In such an event, we might only be able to acquire or dispose of some, but not all, of the components of our positions, or if the overall positions were to need adjustments, we might not be able to make such adjustments. As a result, we would not be able to achieve our desired market position, which may result in a loss. In addition, we can be expected to rely heavily on electronic execution systems (and may rely on new systems and technology in the future), which may be subject to certain systemic limitations or mistakes, causing the interruption of trading orders made by us.

 

Our trading business and the various activities we undertake expose us to counterparty credit risk.

 

Credit risk is the risk that an issuer of a security or a counterparty will be unable or unwilling to satisfy payment or delivery obligations when due. In addition to the risk of an issuer of a security in which we invest failing or declining to perform on an obligation under the security, we are exposed to the risk that third parties, including trading counterparties, clearing agents, trading platforms, decentralized finance protocols, clearinghouses, custodians, administrators and other financial intermediaries that may owe us money, securities or other assets will not perform their obligations. Any of these parties might default on their obligations to us because of bankruptcy, lack of liquidity, operational failure or other reasons, in which event we may lose all or substantially all of the value of any such investment or trading transaction. When we trade on digital asset trading platforms that specialize in digital asset futures and derivatives, we are exposed to the credit risk of that digital asset trading platform.

 

In the case of loans that are secured by collateral, while we generally expect the value of the collateral to be greater than the value of such loans, the value of the collateral could actually be equal to or less than the value of such loans or could decline below the outstanding amount of such loans. This risk is heightened given that some portion of the collateral for these loans is expected to be digital assets, and thus subject to the volatility, liquidity and other risks detailed herein. Our ability to have access to the collateral could be limited by bankruptcy and other insolvency laws. Under certain circumstances, the collateral could be released with the consent of the lenders or pursuant to the terms of the underlying loan agreement with the borrower. There is no assurance that the liquidation of the collateral securing a loan would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal, or that the collateral could be readily liquidated. As a result, we might not receive full payment on a secured loan investment to which we are entitled and thereby could experience a decline in the value of, or a loss on, the investment.

 

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We may co-invest with third parties through joint ventures or other entities. Such investments may include risks in connection with such third-party involvement, including the possibility that a third-party co-venturer may have financial difficulties, may have interests or goals that are inconsistent with ours or may be in a position to take action in a manner contrary to our investment objectives. We and our subsidiaries have loaned money to other companies as part of the balance sheet venture investment business and lending business. The return of principal of such loans will depend in large part on the creditworthiness and financial strength of the issuers of such loans. While we perform extensive due diligence on our investments and loans, nonetheless defaults are possible. In the event of a default by a borrower underlying an investment or loan, we might not receive payments to which we are entitled and thereby could experience a decline in the value of our investments in or loans to the borrower. In the case of loans that are secured by collateral, while we generally expect the value of the collateral to be greater than the value of such loans, the value of the collateral could actually be equal to or less than the value of such loans or could decline below the outstanding amount of such loans subsequent to the investment. This risk is heightened given that some portion of the collateral for these loans is often comprised of digital assets, and thus subject to the volatility, liquidity and other risks detailed herein. Our ability to have access to the collateral could be limited by bankruptcy and other insolvency laws. Under certain circumstances, the collateral could be released with the consent of the lenders or pursuant to the terms of the underlying loan agreement with the borrower. There is no assurance that the liquidation of the collateral securing a loan would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal, or that the collateral could be readily liquidated at prices that would generate sufficient proceeds to repay the loans or at all. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. As a result, we might not receive full payment on a secured loan investment to which we are entitled and thereby could experience a decline in the value of, or a loss on, the investment.

 

In derivatives, we may invest in options on digital or non-digital assets. Purchasing and writing put and call options are highly specialized activities that entail greater-than-ordinary investment risks. An uncovered call writer’s loss is theoretically unlimited. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of over-the- counter options (options not traded on exchanges) are generally established through negotiation with the other party to the option contract. While this type of arrangement allows greater flexibility to tailor an option, over-the-counter options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded. As of the date of this registration statement, the availability of exchange-traded and over-the-counter options on digital assets is extremely limited, so terms may be unfavorable in comparison to those available for more firmly established types of options.

 

The failure or bankruptcy of any of our clearing brokers (or futures commission merchants) could result in a substantial loss of our assets. Under the current regulations of the CFTC, a clearing broker maintains customers’ assets in a bulk segregated account. If a clearing broker fails to do so or is unable to satisfy a substantial deficit in a customer account, its other customers may be subject to risk of loss of their funds in the event of that clearing broker’s bankruptcy. In such an event, the clearing broker’s customers, such as us, are entitled to recover, even in respect of property specifically traceable to them, only a proportional share of all property available for distribution to all of that clearing broker’s customers.

 

Digital asset exchanges and other trading venues are relatively new.

 

We and our affiliates manage our holdings of digital asset, DeFi Protocol tokens and other digital assets primarily through non-U.S. digital asset exchanges. In particular, Valour transacts primarily through non-U.S. digital asset exchanges to buy and sell the digital assets which its ETPs track. To the extent that digital asset exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, this could result in a reduction in digital asset prices. Digital asset market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, derivatives and other currencies. For example, in the past, a number of digital asset exchanges have been closed due to fraud, business failure or security breaches. In many of these instances, the customers of these exchanges were not compensated or made whole for the partial or complete losses of their account balances in such exchanges. While smaller exchanges are less likely to have the infrastructure and capitalization that provide larger exchanges with additional stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information or gain access to private computer systems) and may be more likely to be targets of regulatory enforcement action.

 

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We face risks related to our staking and lending of digital assets, DeFi Protocol tokens and other digital assets.

 

We may stake or lend digital asset assets to third parties, including our affiliates. In the event of a termination of the staking arrangement or loan, the counterparty is required to return the digital assets to us; any gains or loss in the market price during the period would inure to us. In the event of the bankruptcy of the counterparty, we could experience delays in recovering our digital assets. In addition, to the extent that the value of the digital assets increases during the term of the loan, the value of the digital assets may exceed the value of collateral provided to us, exposing us to credit risks with respect to the counterparty and potentially exposing us to a loss of the difference between the value of the digital assets and the value of the collateral. If a counterparty defaults under its obligations with respect to a loan of digital assets, including by failing to deliver additional collateral when required or by failing to return the digital assets upon the termination of the loan, we may expend significant resources and incur significant expenses in connection with efforts to enforce the staking or loan agreement, which may ultimately be unsuccessful.

 

Furthermore, the Company and its affiliates may also pledge and grant security over its digital assets to secure loans. In the event that the Company or its affiliates defaults under its obligations with respect to the loan, including failure to repay the principal amount of the loan or accrued interest, lenders may realize upon its security and take possession to such pledged digital assets.

 

The digital assets that we stake, loan or pledge to third parties include digital assets held by Valour for the purposes of hedging its ETPs. We are exposed to a potentially significant liquidity risk if, for example, the aggregate sale of ETPs exceed the quantum of uncommitted digital asset available to us to satisfy such sale requests. A similar risk applies with respect to individual reserves of each type of digital asset should the sale of ETPs, and correspondingly, the underlying digital asset, exceed our available reserves.

 

The determination as to whether a particular digital asset constitutes a “security” in the United States is uncertain and the regulation of digital assets is uncertain in the light of differences between the SEC’s and CFTC’s approaches to digital asset classification as well as potential legislation.

 

Historically the CFTC and the SEC have not taken consistent positions with respect to the appropriate classification of various digital assets which presents regulatory uncertainty. The classification of a digital asset as a security or a commodity under applicable U.S. federal law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, holding, and clearing of such assets and could materially and adversely affect our business. As detailed below, if certain digital assets in our portfolio were conclusively deemed to be securities by the SEC or a U.S. court, either through a rulemaking or final court order, we could be forced to materially alter our business which could adversely affect our financial condition, business and results of operations, among other things.

 

The legal test for determining whether any given digital asset is a security is a highly complex, fact-driven analysis that has evolved over time, and the outcome of which is difficult to predict. The SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. To date, the SEC has not determined through official rulemaking or regulatory guidance that any particular digital asset that we hold or transact in is a security, and only a relatively small number of specific digital assets have been subjected to review by federal courts (none of which are material holdings of our Company). The views and positions of the SEC and its staff with respect to digital assets are subject to continued evolution, detail, and development in the future for a variety of reasons, including as a result of changes to governing administrations, SEC Chair or commissioner appointments, or otherwise. Though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given digital asset is a security in April 2019, this framework does not constitute an SEC rule or regulation, is not binding on the SEC, and has been updated to account for subsequent judicial or enforcement precedent. Furthermore, while the SEC Division of Enforcement to date has filed complaints and initiated investigations against digital asset exchanges, projects and intermediaries, alleging, among other things, that certain digital assets are securities or have been offered as securities, many of these enforcement actions are ongoing, or have been withdrawn, do not provide conclusive direction for digital asset market participants to follow.

 

Of note, public statements by senior officials at the SEC, some of whom no longer hold a role at the agency, indicate that the SEC does not intend to take the position that Bitcoin or Ether are securities (in their current form). Specifically, Chairman Gensler has acknowledged publicly that he does not consider Bitcoin to be a security. Consistent with these public statements, the SEC approved several spot Bitcoin commodity ETFs and spot Ether commodity ETFs. The SEC has recently approved and/or acknowledged numerous applications for spot ETFs with various additional digital asset underliers. Additionally, SEC staff has issued public statements in an effort to provide regulatory clarity with respect to their views on stablecoins, stating that issuers of ‘Covered Stablecoins’ do not need to register minting and redemption transactions with the SEC, and proof-of-work mining activities, providing guidance that certain mining activities do not involve the offer and sale of securities..

 

The CFTC and its staff have taken the position that certain digital assets fall within the definition of a “commodity” under the U.S. federal commodities and derivatives laws. In his July 2024 testimony before the Senate Committee on Agriculture, Nutrition and Forestry, former CFTC Chairman Rostin Benham re-iterated that in a July 2024 decision (CFTC v. Sam Ikkurty A/K/A Sreeniv Asi Rao, et. al, 22-cv-02465 (Northern District of Illinois)(“Rao”)), a federal court “re-affirmed that both Bitcoin and Ether are commodities under the Commodity Exchange Act.” The court in Rao relied on previous precedent from the federal District Court of Massachusetts (CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492, 498 (D. Mass. 2018) (“My Big Coin Pay”)), which stated that “the [Commodity Exchange Act] only requires the existence of futures trading within a certain class (e.g. “natural gas”) in order for all items within that class (e.g. “West Coast” natural gas) to be considered commodities.” The court in Rao also used the My Big Coin Pay language to determine that two other non- Bitcoin and Ether digital assets also qualify as commodities. The CFTC has further classified other digital assets as commodities in its own enforcement settlement orders and complaints.

 

While both the SEC and CFTC continue to develop distinct positions with respect to digital asset classification and jurisdiction, the U.S. Congress is also moving forward with legislation that would definitively clarify jurisdiction over digital assets between the two agencies. In addition, the House of Representatives and the U.S. Senate have been considering, and may continue to consider, legislation that may provide the SEC, CFTC, and certain other regulatory agencies with clearer digital asset market oversight mandates. Notwithstanding the conclusions we may draw based upon existing applicable law and regulations, new case law precedent, market practices, and digital asset architecture and offering histories, there is no certainty that the SEC will not determine that a particular digital asset is a “security” under applicable law at some point in the future.

 

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We trade our digital asset holdings primarily on non-U.S. digital asset exchanges, which may subject us to regulatory uncertainty in foreign jurisdictions.

 

We buy and sell digital assets primarily on non-U.S. exchanges consistent with the regulatory frameworks applicable to such foreign jurisdictions and outside of the regulatory purview of the SEC. The majority of our digital asset trading activities occur on regulated exchanges located in the European Union (“EU”). In 2023, the EU passed the Markets in Crypto-Assets Act (“MiCA”). The law went into effect in June 2024 and provides a clear framework for offering and trading digital assets, without requiring a determination of the security status of a particular digital asset. While several foreign jurisdictions have taken a broad-based approach to classifying digital assets as “securities,” other foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach. As a result, certain digital assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of digital assets as “securities.”

 

We primarily trade our digital asset holdings in secondary market transactions on non-U.S. digital asset exchanges that blindly match buyers and sellers, which have been determined to be non-securities transactions by a U.S. federal court.

 

While we trade and hold a substantial amount of digital assets, we only interact with digital assets that we believe would not constitute securities under applicable U.S. federal securities laws. On July 13, 2023, in SEC v. Ripple Labs, et al., 20-cv-10832 (S.D.N.Y) (“Ripple Labs”), in a ruling on both parties’ motions for summary judgment, the court distinguished between bilateral, contractual sales of XRP from Ripple (the issuer) to institutional investors, and “programmatic” sales of XRP on secondary markets that facilitate trading through an order book that blindly matches buy and sell orders (“Programmatic Trading”). The court found that while the initial XRP sales satisfied the Howey test and therefore constituted securities under U.S. federal securities laws, the court held that XRP underlying Programmatic Trading did not constitute a security under Howey. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of digital assets as “securities.”

 

While the ruling in Ripple Labs is not definitive, and other courts have taken dissimilar positions with respect to other digital assets, some of our interaction with digital assets is in connection with Programmatic Trading activities (i.e., we generally purchase, sell, and hold digital assets through exchanges that operate blind matching engines). In addition, as described above, these activities occur exclusively in the EU consistent with the MiCA regulatory regime. Ultimately, none of the digital assets that comprise a material portion of our digital asset holdings have been conclusively determined to be a security by the SEC or any U.S. court.

 

The regulatory landscape for digital assets continues to evolve and how the Company will be affected is uncertain.

 

Given the growth in popularity and size of the digital asset industry, the U.S. Congress and U.S. federal agencies have recently focused on establishing a clear framework for the regulation of digital assets. In the past, the SEC has brought several enforcement actions against digital asset market participants, including U.S.-based digital asset exchanges and digital asset issuers, for alleged violations of U.S. securities laws. However, the current administration has taken steps to position the U.S. as a global leader in the digital asset industry, resulting in the creation of an interagency working group that aims to propose a regulatory framework for digital assets in the United States.

 

The U.S. Congress has taken measures to introduce legislation aimed at providing clear laws relating to digital assets. Whether new legislation will be introduced remains uncertain, and it is not clear to what extent the Company will be materially and adversely affected by any new regulations. Separately, the SEC has established a “Crypto Task Force” to focus on providing clear guidance with respect to the application of U.S. federal securities laws in the context of digital assets generally, as well as for digital asset developers and intermediaries. Additionally, the SEC has recently withdrawn or paused several enforcement actions and investigations against digital asset exchanges, issuers, and related companies.

 

The evolving regulatory landscape creates uncertainty for the Company, as new regulations or changes to existing regulations could materially and adversely affect our business operations, financial condition, and results of operations. The Company will continue to monitor regulatory developments and adapt its operations as necessary to comply with any new legal requirements.

 

If we are deemed an “investment company” subject to regulation under the Investment Company Act of 1940, the law’s restrictions could make it impractical for us to continue our business as contemplated, which would have a material adverse effect on our business.

 

We trade and hold a substantial amount of digital assets. As detailed below, if certain of the digital assets that we hold other than Bitcoin and Ether are determined to be securities by the SEC or a U.S. court, we could be forced to materially alter our business in order to comply with the Investment Company Act of 1940.

 

Under the Investment Company Act of 1940, as amended (the “Investment Company Act”), an issuer will generally be deemed to be an “investment company” if, absent an applicable exemption:

 

●it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

 

●it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

 

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We regard ourselves as a non-securities digital asset services company engaged in the business of providing access to non-securities financial products and not in the business of investing, reinvesting or trading in securities. As of March 31, 2025, the value of our total unconsolidated assets, exclusive of cash items, which consisted of securities as defined in Section 2(a)(36) of the Investment Company Act was less than 40% of our total unconsolidated assets, exclusive of cash items, consist of securities. Further, given our current business lines, and the nature of our digital asset holdings, we do not hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Therefore, we do not currently intend to register as an investment company under the Investment Company Act.

 

However, if in the future: (1) some material percentage of our digital asset holdings other than Bitcoin or Ether were conclusively deemed to be securities by the SEC or a U.S. court; or (2) if it was determined that we hold ourselves out as being, or propose to be, primarily engaged in the business of investing, reinvesting or trading in securities, we could be required to register as an investment company pursuant to Section 3(a)(1)(A) of the Investment Company Act. If we, or any of our subsidiaries, become obligated to register as an investment company under the Investment Company Act, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

 

●limitations on capital structure;

 

●restrictions on specified investments;

 

●prohibitions on transactions with affiliates; and

 

●compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

 

For example, we hold Solana (“SOL”) and other digital assets as part of our policy to hedge 100% of the market risk in the underlying assets of our ETPs. While we have taken the position that SOL is not a security under the Investment Company Act, there is risk that the SEC and/or other regulatory authorities may take a different position than us with respect to the classification of SOL as a security. In the event SOL is classified as a security by the SEC or other relevant regulatory authority, we could face significant regulatory and compliance challenges. Specifically, we may be required to register as an investment company under the Investment Company Act, which would necessitate substantial financial and administrative resources to comply with registration and ongoing regulatory requirements. Given these potential risks, the classification of SOL as securities could have a significant impact on our business operations and financial performance.

 

If we, or any subsidiary, were deemed to be an investment company under the Investment Company Act, the applicable entity would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or make business and organizational changes to fall outside the definition of an investment company.

 

Registering as an investment company pursuant to the Investment Company Act could, among other things, materially adversely affect our financial condition, business and results of operations, materially limit our ability to borrow funds or engage in other transactions involving leverage and require us to add directors who are independent of us and otherwise will subject us to additional regulation that will be costly and time-consuming. Modifying our equity interests and debt positions or organizational structure or our contract rights could require us to alter our business and investment strategy in a manner that requires us to purchase or dispose of assets or securities, prevents us from pursuing certain opportunities, or otherwise restricts our business, which may have a material adverse effect on our business results of operations, financial condition or prospects.

 

There are material risks and uncertainties associated with custodians of digital assets.

 

We use multiple custodians (or third-party “wallet providers”) to hold digital assets for our Ventures and Defi Alpha business line, for digital assets underlying Valour ETPs as well as for digital assets held in treasury for the Company. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. We could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares.

 

We also rely on cold self-storage to self-custody and safeguard certain of our digital assets from theft, loss, destruction or other issues relating to hackers and technological attack. Nevertheless, our designated self-custody security system may not be impenetrable and may not be free from defect or immune to acts of God, and we will bear any loss due to a security breach, software defect or act of God.

 

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Our security system and operational infrastructure, or those of other custodians, may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, of other custodians, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or digital assets. Additionally, outside parties may attempt to fraudulently induce employees of ours, or of our custodians, to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could be harmed, which could adversely affect an investment in us. In the event of a security breach, we may be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect an investment in us.

 

Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of digital assets and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. We may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our execution of hedging ETPs, the value of our assets and the value of any investment in our common shares.

 

In the event of a security breach, we may be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect an investment in us.

 

Banks may cut off banking services to businesses that provide digital asset-related services.

 

Companies that provide digital asset-related services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to digital asset related companies or companies that accept digital assets for many reasons, such as perceived compliance risks or costs. The difficulty that many businesses that provide digital asset-related services have and may continue to have in finding banks willing to provide them with bank accounts and other banking services may be currently decreasing the usefulness of digital assets as a payment system and harming public perception of digital assets or could decrease its usefulness and harm its public perception in the future. Similarly, the usefulness of digital assets as a payment system and the public perception of digital assets could be damaged if banks were to close the accounts of many or of a few key businesses providing digital asset-related services. This could decrease the market prices of digital assets and adversely affect the value of our digital asset inventory.

 

Most digital asset transactions are irrevocable.

 

Bitcoin and most other digital asset and DeFi Protocol token transactions are irrevocable and stolen or incorrectly transferred digital assets or DeFi Protocol tokens may be irretrievable. Such transactions are not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible and we may not be capable of seeking compensation for any such transfer or theft. To the extent that we are unable to seek a corrective transaction with the third party or are incapable of identifying the third party that has received our digital assets through error or theft, we will be unable to revert or otherwise recover incorrectly transferred digital assets. We will also be unable to convert or recover digital assets transferred to uncontrolled accounts.

 

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Digital assets are especially susceptible to the impacts of geopolitical events.

 

Crises may motivate large-scale purchases of digital assets which could increase the price of digital assets rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of our digital asset holdings. The possibility of large-scale purchases of digital assets in times of crisis may have a short-term positive impact on the prices of same. Future geopolitical crises may erode investors’ confidence in the stability of digital assets and may impair their price performance which would, in turn, adversely affect our digital asset holdings.

 

As an alternative to fiat currencies that are backed by central governments, digital assets are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of digital assets either globally or locally. Large-scale sales of digital assets would result in a reduction in their market prices and adversely affect our operations and profitability.

 

Our Digital Currencies, DeFi Protocol tokens and digital assets are subject to price volatility and inflation.

 

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Digital Currency and DeFi Protocol token market prices are determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of Digital Currencies and DeFi Protocol tokens, inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of our Digital Currency and DeFi Protocol token inventory and thereby affect our shareholders.

 

The profitability of our operations will be significantly affected by changes in prices of Digital Currencies, DeFi Protocol tokens and other digital assets. Digital Currencies, DeFi Protocol tokens and other digital assets prices are highly volatile, can fluctuate substantially and are affected by numerous factors beyond our control, including use of such Digital Currencies, DeFi Protocol tokens and other digital assets in the DeFi industry, demand, inflation and expectations with respect to the rate of inflation, global or regional political or economic events. If Digital Currencies, DeFi Protocol tokens and other digital assets prices should decline and remain at low market levels for a sustained period, we could determine that it is not economically feasible to continue activities.

 

The price and trading volume of any digital asset is subject to significant uncertainty and volatility, depending on several factors, including, but not limited to:

 

●changes in liquidity, market-making volume, and trading activities;

 

●investment and trading activities of highly active retail and institutional users, speculators, miners, and investors;

 

●decreased user and investor confidence in digital assets and digital platforms;

 

●negative publicity or events and unpredictable social media coverage or “trending” of digital assets;

 

●the ability for digital assets to meet user and investor demands;

 

●the functionality and utility of digital assets and their associated ecosystems and networks;

 

●consumer preferences and perceived value of digital assets and digital asset markets;

 

●regulatory or legislative changes and updates affecting the digital economy;

 

●the characterization of digital assets under the laws of various jurisdictions around the world;

 

●the maintenance, troubleshooting, and development of the blockchain networks;

 

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●the ability for digital networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently;

 

●interruptions in service from or failures of major digital platforms;

 

●availability of an active derivatives market for various digital assets;

 

●availability of banking and payment services to support digital-related projects;

 

●level of interest rates and inflation;

 

●national and international economic and political conditions;

 

●global digital asset supply;

 

●changes in the software, software requirements or hardware requirements underlying a blockchain network;

 

●competition for and among various digital assets; and

 

●actual or perceived manipulation of the markets for digital assets.

 

We may be adversely affected by fluctuations in the market price of Digital Currencies, DeFi Protocol tokens and digital assets.

 

As Valour’s ETPs track the market price of Digital Currencies, DeFi Protocol tokens and other digital assets, the value of our common shares is partially related to the value of such Digital Currencies, DeFi Protocol tokens and other digital assets, and fluctuations in the price of Digital Currencies, DeFi Protocol tokens and other digital assets could materially and adversely affect an investment in our common shares. Several factors may affect the price of Digital Currencies, including: the total number of Digital Currencies, DeFi Protocol tokens and other digital assets in existence; global Digital Currency, DeFi Protocol token and other digital asset demand; global Digital Currency, DeFi Protocol token and other digital asset supply; investors’ expectations with respect to the rate of inflation of fiat currencies; investors’ expectations with respect to the rate of deflation of Digital Currencies, DeFi Protocol tokens and other digital assets; interest rates; currency exchange rates, including the rates at which Digital Currencies, DeFi Protocol tokens and other digital assets may be exchanged for fiat currencies; fiat currency withdrawal and deposit policies of Digital Currency exchanges and liquidity of such Digital Currency exchanges; interruptions in service from or failures of major Digital Currency exchanges; Cyber theft of Digital Currencies, DeFi Protocol tokens and other digital assets from online wallet providers, or news of such theft from such providers or from individuals’ wallets; investment and trading activities of large investors; monetary policies of governments, trade restrictions, currency devaluations and revaluations; regulatory measures, if any, that restrict the use of Digital Currencies, DeFi Protocol tokens and other digital assets as a form of payment or the purchase of Digital Currencies; the availability and popularity of businesses that provide Digital Currencies, DeFi Protocol tokens, other digital assets and blockchain-related services; the maintenance and development of the open-source software protocol of various Digital Currency or DeFi Protocol networks; increased competition from other forms of Digital Currency or payments services; global or regional political, economic or financial events and situations; expectations among Digital Currency, DeFi Protocol token and other digital asset economy participants that the value of Digital Currencies, DeFi Protocol tokens and other digital assets will soon change; and fees associated with processing a Digital Currency, DeFi Protocol token or other digital asset transaction.

 

Digital Currencies, DeFi Protocol tokens and other digital assets have historically experienced significant intraday and long-term price volatility. If Digital Currency, DeFi Protocol token and other digital asset markets continue to be subject to sharp fluctuations, shareholders may experience losses if they need to sell their common shares at a time when the price of Digital Currencies, DeFi Protocol tokens and other digital assets is lower than it was when they purchased their common shares. In addition, investors should be aware that there is no assurance that Digital Currencies, DeFi Protocol tokens and other digital assets will maintain their long-term value in terms of future purchasing power or that the acceptance of Digital Currency, DeFi Protocol token and other digital asset payments by mainstream retail merchants and commercial businesses will continue to grow.

 

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Digital Currency, DeFi Protocol token and digital assets networks might not continue to be maintained.

 

Many Digital Currency networks, the DeFi Protocol token network and other digital asset networks, including the Bitcoin Network, operate based on an open-source protocol maintained by the core developers of such networks and other contributors. As such protocols are not sold and their uses do not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating such network protocols. Consequently, there is a lack of financial incentive for developers to maintain or develop such networks and the core developers may lack the resources to adequately address emerging issues with such network protocol. Although the many networks, including the Bitcoin Network, is currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. To the extent that material issues arise with such network protocols and the core developers and opensource contributors are unable to address the issues adequately or in a timely manner, such networks and our business may be adversely affected.

 

Miners may cease operations, which may have a material adverse effect on our business.

 

If the award of Bitcoins or other Digital Currencies for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners in relevant networks, miners may cease expending processing power to solve blocks and confirmations of transactions on the Bitcoin Blockchain or other networks could be slowed. A reduction in the processing power expended by miners on the applicable blockchain network could increase the likelihood of a malicious actor or botnet obtaining control, which may have a material adverse affect on our business.

 

There is the possibility that blockchain could be manipulated.

 

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains control of more than 50% of the processing power dedicated to mining on a digital asset network, it may be able to alter or manipulate the Blockchain on which such digital asset network and most digital asset transactions rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control. The malicious actor could “double-spend” its own digital asset token or digital currency (i.e., spend the same digital asset in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the processing power on a digital asset network or the effected digital asset community did not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible. To the extent that a digital asset ecosystem, including the core developers and the administrators of mining pools, do not act to ensure greater decentralization of digital asset mining processing power, the feasibility of a malicious actor obtaining control of the processing power on a digital asset network will increase.

 

Further development and acceptance of digital asset and DeFi networks is uncertain.

 

The further development and acceptance of digital asset and other cryptographic and algorithmic protocols governing the issuance of transactions in digital assets and DeFi Protocol tokens, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The growth of this industry in general, and the use of digital assets in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of such networks may adversely affect the value of the corresponding digital assets and DeFi Protocol tokens, and thus may adversely affect our operations. The factors affecting the further development of the industry, include, but are not limited to the following:

 

●continued worldwide growth in the adoption and use of digital assets and DeFi;

 

●governmental and quasi-governmental regulation of digital assets and their use, or restrictions on or regulation of access to and operation of the network or similar digital asset and DeFi systems;

 

●changes in consumer demographics and public tastes and preferences;

 

●the maintenance and development of the open-source software protocol of relevant networks;

 

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●the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

●general economic conditions and the regulatory environment relating to digital assets and decentralized finance; and

 

●negative consumer sentiment and perception of digital assets.

 

Currently, there is relatively small use of Digital Currencies in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect our operations, investment strategies, and profitability.

 

As relatively new products and technologies, Digital Currencies have not been widely adopted, for example as a means of payment for goods and services, by major retail and commercial outlets. Conversely, a significant portion of Digital Currency demand is generated by speculators and investors seeking to profit from the short-term or long-term holding of Digital Currencies. The relative lack of acceptance of Digital Currencies in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services or other direct use cases that may arise. A lack of expansion by Digital Currencies into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in their market prices, either of which could adversely impact our operations, investment strategies, and profitability. Further, if fees increase for recording transactions in the applicable blockchain, demand for Digital Currencies may be reduced and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in price of the Digital Currencies.

 

Our lines of business make us susceptible to security breaches.

 

As with any other computer code, flaws in digital asset and DeFi Protocol source code have been exposed by certain malicious actors. Several errors and defects have been found and corrected, including those that disabled some functionality for users and exposed users’ information. Discovery of flaws in or exploitations of the source code that allow malicious actors to take or create digital assets and / or DeFi Protocol tokens can occur.

 

Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin and other Digital Currency exchange market since the launch of the Bitcoin Network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm our business operations or result in loss of our assets. Any breach of our infrastructure could result in damage to our reputation and have a material adverse effect on our business. Furthermore, we believe that if our assets grow, we may become a more appealing target for security threats, such as hackers and malware.

 

Any security procedures implemented cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by us. Our security procedures and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of one of our employees or otherwise, and, as a result, an unauthorized party may obtain access to our digital asset account, private keys, data or digital assets. Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of one of our accounts occurs, the market perception of our effectiveness could be harmed.

 

As technological change occurs, the security threats to our digital assets, DeFi Protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. Our ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of our digital assets, DeFi Protocol tokens and other digital assets. To the extent that we are unable to identify and mitigate or stop new security threats, our digital assets, DeFi Protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack.

 

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Fluctuations in share price of public companies we invest in could adversely affect us.

 

Our investments in securities of public companies are subject to volatility in the share prices of such companies. There can be no assurance that an active trading market for any of the subject shares is sustainable. The trading prices of the subject shares could be subject to wide fluctuations in response to various factors beyond our control, including quarterly variations in the subject companies’ results of operations, changes in earnings, results of exploration and development activities, estimates by analysts, conditions in the technological and digital asset industries and general market or economic conditions. In recent years equity markets have experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on market prices, often unrelated to the operating performance of the specific companies. Such market fluctuations could adversely affect the market price of our investments.

 

Our investments in private issuers or projects may create liquidity risks.

 

Through our Ventures business line, we invest in securities and/or digital assets of private issuers or projects. These may be subject to trading restrictions, including hold periods, and there may not be any market for such securities or digital assets. These limitations may impair our ability to react quickly to market conditions or negotiate the most favourable terms for exiting such investments. Investments in private issuers or project are subject to a relatively high degree of risk. There can be no assurance that a public market will develop for any of our private investments, or that we will otherwise be able to realize a return on such investments.

 

The value attributed to securities and/or digital assets of private issuers or projects will be the cost thereof, subject to adjustment in limited circumstances, and therefore may not reflect the amount for which they can be sold. Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a ready market had existed for the investments.

 

We may also invest in illiquid securities of public issuers. A considerable period may elapse between the time a decision is made to sell such securities and the time we are able to do so, and the value of such securities could decline during such period. Illiquid investments are subject to various risks, particularly the risk that we will be unable to realize our investment objectives by sale or other disposition at attractive prices or otherwise be unable to complete any exit strategy. In some cases, we may be prohibited by contract or by law from selling such securities for a period or otherwise be restricted from disposing of such securities. Furthermore, the types of investments made may require a substantial length of time to liquidate.

 

We may also make direct investments in publicly traded securities that have low trading volumes. Accordingly, it may be difficult to make trades in these securities without adversely affecting the price of such securities.

 

Risks Relating to Our Financial Position, Capital Requirements and Management Team

 

We operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively.

 

The digital asset economy is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. Our Asset Management, Infrastructure, Venture, DeFi Alpha, Reflexivity Research and Stillman Digital business lines compete against several companies and expect that we will face even more competition in the future. These competitors could have various competitive advantages over us, including but not limited to:

 

●greater name recognition, longer operating histories, and larger market shares;

 

●larger sales and marketing budgets and organizations;

 

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●more established marketing, banking, and compliance relationships;

 

●greater resources to make acquisitions;

 

●lower labor, compliance, risk mitigation, and research and development costs;

 

●operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and

 

●substantially greater financial, technical, and other resources.

 

If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results, and financial condition could be adversely affected.

 

Harm to our brand and reputation could adversely affect our business.

 

Our reputation and brand may be adversely affected by complaints and negative publicity about us, even if factually incorrect or based on isolated incidents. Damage to our brand and reputation may be caused by:

 

●cybersecurity attacks, privacy or data security breaches, or other security incidents;

 

●complaints or negative publicity about us, our ETPs, our management team, our other employees or contractors or third-party service providers;

 

●actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by our management team, our other employees or contractors or third-party service providers;

 

●unfavorable media coverage;

 

●litigation involving, or regulatory actions or investigations into our business;

 

●a failure to comply with legal, tax and regulatory requirements;

 

●any perceived or actual weakness in our financial strength or liquidity;

 

●any regulatory action that results in changes to or prohibits certain lines of our business;

 

●a failure to operate our business in a way that is consistent with our values and mission;

 

●a sustained downturn in general economic conditions; and

 

●any of the foregoing with respect to our competitors, to the extent the resulting negative perception affects the public’s perception of us or our industry as a whole.

 

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Our revenue and cash flow are generated primarily from financing activities which creates liquidity risks.

 

Our revenue and cash flow are generated primarily from financing activities, trading returns of DeFi Alpha, proceeds from the disposition of investments, management fees of ETPs and staking and lending activities of digital assets and DeFi Protocol tokens. The availability of these sources of income and the amounts generated from these sources depend upon various factors, many of which are outside of our direct control. Our liquidity and operating results may be adversely affected if its access to the capital markets is hindered, whether as a result of a downturn in the market conditions generally or to matters specific to us, if DeFi Alpha is unable to identify profitable trades, if the value of our investments decline, resulting in losses upon disposition, if there is low demand for our ETPs, resulting in lack of management fees received, and if rates provided by counterparties for staking and lending decrease.

 

We are dependent on our management personnel.

 

We are dependent upon the efforts, skill and business contacts of key members of management and the Board, for among other things, the information and deal flow they generate during the normal course of their activities and the synergies that exist amongst their various fields of expertise and knowledge. Accordingly, our success may depend upon the continued service of these individuals who are not obligated to remain our consultants. The loss of the services of any of these individuals could have a material adverse effect on our revenues, net income and cash flows and could harm our ability to maintain or grow existing assets and raise additional funds in the future.

 

It is not certain that we will succeed in managing our growth.

 

Significant growth in the business, as a result of acquisitions or otherwise, could place a strain on our managerial, operational and financial resources and information systems. Future operating results will depend on the ability of senior management to manage rapidly changing business conditions, and to implement and improve our technical, administrative and financial controls and reporting systems. No assurance can be given that we will succeed in these efforts. The failure to effectively manage and improve these systems could increase costs, which could have a materially adverse effect on our operating results and overall performance.

 

Conflicts of interest may arise.

 

Certain current or future directors and officers of us and our subsidiaries may be shareholders, directors and officers of other companies that may operate in the same sectors as the Company. Such associations may give rise to conflicts of interest from time to time. Our directors and officers are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in such conflict is required under the applicable corporate laws to disclose his or her interest and to abstain from voting on such matter.

 

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DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES

 

We are permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this registration statement on Form 40-F in accordance with Canadian disclosure requirements, which are different from those of the United States. We prepare our consolidated financial statements, which are filed with this registration statement on Form 40-F, in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, and they may be subject to Canadian auditing and auditor independence standards. IFRS differs in certain respects from United States generally accepted accounting principles (“U.S. GAAP”) and practices prescribed by the SEC. Therefore, such financial statements may not be comparable to financial statements prepared in accordance with U.S. GAAP.

 

PRINCIPAL DOCUMENTS

 

In accordance with General Instruction B.(1) of Form 40-F, we hereby incorporate by reference Exhibits 99.1 through 99.143 inclusive, as set forth in the Exhibit Index attached hereto. The documents filed or incorporated by reference as Exhibits contain all information material to an investment decision that we, since January 1, 2024: (i) made or were required to make public pursuant to the laws of any Canadian jurisdiction; (ii) filed or were required to file with the Cboe Canada Exchange (“Cboe Canada”) and which was made public by Cboe Canada; or (iii) distributed or were required to distribute to its security holders. In accordance with General Instruction D(9) of Form 40-F, we have filed the written consent of our auditors as Exhibit 99.143, as set forth in the Exhibit Index attached hereto.

 

TAX MATTERS

 

Purchasing, holding, or disposing of our securities may have tax consequences under the laws of the United States and Canada that are not described in this registration statement on Form 40-F.

 

DESCRIPTION OF COMMON SHARES

 

The required disclosure containing a description of the securities to be registered is included under the heading “Description of Share Capital” in our Annual Information Form for the financial year ended December 31, 2024, attached hereto as Exhibit 99.126.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

DISCLOSURE OF CONTRACTUAL OBLIGATIONS

 

The following table lists, as of December 31, 2024, information with respect to our known contractual obligations (in Canadian dollars):

 

    Payments due by period  
Contractual Obligations   Total     Less than
1 year		     1-3 years     3-5 years     More than
5 years		  
Long-term debt obligations     NIL       13,947,681       NIL       NIL       NIL  
Capital (finance) lease obligations     NIL       NIL       NIL       NIL       NIL  
Operating lease obligations     NIL       NIL       NIL       NIL       NIL  
Purchase obligations     NIL       5,010,922       NIL       NIL       NIL  
Other long-term liabilities (bonds, debentures, etc.)     NIL       NIL       NIL       NIL       NIL  
Total     NIL       18,958,603       NIL       NIL       NIL  

 

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NASDAQ CORPORATE GOVERNANCE

 

Nasdaq Marketplace Rule 5615(a)(3) permits a foreign private issuer to follow its home country practice in lieu of certain of the requirements of the Rule 5600 Series. A foreign private issuer that follows a home country practice in lieu of one or more provisions of the Rule 5600 Series shall disclose in its registration statement related to its initial public offering or first U.S. listing on Nasdaq, or on its website, each requirement of the Rule 5600 Series that it does not follow and describe the home country practice followed by the issuer in lieu of those requirements.

 

We do not follow Rule 5620(c), but instead follow our home country practice. The Nasdaq minimum quorum requirement under Rule 5620(c) for a meeting of shareholders is 33.33% of the outstanding common shares. Our bylaws provide that two persons present in person, each being a shareholder entitled to vote at the meeting or a duly appointed proxyholder for an absent shareholder entitled to vote at the meeting shall be a quorum at any meeting of the shareholders. The foregoing is consistent with the laws, customs and practices in Canada. As required by Nasdaq Rule 5615(a)(3), the Registrant will disclose on its website, www.defi.tech, as of the listing date, each requirement of the Nasdaq Stock Market Rules that it does not follow and describe the home country practice followed in lieu of such requirements.

 

UNDERTAKING

 

We undertake to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form 40-F, the securities in relation to which the obligation to file an Annual Report on Form 40-F arises or transactions in said securities.

 

CONSENT TO SERVICE OF PROCESS

 

We have filed with the Commission a Form F-X. Any change to the name or address of our agent and service shall be communicated promptly to the Commission by amendment to the Form F-X referencing the file number of the Registrant.

 

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EXHIBIT INDEX

 

The following documents are being filed with the Commission as Exhibits to this registration statement:

 

Exhibit   Description
99.1*   Letter from successor auditor dated January 8, 2024
99.2*   Notice dated January 8, 2024
99.3*   Letter from former auditor dated January 8, 2024
99.4*   News release dated January 8, 2024
99.5*   News release dated January 8, 2024
99.6*   News release dated January 9, 2024
99.7*   News release dated January 22, 2024
99.8*   News release dated January 30, 2024
99.9*   News release dated February 5, 2024
99.10*   News release dated February 7, 2024
99.11*   News release dated February 9, 2024
99.12*   Report of Distributions outside Canada (Form 72-503F) dated February 15, 2024
99.13*   Report of exempt distribution (45-106F1) dated February 15, 2024
99.14*   News release dated February 20, 2024
99.15*   News release dated February 22, 2024
99.16*   News release dated March 4, 2024
99.17*   News release dated March 7, 2024
99.18*   News release dated March 14, 2024
99.19*   News release dated March 18, 2024
99.20*   News release dated March 20, 2024
99.21*   News release dated March 28, 2024
99.22*   News release dated April 1, 2024
99.23*   Form 52-109F1 - Certification of annual filings dated April 1, 2024 (CEO)
99.24*   Form 52-109F1 - Certification of annual filings dated April 1, 2024 (CFO)
99.25*   Annual information form dated April 1, 2024
99.26*   Annual MD&A dated April 1, 2024
99.27*   AB Form 13-501F1 (class 1 and 3B reporting issuers - participation fee) dated April 1, 2024
99.28*   ON Form 13-502F1 (class 1 and 3B reporting issuers - participation fee) dated April 1, 2024
99.29*   Audited annual financial statements dated April 1, 2024
99.30*   News release dated April 8, 2024
99.31*   Notice of the meeting and record date dated April 15, 2024

 

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99.32*   News release dated April 17, 2024
99.33*   News release dated April 18, 2024
99.34*   News release dated April 30, 2024
99.35*   News release dated May 7, 2024
99.36*   News release dated May 8, 2024
99.37*   News release dated May 13, 2024
99.38*   News release dated May 15, 2024
99.39*   Form 52-109F2 - Certification of interim filings dated May 15, 2024 (CEO)
99.40*   Form 52-109F2 - Certification of interim filings dated May 15, 2024 (CFO)
99.41*   Interim MD&A dated May 15, 2024
99.42*   Interim financial statements/report dated May 15, 2024
99.43*   News release dated May 15, 2024
99.44*   News release dated May 16, 2024
99.45*   News release dated May 23, 2024
99.46*   Form of proxy dated May 27, 2024
99.47*   Notice of meeting dated May 27, 2024
99.48*   Management information circular dated May 27, 2024
99.49*   News release dated June 3, 2024
99.50*   News release dated June 4, 2024
99.51*   News release (section 4.8 of NI 62-104) dated June 6, 2024
99.52*   News release dated June 10, 2024
99.53*   News release dated June 11, 2024
99.54*   Other dated June 12, 2024
99.55*   News release dated June 18, 2024
99.56*   News release dated June 19, 2024
99.57*   News release dated June 19, 2024
99.58*   News release dated June 24, 2024
99.59*   News release dated June 28, 2024
99.60*   News release dated July 9, 2024
99.61*   News release dated July 10, 2024
99.62*   News release dated July 16, 2024
99.63*   News release dated July 17, 2024
99.64*   News release dated July 18, 2024
99.65*   News release dated July 30, 2024
99.66*   News release dated July 31, 2024
99.67*   News release dated August 6, 2024
99.68*   News release dated August 8, 2024
99.69*   News release dated August 13, 2024
99.70*   News release dated August 14, 2024
99.71*   Form 52-109F2 - Certification of interim filings dated August 14, 2024 (CFO)
99.72*   Form 52-109F2 - Certification of interim filings dated August 14, 2024 (CEO)
99.73*   Interim MD&A dated August 14, 2024
99.74*   Interim financial statements/report dated August 14, 2024
99.75*   News release dated September 5, 2024
99.76*   News release dated September 6, 2024
99.77*   Audited annual financial statements dated April 1, 2024
99.78*   Form 52-109F1R - Certification of refiled annual filings dated September 6, 2024 (CFO)
99.79*   Form 52-109F1R - Certification of interim annual dated September 6, 2024 (CEO)
99.80*   News Release dated September 10, 2024
99.81*   News Release dated September 13, 2024

 

27

 

 

99.82**   News release dated September 16, 2024
99.83**   News release dated September 30, 2024
99.84**   News release dated October 7, 2024
99.85**   News release dated October 8, 2024
99.86**   News release dated October 10, 2024
99.87**   Report of exempt distribution (45-106F1) dated October 10, 2024
99.88**   News release dated October 18, 2024
99.89**   News release dated October 29, 2024
99.90**   News release dated October 30, 2024
99.91**   News release dated November 4, 2024
99.92**   News release dated November 4, 2024
99.93**   News release dated November 5, 2024
99.94**   News release dated November 7, 2024
99.95**   News release dated November 12, 2024
99.96**   News release dated November 12, 2024
99.97**   News release dated November 14, 2024
99.98**   Interim financial statements/report dated November 14, 2024
99.99**   Interim MD&A dated November 14, 2024
99.100**   Form 52-109F2 - Certification of interim filings dated November 14, 2024 (CFO)
99.101**   Form 52-109F2 – Certification of interim filings dated November 14, 2024 (CEO)
99.102**   News release dated November 14, 2024
99.103**   News release dated November 22, 2024
99.104**   News release dated November 26, 2024
99.105**   News release dated December 2, 2024
99.106**   News release dated December 3, 2024
99.107**   News release dated December 10, 2024
99.108**   News release dated December 12, 2024
99.109**   News release dated December 18, 2024
99.110**   News release dated January 6, 2025
99.111   News release dated January 21, 2025
99.112   News release dated February 4, 2025
99.113   News release dated February 5, 2025
99.114   News release dated February 6, 2025
99.115   News release dated February 11, 2025
99.116   News release dated March 3, 2025
99.117   News release dated March 3, 2025
99.118   Material change report dated March 3, 2025
99.119   News release dated March 7, 2025
99.120   News release dated March 10, 2025
99.121   Report of Distributions outside Canada (Form 72-503F) dated March 10, 2025
99.122   News release dated March 24, 2025
99.123   News release dated March 26, 2025
99.124   Audited annual financial statements dated March 30, 2025
99.125   Annual MD&A dated March 30, 2025
99.126   Annual information form dated March 30, 2025
99.127   Form 52-109F1 – Certification of annual filings dated March 31, 2025 (CEO)
99.128   Form 52-109F1 – Certification of annual filings dated March 31, 2025 (CFO)
99.129   News release dated March 31, 2025
99.130   ON Form 13-502F1 (class 1 and 3B reporting issuers – participation fee) dated March 31, 2025
99.131   AB Form 13-501F1 (class 1 and 3B reporting issuers – participation fee) dated March 31, 2025
99.132   News release dated April 8, 2025
99.133   Material Change Report dated April 10, 2025
99.134   Interim financial statements/report (amended) dated April 14, 2025
99.135   Interim MD&A (amended) dated April 14, 2025
99.136   Interim financial statements/report (amended) dated April 14, 2025
99.137   Interim MD&A (amended) dated April 14, 2025
99.138   Form 52-109F2R – Certification of refiled interim filings (CEO) dated April 14, 2025
99.139   Form 52-109F2R – Certification of refiled interim filings (CFO) dated April 14, 2025
99.140   Form 52-109F2R – Certification of refiled interim filings (CEO) dated April 14, 2025
99.141   Form 52-109F2R – Certification of refiled interim filings (CFO) dated April 14, 2025
99.142   News release dated April 14, 2025
99.143   Consent of HDCPA Professional Corporation, dated April 14, 2025

 

*previously filed with the September 16 Form 40-F
** previously filed with the January 17 Form 40-F

 

28

 

 

SIGNATURES

 

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F/A and has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Defi Technologies Inc.
   
Date: April 14, 2025 By: /s/ Olivier Roussy Newton
    Olivier Roussy Newton
    Chief Executive Officer and Executive Chairman

 

 

29

 

Exhibit 99.111

 

 

Valour Surpasses US$1 Billion in Assets Under Management

 

●Record AUM Milestone: Valour has achieved a historic milestone by surpassing US$1 billion in AUM, with a total of US$1.02 billion (C$1.46 billion) as of January 20, 2025.

 

●Strategic Global Expansion: Valour is actively working on expanding its reach into emerging markets through MOUs with AsiaNext and SovFi for listing digital asset ETPs in APAC, and with the NSE to establish a presence in Africa. These efforts align with its strategy to enter high-growth regions like Asia, Africa, and the Middle East.

 

●Innovative Leadership: With a 133% year-over-year AUM growth in 2024 and top-performing ETPs like Valour SOL, BTC, ETH, and ADA, Valour continues to lead the market by delivering cutting-edge, cost-effective, and secure digital asset investment products across Europe and beyond.

 

Toronto, Canada, January 21, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce that its subsidiary, Valour Inc., and Valour Digital Securities Limited (together, "Valour"), a leading issuer of exchange traded products ("ETPs") has surpassed US$1 billion in assets under management (“AUM”) for the first time in its history. The official total AUM now stands at a record US$1.02 billion (C$1.46 billion) as of January 20, 2025.

 

This milestone builds upon Valour’s strong December performance, which included record monthly net inflows of C$56 million (US$38.8 million) and the historic launch of 20 new digital asset ETPs on the Spotlight Stock Market. Valour’s achievements have cemented its position as a leader in providing seamless access to digital asset.

 

In addition to its record-breaking financial performance, Valour is expanding its geographic focus to unlock opportunities in emerging markets. Valour has signed a Memorandum of Understanding (a “MOU”) with AsiaNext and SovFi to pursue the listing and expansion of its digital asset ETPs on AsiaNext's Singapore-licensed securities exchange. This initiative aims to enhance institutional access across the Asia-Pacific (“APAC”) region, which is witnessing rapid digital asset adoption.

 

Similarly, Valour is working to enter the African market through a MOU with the Nairobi Securities Exchange (“NSE”) and SovFi. This collaboration seeks to facilitate the creation, issuance, and trading of digital asset ETPs in Africa. These MOUs mark the initial steps in Valour’s efforts to establish a presence in these high-potential regions as the regulatory frameworks and market infrastructures governing such jurisdictions continue to evolve.

 

 

 

 

Valour’s current strategic focus encompasses Europe, Asia, Africa, and the Middle East, which represent significant opportunities for growth due to their increasing adoption of digital assets. By engaging with key partners and regulators in these regions, Valour is positioning itself to capitalize on the ongoing global evolution of digital asset investment products.

 

"Reaching US$1 billion in AUM is a significant milestone for Valour and a clear reflection of the growing demand for secure, innovative, and accessible digital asset investment products,” said Olivier Roussy Newton, CEO of DeFi Technologies. “Our team has worked diligently to create a product portfolio that not only meets the current needs of investors but also anticipates the future of digital asset participation. As we actively work to expand into promising regions such as Asia, Africa, and the Middle East, we are committed to collaborating with strategic partners and regulators to unlock the full potential of digital assets. This achievement marks the start of an exciting new chapter, and we are eager to continue driving growth and adoption in the global ETP market."

 

Since its inception, Valour has remained focused on delivering cutting-edge financial products, including physically backed and fully hedged digital asset ETPs. These products are listed across Europe’s leading stock exchanges, ensuring ease of access and liquidity for investors.

 

Valour ended 2024 with a 133% year-over-year AUM growth, highlighting the strength of its offerings and strategic execution. Its top-performing ETPs include Valour SOL, BTC, ETH, and ADA, among others. Investor demand continues to rise for diverse and innovative digital asset solutions, further solidifying Valour’s leadership in the market.

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

2

 

 

 

Cautionary note regarding forward-looking information:

 

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the growth of AUM; geographical expansion of Valour’s range of ETPs; MOUs; expansion of digital asset ETPs; investor interest and confidence in digital assets; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech    
(323) 537-7681    

 

 

3

 

 

Exhibit 99.112

 

DeFi Technologies Signs Binding LOI with CoreFi Strategy and Orinswift Ventures, Secures US$20M CORE Token Commitment from the Core Foundation to Drive Bitcoin Finance

 

●Strategic Collaboration and Reverse Takeover: DeFi Technologies has entered a binding letter agreement with CoreFi Strategy and Orinswift Ventures to facilitate a reverse takeover, enabling the listing of the resulting issuer’s common shares on the Cboe Canada Stock Exchange (Cboe).

 

●Core Foundation Contribution and Financing Initiative: The Core Foundation will contribute US$20 million in CORE Tokens to strengthen CoreFi’s treasury. Additionally, CoreFi plans to raise US$20 million in concurrent financing to accelerate its growth in Bitcoin Finance (BTCfi) technologies.

 

●CoreFi and CORE Blockchain Innovation: CoreFi Strategy, inspired by models like MicroStrategy, offers a regulated, leveraged approach to Bitcoin yield and CORE. The Core blockchain supports Bitcoin staking and a vibrant EVM-compatible ecosystem, securing over 5,700 Bitcoin staked, $850M+ total value locked, and a rapidly growing user base.

 

Toronto, Canada, February 4, 2025 — DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company at the forefront of merging traditional capital markets with decentralized finance (“DeFi”), is pleased to announce that they have entered into a binding letter agreement (the “Agreement” with CoreFi Strategy Corp. (“CoreFi”), and Orinswift Ventures Ltd. (“Orinswift”), setting the stage for a strategic reverse takeover and listing of common shares of the Resulting Issuer (as defined below) on the Cboe Canada Stock Exchange (“Cboe”).

 

This announcement builds on the Company’s November 14, 2024, news release, marking a significant milestone in the launch of its CoreFi Strategy. Inspired by the successful models of MicroStrategy and MetaPlanet, CoreFi Strategy provides a regulated, leveraged approach to generating Bitcoin yield and utilizing Core, unlocking new opportunities in Bitcoin Finance (“BTCfi”). As part of this initiative, the Core Foundation has committed US$20 million in CORE Tokens, enhancing CoreFi’s operational capabilities and cementing its leadership in the BTCfi space. BTCfi is the next phase of Bitcoin’s evolution, and CoreFi is at the center of it.

 

CoreFi is a private company incorporated pursuant to the Canada Business Corporations Act. Recently launched in partnership with DeFi Technologies, CoreFi will offer a regulated, leveraged investment strategy centered on Bitcoin yield and CORE, the native asset of the Core blockchain. This strategy enables investors to pursue higher-risk, higher-reward opportunities within the rapidly growing BTCfi ecosystem.

 

 

 

 

“CoreFi Strategy is elevating the MicroStrategy playbook,” said Rich Rines, contributor to Core. “MicroStrategy pioneered the hold-borrow-hold approach. CoreFi Strategy takes it a step further by adding staking into the mix. Their hold-stake-borrow-hold strategy applied to Bitcoin and CORE unlocks attractive Bitcoin yields while also building upside exposure to the rapidly emerging BTCfi landscape.”

 

What is BTCfi & Core?

 

BTCfi, short for Bitcoin Finance, refers to decentralized financial applications and services built around Bitcoin. It brings some of the most popular features of decentralized finance (DeFi)—like lending, borrowing, staking, and yield generation—to the Bitcoin ecosystem. In essence, BTCfi expands Bitcoin’s use case beyond being a “store of value” by enabling more interactive and utility-driven financial applications. With BTCfi, users can do more with their Bitcoin, such as earning rewards or participating in decentralized applications, without giving up custody of their assets.

 

The Core blockchain is the Proof of Stake Layer for Bitcoin, enhancing Bitcoin by introducing self-custodial Bitcoin staking. It also supports an ecosystem compatible with the Ethereum Virtual Machine (EVM), opening the door for various BTCfi applications. Since April 2024, more than 5,700 Bitcoin (BTC) have been staked using CORE, boosting Bitcoin’s overall utility and network security.

 

CORE stands out as one of the most Bitcoin-aligned blockchains by integrating Bitcoin’s security and economic incentives directly into its consensus mechanism.

 

●Over 5,700 Bitcoin staked to strengthen its network.

 

●~75% of Bitcoin mining hash power contributing to its security.

 

●An ecosystem valued at over $850 million in total locked assets.

 

●More than 1 million active wallets each week.

 

●310+ million total transactions processed.

 

●A growing network of 150+ decentralised applications leveraging the platform.

 

With these milestones, Core is enhancing Bitcoin’s utility and scalability, while driving innovation in BTCfi.

 

Olivier Roussy Newton, CEO of DeFi Technologies commented, “This partnership is a pivotal moment for DeFi Technologies as we bring innovative Bitcoin Finance (BTCfi) solutions to traditional investors. BTCFi unlocks Bitcoin’s usability and scalability by offering yield, lending, and new financial tools - all of which are key drivers to future growth. By leveraging CoreFi’s regulated and scalable approach, we are making it easier for institutional and retail participants to access Bitcoin yield opportunities. The US$20 million contribution from the Core Foundation reflects the strength of CoreFi’s vision and enhances its ability to deliver value. This collaboration positions us as leaders in the BTCfi space and also adds significant value for DeFi Technologies’ investors by expanding our portfolio of high-growth, revenue-generating assets.”

 

2

 

Transaction Overview

 

The Transaction will be completed through a definitive agreement (the “Definitive Agreement”) that is to be negotiated by the parties, which will contain customary representations and warranties for similar transactions, and is expected to be structured as a three-corned amalgamation whereby a newly incorporated subsidiary of Orinswift will amalgamate with CoreFi, resulting in Orinswift acquiring all securities of CoreFi, and CoreFi securityholders becoming securityholders of Orinswift, as the resulting issuer following closing of the Transaction (the “Resulting Issuer”). The final structure for the Transaction is subject to satisfactory tax, corporate and securities law advice for each of Orinswift, CoreFi, and DeFi.

 

As part of the RTO, CoreFi is set to complete a concurrent financing initiative, aiming to raise US$20 million (the “Financing”). This capital will bolster CoreFi’s technological capabilities and accelerate its growth strategy in the digital asset sector. The successful financing is integral to meeting the listing requirements and supporting the strategy and operations of the Resulting Issuer.

 

Strategic and Financial Benefits

 

The collaboration between CoreFi, Orinswift, and DeFi Technologies brings together complementary technologies and expertise to strengthen CoreFi’s ability to scale and validate digital assets. This partnership is designed to meet the increasing demand for secure and reliable digital asset solutions, particularly in the growing Bitcoin Finance (BTCfi) sector.

 

By combining their strengths, the parties aim to position the resulting entity as a leader in BTCfi, capturing significant opportunities in this rapidly expanding market.

 

About CoreFi Strategy Corp.

 

CoreFi Strategy Corp. specializes in the development of innovative BTCfi technologies that enhance the scalability and functionality of digital assets within the financial sector. CoreFi holds and dual stakes Bitcoin and CORE tokens as part of its treasury strategy.

 

About Orinswift Ventures Ltd.

 

Orinswift Ventures Ltd. focuses on exploring and advancing business opportunities that align with dynamic market trends, particularly in the technology sector.

 

3

 

About Core

 

Core is the Proof of Stake (PoS) layer for Bitcoin, enabling Self-Custodial Bitcoin Staking and supporting an EVM-compatible BTCfi ecosystem. Since April 2024, over 5,700 BTC have been staked with Core, enhancing Bitcoin’s utility and security. Core is the most Bitcoin-aligned EVM blockchain, with ~76% of Bitcoin mining hash power contributing to the network’s security. This breakthrough has amassed millions of Core adopters - over 35M unique addresses, 310M+ transactions, and over 850M TVL since its mainnet launch in January 2023.

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the timing and completion of the Transaction; listing of the Resulting Issuer on Cboe Canada Exchange; the Financing; the business strategy and plan of the Resulting Issuer; investor interest and confidence in digital assets, in particular in Bitcoin and Core; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the ability of the Resulting Issuer to execute on its business plan; the growth of the Bitcoin ecosystem; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
+1 (323) 537-7681

 

 

4

 

 

Exhibit 99.113

 

 

DeFi Technologies Provides Monthly Corporate Update:Valour Reports C$1.4 Billion (US$1.009 Billion) in AUM, and Monthly Net Inflows of C$48 Million (US$33.5 Million) in January 2025, Along with a Treasury Strategy Update

 

●AUM & Robust Monthly Net Inflows: As of January 31, 2024, Valour reported C$1.4 billion (US$1.009 Billion) in assets under management (AUM), reflecting a 23% increase from the previous month, driven by rising digital asset prices and continued net inflows of C$48 million (US$33.5 million) in January, fueled by strong demand for ETPs such as XRP, SUI, and DOGE. Valour continues to experience record trading volumes and inflows, particularly following the launch of 20 new digital asset ETPs on the Spotlight Stock Market—the largest rollout in Valour’s history—expanding its portfolio to over 60 ETPs across European exchanges and further solidifying its position as a leading digital asset ETP issuer

 

●Strong Financial Position: Valour ended January with a cash and USDT balance of approximately C$27.2 million (US$18.9 million), reflecting a 24.9% increase from the prior month. Loans payable remained steady at approximately C$8.3 million (US$6 million) primarily attributed to the ongoing Genesis restructuring.

 

●Advanced Treasury Strategy: The Company also maintained a diversified portfolio of assets in its digital asset treasury, including 208.8 BTC (C$29,111,593 /US$20,324,987),14,375 SOL (C$4,286,865 / US$2,992,982), 121 ETH (C$602,810 / US$420,867), and 433,322 AVAX tokens (C$24,629,461 / US$17,195,674). The portfolio’s total value stood at approximately C$63.4 million (US$44.2 million), representing an 8.7% increase from the previous month due to an increase in digital asset prices compared to the previous month. The company may choose to rebalance or increase its treasury at any time using its current C$90.6 million (US$63.1 million) in cash, USDT, and treasury holdings.

 

●DeFi Technologies Operated Validator Nodes: DeFi Technologies operates three validator nodes: one on Solana (SOL), one on CORE, and another on Cardano (ADA). The company stakes a portion of its C$526 million (US$367 million) in SOL on its validator node, generating an approximate 8% yield. If the entire current amount of SOL were staked, it would generate approximately C$42 million (US$29 million) in revenue annually. Additionally, on its CORE validator, the company stakes a portion of its BTC holdings, which total C$362 million (US$253 million), generating a yield between 6-8% on DeFi’s BTC and CORE holdings. On its Cardano validator, DeFi stakes a portion of its C$96.34 million (US$67.24 million) in AUM, generating an average 2.7% yield.

 

 

 

 

Toronto, Canada, February 5, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce that its subsidiary, Valour Inc., and Valour Digital Securities Limited (together, “Valour”), a leading issuer of exchange traded products (“ETPs”) reports assets under management (“AUM”) of C$1.4 Billion (US$1.009 Billion) as of January 31, 2024, reflecting a 23% increase from the previous month, driven by rising digital asset prices and net inflows of C$48 million (US$33.5 million).

 

Net Inflows and Investor Confidence

 

In January, Valour had substantial net inflows of C$48 million (US$33.5 million), marking its second consecutive month surpassing US$30 million in inflows. This follows a record-breaking December 2024, which saw C$56 million (US$38.8 million) in net inflows. The continued momentum reflects strong investor confidence, growing demand for Valour’s diverse range of ETPs, and the impact of 20 newly introduced digital asset ETPs on the Spotlight Stock Market. This landmark expansion has reinforced Valour’s position as a market leader and underscored its commitment to delivering innovative investment opportunities.

 

Key Products Driving Inflows

 

A combination of established and newer ETP listings, including XRP, SUI, and DOGE drove the exceptional performance. Key contributors include:

 

●VALOUR XRP SEK: C$10,264,622 (US$7,079,050)

 

●VALOUR SUI SEK: C$9,591,330 (US$6,614,710)

 

●VALOUR DOGE SEK: C$4,428,835 (US$3,054,369)

 

●VALOUR HBAR SEK: C$3,191,907 (US$2,201,315)

 

●VALOUR DOT SEK: C$3,169,633 (US$2,185,954)

 

●VALOUR RNDR SEK: C$3,121,695 (US$2,152,893)

 

●VALOUR BTC SEK: C$2,639,506 (US$1,820,349)

 

●VALOUR INJ SEK: C$2,167,541 (US$1,494,856)

 

●VALOUR TAO SEK: C$1,901,723 (US$1,311,533)

 

●VALOUR ADA SEK: C$1,708,077 (US$1,177,984)

 

These inflows highlight Valour’s leadership in providing access to diverse digital assets.

 

2

 

 

 

Valour’s Top ETPs by AUM

 

Via its subsidiary Valour, DeFi Technologies operates the third-largest Solana fund globally and the largest in North America. Valour generates revenue in part by staking its AUM. For reference, in Q3 2024, Valour earned 8.12% of AUM in staking and management fees, based on staking an average of 67% of its AUM, which totaled C$753 million (US$537 million).

 

●Valour SOL: C$526,357,999 (US$367,366,302)

 

●Valour BTC: C$362,703,474 (US$253,145,263)

 

●Valour ADA: C$96,340,986 (US$67,240,228)

 

●Valour ETH: C$96,410,234 (US$67,288,559)

 

●Valour XRP: C$85,714,558 (US$59,823,619)

 

●Valour SUI: C$73,136,659 (US$51,045,000)

 

●Valour AVAX: C$31,466,841 (US$21,961,967)

 

●Valour DOT: C$26,711,029 (US$18,642,696)

 

Strong Financial Position

 

As of January 31, 2025, the Company maintains a strong financial position:

 

Cash and USDT Balance: Approximately C$27.2 million (US$18.9 million), a 24.9% increase from the previous month.

 

Loans Payable: Approximately C$8.3 million (US$6 million), unchanged from the previous month, primarily attributed to the ongoing Genesis restructuring

 

Digital Asset Treasury

 

The company also maintained a diversified portfolio of assets in its treasury, led by BTC, SOL, ETH, and AVAX tokens. The portfolio’s total value stood at approximately C$63.4 million (US$44.2 million), representing an 8.7% increase from the previous month due to an increase in digital asset prices compared to the previous month. The company may choose to rebalance or increase its treasury at any time using its current C$90.6 million (US$63.1 million) in cash, USDT, and treasury holdings.

 

●208.8 BTC: C$29,111,593 (US$20,324,987)
   
●433,322 AVAX: C$24,629,461 (US$17,195,674)
   
●14,375 SOL: C$4,286,865 (US$2,992,982)
   
●1,462,703 CORE: C$2,578,571 (US$1,800,294)
   
●131,616 DOT: C$1,362,939 (US$951,570)
   
●586,683 ADA: C$809,301(US$565,034)
   
●121 ETH: C$602,810 (US$420,867)
   
●490.5 UNI: C$10,099 (US$7,051)

 

3

 

 

 

DeFi Technologies Operated Validator Nodes

 

DeFi Technologies operates three validator nodes: one on Solana (SOL), one on CORE, and another on Cardano (ADA). The company stakes a portion of its C$526 million (US$367 million) in SOL on its validator node, generating an approximate 8% yield. If the entire current amount of SOL were staked, it would generate approximately C$42 million (US$29 million) in revenue annually for the Company.

 

Additionally, on its CORE validator, the company stakes a portion of its BTC holdings, which total C$362 million (US$253 million), generating a yield between 6-8% more recently on DeFi’s BTC and CORE holdings.

 

On its Cardano validator, DeFi stakes a portion of its C$96.34 million (US$67.24 million) in AUM, generating an estimated average of 2.7% yield.

 

DeFi Alpha Strategy

 

The Company is assessing multiple arbitrage opportunities, having generated revenues of C$111.5 Million (US$82.0 Million) in Q2 2024 and C$20.6 million (US$14.7 million) in Q3 2024 with zero losses to date. This strategy has strengthened the Company’s financial position, enabling debt repayment and supporting the deployment of a digital asset treasury strategy.

 

Stillman Digital

 

Stillman Digital reported a consolidated trading revenue of approximately C$1.2M for December 2024, projecting an annualized run rate of over C$14M. In support of its international expansion, the company has enhanced its banking infrastructure through a partnership with Bank Frick. This collaboration introduces a groundbreaking solution that enables seamless fiat transaction settlements through the innovative Bank FrickxPulse network. Additionally, a partnership with Finery Markets is yielding positive growth results, further boosting the Company’s foray into the international stage. Stillman also strengthened its team with several key hires in engineering and trading to optimize the monetization of its billions of dollars in trading flow and enhance its built-in-house technology infrastructure.
 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/

 

4

 

 

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

About Stillman Digital

 

Stillman Digital is a leading digital asset liquidity provider that offers limitless liquidity solutions for businesses, focusing on industry-leading trade execution, settlement, and technology. For more information, please visit https://www.stillmandigital.com

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the growth of AUM; digital asset treasury strategy of the Company; expansion of digital asset ETPs; yield amounts from the Company’s validator nodes; investor interest and confidence in digital assets; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton

Chief Executive Officer

ir@defi.tech

(323) 537-7681

 

5

 

Exhibit 99.114

 

 

DeFi Technologies Announces Attendance and Platinum Sponsorship of Saudi Capital Markets Forum (CMF) Riyadh 2025

 

Toronto, Canada, February 6, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce that its subsidiary Valour, a leading issuer of exchange-traded products (“ETPs”) providing simplified access to digital assets, will be a Platinum Sponsor of the 2025 Capital Markets Forum (“CMF Riyadh”), taking place from February 18–20, 2025, at the prestigious King Abdullah Financial District (KAFD) Conference Center in Riyadh, Saudi Arabia.

 

Valour and DeFi Technologies’ sponsorship of the CMF 2025 underscores their strategic commitment to expanding their presence in the Middle East and in the Kingdom of Saudi Arabia more specifically. This Platinum Sponsorship is an affirmation of Valour and DeFi Technologies’ commitment to support Saudi Arabia’s ambitious economic transformation plan, which aims to build an innovative and sustainable economy as part of the Vision 2030, a blueprint to diversify the economy, empower citizens, create a vibrant environment for both local and international investors, and establish Saudi Arabia as a global leader. Moreover, it underscores their strategic initiative to build on the growing interest in digital assets throughout the Middle East.

 

Held under the patronage of His Excellency Mohammed Al-Jadaan, Minister of Finance and Chairman of the Financial Sector Development Program Committee, CMF Riyadh is the premier platform for discussions on the future of capital markets in the Kingdom of Saudi Arabia and beyond. The event will bring together investors, financial institutions, corporate executives, government representatives, and policymakers to explore global economic trends, investment strategies, fintech innovations, ESG considerations, and the evolving role of capital markets in sustainable economic growth.

 

By joining leading financial institutions such as HSBC, EFG Hermes, Bloomberg, Goldman Sachs, Morgan Stanley, and J.P. Morgan as a sponsor, DeFi Technologies underscores its commitment to driving innovation and expanding access to digital asset investment solutions in the global financial ecosystem. With a core focus on bridging the gap between traditional finance (TradFi) and decentralized finance (DeFi), DeFi Technologies is at the forefront of delivering regulated, institutionally accessible digital asset products that align with the evolving financial landscape.

 

The sponsorship reflects DeFi Technologies’ strategic interest in the Middle East’s financial sector and aligns with its mission to empower investors with seamless access to regulated digital asset products. Through its subsidiary Valour, DeFi Technologies enables retail and institutional investors to gain exposure to a diverse range of digital asset investment solutions via their traditional banking and brokerage accounts.

 

Attendees of CMF Riyadh 2025 will have the opportunity to engage with DeFi Technologies’ leadership team to explore institutional-grade digital asset ETPs, innovative DeFi investment strategies, and the future of blockchain-powered financial markets.

 

 

 

 

 

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the growth of AUM; geographical expansion of Valour’s range of ETPs; MOUs; expansion of digital asset ETPs; investor interest and confidence in digital assets; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

 

 

Exhibit 99.115

 

 

DeFi Technologies Added to MSCI Canada Small Cap Index

 

Toronto, Canada, February 11, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce its inclusion in the MSCI Canada Small Cap Index, effective as of February 28, 2025, following the February index review by MSCI Inc.

 

The MSCI Canada Small Cap Index is a key benchmark measuring the performance of the small-cap segment of the Canadian equity market. It is part of MSCI’s Global Equity Index Series (GEIS) and covers approximately 14% of the free float-adjusted market capitalization in Canada. The inclusion of DeFi Technologies in this index reflects the Company’s growth and increasing recognition in the market.

 

Criteria for Inclusion

 

MSCI follows a stringent methodology for selecting companies for the Small Cap Index. The key qualifications include:

 

●Market Capitalization: Companies must fall within a defined market capitalization range for small-cap classification, which MSCI periodically reviews.

 

●Liquidity: Eligible securities must exhibit adequate trading liquidity, ensuring investability and accessibility for investors.

 

●Free Float: Market capitalization is adjusted for the proportion of shares available for public trading, with companies having low free float potentially excluded.

 

●Industry Representation: The index aims for balanced representation across industries, ensuring broad market exposure within the small-cap segment.

 

Significance of the Inclusion

 

Being added to the MSCI Canada Small Cap Index enhances DeFi Technologies’ visibility among institutional investors and funds that track MSCI indices. It also signals strong market performance and increased investor confidence in the Company’s business model and strategic direction.

 

“Our inclusion in the MSCI Canada Small Cap Index marks a significant milestone for DeFi Technologies and validates the progress we’ve made in our mission to bridge traditional finance with the rapidly evolving decentralized financial ecosystem,” said Olivier Roussy Newton, CEO of DeFi Technologies. “This recognition reinforces our commitment to driving innovation and delivering value to our shareholders.”

 

About MSCI Canada Small Cap Index

 

The MSCI Canada Small Cap Index is part of MSCI’s broader global equity indices, which provide essential benchmarks for investors worldwide. The index is widely used by asset managers and institutional investors to track and manage small-cap investments in the Canadian market. The February 2025 index review process considered trading data from the last 10 trading days in January, with the final selection based on a pricing date determined by MSCI’s methodology.

 

 

 

 

 

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the inclusion of the Company in the MSCI Canada Small Cap Index investor interest and confidence in digital assets; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the removal of the Company from the MSCI Canada Small Cap Index; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

 

 

Exhibit 99.116

 

 

DeFi Technologies Appoints Chase Ergen to Board of Directors

 

Toronto, Canada, March 3, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce the appointment of Chase Ergen to its board of directors (the “Board”).

 

Chase Ergen is a visionary entrepreneur and a leading figure in the decentralized finance space. As the son of Charlie Ergen, founder of Dish Network, a subsidiary of Echostar (NASDAQ: SATS), Chase has leveraged his firsthand experience, entrepreneurial roots, and forward-thinking mindset to drive innovation across satellite technology, information and communications technology (ICT), and cross-sector enterprises. With 20 years of experience in the satellite and 5G telecommunications ecosystem, along with deep relationships in U.S. institutional finance, his expertise in emerging technologies and financial systems will be instrumental in advancing DeFi Technologies’ strategic initiatives. His appointment will strengthen the company’s engagement with both retail and institutional communities, leveraging the extensive relationships fostered and built by Dish Network.

 

Concurrently serving as the Executive Director of the ‘Make America Wealthy Again’ Super PAC, Chase leads initiatives aimed at promoting financial empowerment and economic growth. His work focuses on creating opportunities for Americans to build wealth, emphasizing policies that support innovation and entrepreneurship—skills that will be invaluable as DeFi Technologies continues to lead in bridging traditional finance with innovative decentralized finance technologies.

 

A former Bitcoin miner, Chase was an early adopter in the cryptocurrency space, gaining firsthand experience with blockchain technology and decentralized finance long before they became mainstream. His deep understanding of digital assets and financial systems has positioned him as an influential leader in the DeFi ecosystem.

 

“I’m excited to welcome my dear friend Chase to our Board,” said Olivier Roussy Newton, CEO of DeFi Technologies. “His extensive background in finance, technology, and wealth creation aligns with our mission to bridge the gap between traditional and decentralized finance. His insights and leadership will be invaluable as we continue expanding our innovative financial products and services.”

 

Chase has launched and scaled multiple ventures, always with a focus on emerging technologies and wealth creation. His appointment reinforces DeFi Technologies’ commitment to strengthening its leadership team and furthering its mission to reshape the financial landscape through decentralized technologies.

 

Chase’s appointment follows the resignation of Krisztian Toth from the Board who will transition into an advisory role. The Company thanks him for his services as a director.

 

 

 

 

 

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the appointment of directors to the Board; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

 

 

 

Exhibit 99.117

 

 

 

Valour Expands Digital Asset Offerings with the Launch of Valour Dogecoin, Valour Aptos, Valour Sui, and Valour Render ETPs on Börse Frankfurt in Germany

 

Toronto, Canada, March 3, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce that its subsidiary Valour Inc. (“Valour”), a leading issuer of exchange traded products (“ETPs”) that provide simplified access to digital assets, has launched of four new digital asset ETPs on the Börse Frankfurt exchange: Valour Dogecoin (DOGE) EUR ETP, Valour Aptos (APT) EUR ETP, Valour Sui (SUI) EUR ETP, and Valour Render (RENDER) EUR ETP. These new products expand Valour’s commitment to offering investors seamless, secure, and cost-effective exposure to the most innovative digital assets in the market.

 

Introducing New ETPs for Emerging Digital Assets

 

Valour Dogecoin (DOGE) EUR ETP (ISIN: CH1108679791)

 

Dogecoin (DOGE) is one of the most recognized and actively used cryptocurrencies, originally introduced in 2013 as a parody but now serving as a widely adopted digital currency. With a market capitalization of approximately $30.64 billion, DOGE ranks as the 8th largest digital asset globally. It is known for its strong community, fast transaction speeds, and usability for microtransactions, tipping, and merchant payments. The Valour Dogecoin ETP allows investors to gain exposure to DOGE’s performance without the complexities of direct cryptocurrency ownership, featuring a competitive management fee of 1.9%.

 

Valour Aptos (APT) EUR ETP (ISIN: CH1108679783)

 

Aptos (APT) is a next-generation Layer 1 blockchain designed for scalability, reliability, and security. Powered by its innovative Move programming language, Aptos enables fast transactions and a developer-friendly ecosystem. It is focused on advancing Web3 usability and adoption, providing infrastructure for NFTs, DeFi, and beyond. With a market capitalization of $6.19 billion, Aptos ranks 31st globally among digital assets. The Valour Aptos ETP grants investors seamless exposure to the Aptos blockchain ecosystem.

 

Valour Sui (SUI) EUR ETP (ISIN: CH1108679080)

 

Sui (SUI) is an innovative blockchain designed for high throughput and instant finality, making it ideal for applications such as gaming and finance. Sui utilizes an object-centric approach that allows for the independent validation of transactions, leveraging a Byzantine fault-tolerant proof-of-stake (PoS) consensus mechanism. With a market capitalization of $28.01 billion, Sui ranks 15th among digital assets worldwide. The Valour Sui ETP provides investors with access to this advanced blockchain, featuring a 1.9% management fee.

 

 

 

 

 

 

Valour Render (RENDER) EUR ETP (ISIN: CH1108679783)

 

Render (RENDER) is the native cryptocurrency of the Render Network, a decentralized GPU-based rendering platform that optimizes computational power for visual effects, gaming, and digital design. The Render Network enables cost-effective and scalable rendering solutions, fostering innovation across the creative industries. With a market capitalization of $2.26 billion, Render ranks 49th globally among digital assets. The Valour Render ETP offers investors exposure to the expanding world of decentralized computing and digital content creation.

 

Bringing Innovation to European Investors

 

With the introduction of these four new ETPs, Valour continues to expand its portfolio of digital asset investment products, offering European investors diversified and institutional-grade access to the cryptocurrency market. Valour’s ETPs provide a seamless entry point for investors looking to gain exposure to emerging blockchain technologies without the need for direct ownership or complex custody solutions.

 

“We are excited to bring Valour Dogecoin, Valour Aptos, Valour Sui, and Valour Render ETPs to the Börse Frankfurt exchange,” said Olivier Roussy Newton, CEO of Valour. “These new listings underscore our commitment to delivering innovative and accessible digital asset investment solutions to the European market. By offering secure and transparent exposure to some of the most promising protocols, we continue to drive the adoption of digital assets among institutional and retail investors alike.”

 

“After successfully launching 20 products in the Nordics in December, we are now enhancing our product range in Germany with the most sought-after underlying digital assets. Investor demand for diversified crypto exposure continues to rise, and Aptos, Sui, Render, and Dogecoin stand out as some of the most compelling assets in the market. This launch reinforces our commitment to providing institutional-grade access to the digital asset space, aligned with market trends and investor needs.” said Johanna Belitz, Head of Nordics

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

2

 

 

 

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the listing of ETPs; the development and prospects of the underlying digital assets; investor confidence in Valour’s ETPs; investor interest and confidence in digital assets; the regulatory environment with respect to the growth and adoption of decentralized finance and digital assets; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

3

 

Exhibit 99.118

 

FORM 51-102F3 MATERIAL CHANGE REPORT

 

ITEM 1Name and Address of Company:

 

DeFi Technologies Inc. (“DeFi” or the “Company”)

198 Davenport Road

Toronto, Ontario

M5R 1J2

 

ITEM 2Date of Material Change:

 

March 3, 2025

 

ITEM 3News Release:

 

A news release was issued by the Company on March 3, 2025 and subsequently filed on SEDAR.

 

ITEM 4Summary of Material Change:

 

The Company announced the appointment of Chase Ergen to its board of directors.

 

ITEM 5Full Description of Material Change:

 

The Company announced the appointment of Chase Ergen to its board of directors.

 

The Company also announced that Krisztian Toth has resigned as a member of the board of directors.

 

ITEM 6Reliance on subsection 7.1(2) or (3) of National Instrument 51-102:

 

Not applicable.

 

ITEM 7Omitted Information:

 

Not applicable.

 

ITEM 8Executive Officer:

 

Olivier Roussy Newton

Chief Executive Officer

olivier@defi.tech

 

ITEM 9Date of Report:

 

March 3, 2025

Exhibit 99.119

 

DeFi Technologies Acquires Majority Stake in Swiss Artificial Intelligence and Asset Management Firm Neuronomics AG

 

●DeFi Technologies Increases its Stake in Neuronomics AG to 52.5%: DeFi Technologies acquires a majority stake in Neuronomics AG, a Swiss asset management firm specializing in artificial intelligence and computational neurosciences.
   
●Strategic Expansion in Asset Management and Trading: This acquisition strengthens DeFi Technologies’ artificial intelligence, asset management and trading capabilities, diversifying revenue streams while complementing DeFi Alpha, the Company’s specialized arbitrage trading desk.
   
●Technological Innovation and Performance Excellence: Neuronomics utilizes advanced model-driven quantitative strategies that have delivered exceptional risk-adjusted performance. By significantly outperforming benchmarks, Neuronomics positions DeFi Technologies for continued growth in the asset management sector and the wider cryptocurrency market.

 

Toronto - March 7, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce announce that it has increased its stake in Neuronomics AG (“Neuronomics”), a Swiss asset management firm specializing in artificial intelligence and model-driven quantitative trading strategies, to 52.5% (the “Acquisition”)

 

DeFi Technologies’ Previous Investment and Strategic Expansion

 

This Acquisition follows DeFi Technologies’ earlier subscription to a capital increase in Neuronomics, where the Company acquired a 10% stake. The Acquisition of the majority stake in Neuronomics further aligns with DeFi Technologies’ strategy to expand its presence in artificial intelligence, asset management and trading sectors while diversifying its revenue streams. This strategic acquisition complements DeFi Technologies’ existing initiatives, including the DeFi Alpha arbitrage trading desk, which will benefit from Neuronomics’ technological expertise and market insights.

 

Strategic Acquisition to Expand Capabilities

 

Neuronomics, founded in Switzerland, has established itself as a leader in asset management by developing advanced quantitative trading strategies based on artificial intelligence (“AI”) and computational neuroscience. The firm holds an asset management license from the Swiss Financial Market Supervisory Authority (“FINMA”), enabling it to manage and administer financial assets on behalf of clients. Neuronomics’ research-driven approach focuses on two key areas: AI and Computational Neuroscience in Finance.

 

 

 

 

Artificial Intelligence in Finance

 

Neuronomics has pioneered the application of advanced AI models in financial settings, delivering AI strategies that outperform market index across all key metrics. The firm’s proprietary AI models combine multiple algorithms to enhance predictive accuracy and reduce model overfitting. Their approach translates AI model outputs into portfolio allocations, optimizing asset distribution to maximize returns while managing risk. Additionally, Neuronomics is at the forefront of customizing Large Language Models (“LLMs”) for predicting asset price developments based on real-time market news. This capability positions Neuronomics to identify emerging investment narratives well ahead of competitors, offering a distinct edge in the market).

 

Computational Neuroscience in Finance

 

Neuronomics also explores how human cognitive biases and emotional responses shape financial behavior, uncovering market inefficiencies that traditional strategies often overlook. Through computational neuroscience, Neuronomics models the neuronal processes of traders, identifying predictable market behaviors that result from overreactions or emotional trading. This approach has been particularly successful in the cryptocurrency market, which is highly influenced by emotional decision-making. Since launching their neurofinance-based crypto strategy in July 2020, Neuronomics has consistently delivered high risk-adjusted returns with minimal correlation to traditional markets

 

Technological Innovation and Performance Excellence

 

Neuronomics leverages cutting-edge AI technology to offer high risk-adjusted returns in the cryptocurrency market. Their latest developed AI-powered quantitative strategy, set to launch with DeFi Technologies, has demonstrated exceptional performance, with forward-testing analysis showing annual returns of 80% and significantly reduced drawdowns and volatility compared to passive market exposure. The AI-driven model removes human bias, enhances consistency, and dynamically adapts to evolving market conditions, ensuring sustained performance even in volatile markets.

 

These strategies are built on a diversified, long-only crypto portfolio, rebalanced based on advanced AI models that identify market inefficiencies such as momentum and reversal opportunities. The AI-driven approach has consistently outperformed benchmarks like the CCi30 index, achieving a Sharpe Ratio greater than 1, underscoring its superior risk-adjusted returns. Their Neurofin strategy underscores this resilience by generating positive net returns amid a market downturn exceeding 20% over the past month. Neuronomics’ expertise in AI-driven strategies will significantly enhance DeFi Technologies’ capabilities, especially as a complement to DeFi Alpha, its specialized arbitrage trading desk, which focuses on identifying and capitalizing on low-risk opportunities within the cryptocurrency market.

 

 

2

 

 

 

Background on Management

 

●Dr. Lorric Ziegler, Partner, brings a strong background in AI and computational neuroscience, with a PhD from EPFL and experience in machine learning and AI applications at prominent Swiss investment firms. Since joining Neuronomics in 2021, Dr. Ziegler has optimized the firm’s IT, asset management, and risk management processes.
   
●Dr. Michael Kometer, Co-Founder and Board Member, holds a PhD from the University of Zurich and is an expert in algorithmic trading and emotional decision-making in finance. His research has been widely cited, and his work integrates neuroscience, AI, and finance to develop cutting-edge investment strategies.
   
●Patrick Schuppli, Partner, manages business operations and relationships at Neuronomics. With a Master’s in Business and Economics from the University of Basel, his expertise in commodity trading and blockchain-based projects has been pivotal in driving business growth.
   
●Gilles Ramstein, AI Scientist, specializes in machine learning and data science. His innovative work in automating financial processes and developing AI-driven strategies has significantly enhanced the firm’s predictive models.

 

Executive Comments

 

Olivier Roussy Newton, Chief Executive Officer of DeFi Technologies, commented: “This acquisition marks a significant milestone for DeFi Technologies, not only enhancing our position in asset management but also expanding our capabilities in quantitative trading. Neuronomics’ expertise in AI and computational neuroscience will complement our existing trading operations, particularly through DeFi Alpha. This acquisition is a natural extension of our growth strategy, which focuses on diversifying revenue streams, strengthening our trading desk, and enhancing our technological expertise in both traditional and decentralized finance markets.”

 

Michael Kometer, Co-Founder of Neuronomics, added: “Partnering with DeFi Technologies presents a unique opportunity to scale our operations and further integrate our advanced AI capabilities and model-driven strategies within DeFi Technologies’ broader ecosystem. Together, we will continue to drive innovation and deliver exceptional value to our clients, expanding our reach and operational impact.”

 

3

 

 

Acquisition Details

 

In connection with the Acquisition, the Company issued 186,304 common shares of the Company (the “Payment Shares”), plus additional cash considerations, to the selling shareholders of Neuronomics. 152,433 of the Payment Shares are subject to a lock-up schedule, with 50% released in three months and the remainder released in six months. No finder fees were paid in connection with the Acquisition. Closing of the Acquisition is subject to the acceptance of Cboe Canada Exchange.

 

About Neuronomics AG

 

Neuronomics AG is a Swiss asset management firm specializing in AI-powered quantitative trading strategies. By integrating artificial intelligence, computational neuroscience and quantitative finance, Neuronomics delivers cutting-edge solutions that drive superior risk-adjusted performance in financial markets. For more information please visit https://www.neuronomics.com/

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that provide retail and institutional investors with simple and secure access to digital assets through their traditional bank accounts. Valour’s fully hedged digital asset ETPs feature low to zero management fees and are listed on various European exchanges, banks, and broker platforms. Valour operates as part of the asset management business line of DeFi Technologies Inc.

 

For more information about Valour, to subscribe, or to receive updates, visit valour.com

 

4

 

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to statements regarding the closing of the Acquisition; returns generated by Neuronomic’s AI models; the business and growth opportunities of Neuronomics; synergies realized from the Acquisition; ability of DeFi Technologies to utilize Neuronomic’s trading strategies; the regulatory environment with respect to the growth and adoption of decentralized finance and digital assets; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited to the growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

5

 

 

Exhibit 99.120

 

 

DeFi Technologies Provides Monthly Corporate Update: Valour Reports C$1.07 Billion (US$750 Million) in AUM, and Monthly Net Inflows of C$16.4 Million (US$11.4 Million) in February 2025, Among Other Key Developments

 

●AUM & Continued Monthly Net Inflows: Valour reported assets under management (AUM) of C$1.07B (US$750M) as of March 6, 2025, a 25% decrease driven by digital asset price declines. Net inflows for February remained strong at C$16.4M (US$11.4M), marking the fourth consecutive month of eight-figure inflows. From January to October 2024, Valour saw total inflows of C$101.3M (US$70.5M), while in just the last four months, inflows have already surpassed that total at C$141.7M (US$98.6M)—demonstrating accelerating investor demand of Valour’s ETPs.

 

●Strong Financial Position & Treasury Strategy: The company maintains a total cash, USDT, and treasury balance of C$66M (US$46M), comprising C$20.6M (US$14.4M) in cash and USDT, reflecting a 23.8% decrease from the previous month, and C$45.4M (US$31.6M) in its digital asset treasury, a 28.5% decline from the previous month.

 

●Stillman Digital’s Growth: Stillman processed C$1.84B (US$1.28B) in February client volume and generated C$1.03M (US$713K) in revenue, marking its fourth consecutive month of seven-figure revenue. Stillman Digital was added to the Circle Alliance Program and Talos institutional trading platform, reinforcing its stablecoin and electronic trading expansion.

 

Toronto, Canada, March 10, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce that its subsidiary, Valour Inc., and Valour Digital Securities Limited (together, "Valour"), a leading issuer of exchange traded products ("ETPs") reports assets under management (“AUM”) of C$1.07 Billion (US$750 Million) as of March 6, 2025, reflecting a 25% decrease from the previous month, driven by a decrease digital asset prices and net inflows of C$16.4 Million (US$11.4 Million).

 

Net Inflows and Investor Confidence

In February, Valour recorded substantial net inflows of C$16.4 million (US$11.4 million), marking its fourth consecutive month of eight-figure inflows. This achievement comes despite a month of record outflows across global exchanges and funds. From January to October 2024, Valour saw total inflows of C$101.3 million (US$70.5 million). In just the last four months, it has already exceeded that amount, with C$141.7 million (US$98.6 million) in inflows. This continued momentum underscores strong investor confidence and the growing demand for Valour’s diverse range of ETPs.

 

 

 

 

 

Key Products Driving Inflows

A combination of established and newer ETP listings, including SUI, BTC and ADA drove the exceptional performance. Key contributors include:

 

●VALOUR SUISEK SEK: C$3,918,862 (US$2,713,058)

 

●VALOUR BTCSEK SEK: C$3,179,025 (US$2,200,863)

 

●VALOUR ADASEK SEK: C$1,660,811 (US$1,149,792)

 

●VALOUR XRPSEK SEK: C$1,348,325 (US$933,456)

 

●VALOUR ETHSEK SEK: C$1,028,474 (US$712,021)

 

These inflows highlight Valour's leadership in providing access to diverse digital assets.

 

Valour’s Top ETPs by AUM

 

Through its subsidiary Valour, DeFi Technologies generates revenue in part by staking its AUM. In Q3 2024, Valour earned an approximate 8.12% yield on AUM from staking and management fees. This was based on staking an average of 67% of its total AUM, which amounted to C$753 million (US$537 million).

 

●Valour SOL: C$326,211,448 (US$226,969,176)

 

●Valour BTC: C$319,974,070 (US$222,629,376)

 

●Valour ADA: C$91,197,016 (US$63,452,438)

 

●Valour XRP: C$76,501,519 (US$53,227,705)

 

●Valour ETH: C$65,649,690 (US$45,677,294)

 

●Valour SUI: C$56,044,110 (US$38,993,989)

 

●Valour DOT: C$19,402,298 (US$13,499,599)

 

●Valour AVAX: C$18,751,945 (US$13,047,101)

 

Strong Financial Position

As of February 28, 2025, the Company maintained a strong financial position:

 

2

 

 

 

Cash and USDT Balance: Approximately C$20.6 million (US$14.4 million).

 

Loans Payable: Approximately C$8.6 million (US$6 million), unchanged from the previous month, primarily attributed to the ongoing Genesis restructuring

 

 

Digital Asset Treasury

The Company maintained a diversified treasury portfolio while acquiring an additional 700,000 ADA and 50,000 DOT tokens. The portfolio's total value stood at approximately C$45.4 million (US$31.6 million). The Company may choose to rebalance or expand its treasury at any time using its available C$66 million (US$46 million) in cash, USDT, and other treasury holdings.

 

●208.8 BTC: C$27,118,709 (US$18,868,471)

 

●433,322 AVAX: C$13,609,238 (US$9,468,943)

 

●14,375 SOL: C$3,040,625 (US$2,115,586)

 

●1,442,703 CORE: C$985,131 (US$685,428)

 

●181,616 DOT: C$1,170,681 (US$814,529)

 

●1,286,683 ADA: C$1,709,663 (US$1,189,538)

 

●121 ETH: C$390,462 (US$271,673)

 

●490.5 UNI: C$5,128 (US$3,568)

 

 

DeFi Technologies Operated Validator Nodes

 

Aside from staking a majority of Valour’s AUM to earn yield, DeFi Technologies also operates three validator nodes: one on Solana (“SOL”), one on CORE, and another on Cardano (“ADA”). The Company stakes a portion of its C$326.2 million (US$227 million) in SOL on its validator node, generating an approximate 8% yield. If the entire current SOL holdings were staked, it would generate approximately C$26.1 million (US$18.16 million) in revenue annually as of current digital asset prices.

 

Additionally, on its CORE validator, the Company stakes a portion of its C$320 million (US$223 million) in BTC holdings, generating a yield between 6-8%, with a midpoint estimate of C$22.4 million (US$15.58 million) in annual revenue as of current digital asset prices.

 

On its Cardano validator, DeFi stakes a portion of its C$91.2 million (US$63.45 million) in AUM, generating an estimated 2.7% yield, equating to C$2.46 million (US$1.71 million) annually as of current digital asset prices.

 

DeFi Alpha Strategy

 

The Company is assessing multiple arbitrage opportunities. In Q2 2024, it generated C$111.5 million (US$82.0 million) in revenue, followed by C$20.6 million (US$14.7 million) in Q3 2024, with zero losses to date. This strategy has strengthened the Company's financial position, enabling debt repayment and supporting the expansion of its digital asset treasury strategy.

 

3

 

 

 

Stillman Digital

 

Stillman Digital Inc. and Stillman Digital Bermuda Ltd. (together, “Stillman Digital”) continues to deliver strong trading performance, further solidifying its role in institutional digital asset markets. In February 2025, Stillman Digital processed C$1.84 billion (US$1.28 billion) in client trading volume, generating C$1,025,503 (US$713,518) in trading revenue. This follows January’s volume of C$2.08 billion (US$1.45 billion) and revenue of C$1,074,217 (US$747,412). Notably, Stillman Digital recorded a single-day peak revenue of C$119,291 (US$83,000) in February, underscoring the potential scalability of its trading operations.

 

Stillman Digital remains focused on expanding its electronic trading capabilities and growing its institutional book of business. Additionally, Stillman Digital has been added as a member of the Circle Alliance Program, reinforcing its emphasis on stablecoin trading and strengthening its international presence. Further advancing its institutional footprint, Stillman Digital has also been added as a Maker on the Talos institutional trading platform.

 

With its highly scalable business model, built on a strong technological and regulatory foundation, Stillman Digital is well-positioned for continued growth as it refines and optimizes its trading infrastructure.

 

Recent Strategic Developments from February include:

 

DeFi Technologies Added to MSCI Canada Small Cap Index

 

The Company was added to the MSCI Canada Small Cap Index, effective February 28, 2025, highlighting its growth and market recognition. As part of MSCI’s Global Equity Index Series (GEIS), the index benchmarks small-cap equities in Canada, covering 14% of the country’s free float-adjusted market capitalization. Inclusion enhances DeFi Technologies' visibility among institutional investors and reflects strong market performance and investor confidence.

 

DeFi Technologies Announces Attendance and Platinum Sponsorship of the Capital Markets Forum Riyadh 2025

 

The Company was a Platinum Sponsor of the Capital Markets Forum (CMF) 2025, held February 18–20 in Riyadh, Saudi Arabia. The sponsorship reinforced DeFi Technologies' expansion into the Middle East and its support for Saudi Arabia’s Vision 2030. CMF Riyadh, hosted under His Excellency Mohammed Al-Jadaan, brought together global investors, financial institutions, and policymakers to discuss the future of capital markets. By sponsoring alongside HSBC, Goldman Sachs, and Morgan Stanley, DeFi Technologies strengthened its position in bridging TradFi and DeFi with regulated digital asset products.

 

DeFi Technologies Signs Binding LOI with CoreFi Strategy and Orinswift Ventures, Secures US$20M CORE Token Commitment from the Core Foundation to Drive Bitcoin Finance

 

DeFi Technologies signed a binding letter agreement with CoreFi Strategy and Orinswift Ventures for a reverse takeover (the “CoreFi LOI”). As part of this initiative, the Core Foundation will contribute US$20 million in CORE Tokens to bolster CoreFi’s treasury, while CoreFi plans to raise an additional US$20 million in financing to drive growth in Bitcoin Finance (BTCfi) technologies. CoreFi Strategy, inspired by MicroStrategy, offers a regulated, leveraged Bitcoin yield approach, leveraging the CORE blockchain, which supports Bitcoin staking, an EVM-compatible ecosystem, and over 5,700 BTC staked with $850M+ total value locked.

 

4

 

 

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

About Stillman Digital

 

Stillman Digital is a leading digital asset liquidity provider that offers limitless liquidity solutions for businesses, focusing on industry-leading trade execution, settlement, and technology. For more information, please visit https://www.stillmandigital.com

 

Cautionary note regarding forward-looking information:

 

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the growth of AUM; digital asset treasury strategy of the Company; expansion of digital asset ETPs; yield amounts from the Company’s validator nodes; investor interest and demand for Valour’s ETP; investor confidence in digital assets generally; scalability of Stillman Digital’s business model; the CoreFi LOI and the closing of the transactions thereunder; arbitrage opportunitites by DeFi Alpha; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; fluctuation in digital asset prices; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

5

 

Exhibit 99.121

 

FORM 72-503F

REPORT OF DISTRIBUTIONS OUTSIDE CANADA

 

Instructions:

 

1.An issuer that is required to complete this Form must do so through the online e-form available at http://www.osc.gov.on.ca.

 

2.Security codes: Wherever this form requires disclosure of the type of security, use the following security codes:

 

Security code Security type
BND Bonds
CER Certificates (including pass-through certificates, trust certificates)
CMS Common shares
CVD Convertible debentures
CVN Convertible notes
CVP Convertible preferred shares
DCT Digital coins or tokens
DEB Debentures
DRS Depository receipts (such as American or Global depository receipts/shares)
FTS Flow-through shares
FTU Flow-through units
LPU Limited partnership units and limited partnership interests (including capital commitments)
MTG Mortgages (other than syndicated mortgages)
NOT Notes (include all types of notes except convertible notes)
OPT Options
PRS Preferred shares
RTS Rights
SMG Syndicated mortgages
SUB Subscription receipts
UBS Units of bundled securities (such as a unit consisting of a common share and a warrant)
UNT Units (exclude units of bundled securities, include trust units and mutual fund units)
W NT Warrants (including special warrants)
OTH Other securities not included above (if selected, provide details of security type in Item 7d)

 

3.Distributions by more than one issuer of a single security: If two or more issuers distributed a single security, provide the full legal name(s) of the co-issuer(s) in section 1c) other than the issuer named in section 1a).

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.122

 

 

DeFi Technologies Announces Inclusion in MVIS Global Digital Assets Equity Index and VanEck Digital Transformation ETF (DAPP)

 

Toronto, Canada, March 24, 2025 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance, is pleased to announce its inclusion in the MVIS Global Digital Assets Equity Index and VanEck Digital Transformation ETF (NASDAQ: DAPP), a prominent exchange-traded fund designed to provide investors with exposure to companies participating in the rapidly evolving digital assets economy.

 

VanEck’s Digital Transformation ETF seeks to track the MVIS Global Digital Assets Equity Index, offering diversified exposure to digital asset exchanges, miners, infrastructure companies, and other leaders driving digital asset innovation. Notable companies within the ETF include Microstrategy Inc., Coinbase Global Inc., Block Inc., Galaxy Digital Holdings Ltd., Mara Holdings Inc., Riot Platforms Inc., Hut 8 Corp., Cipher Mining Inc., Hive Blockchain Technologies Ltd., and others.

 

“Our inclusion in the VanEck Digital Transformation ETF and MVIS Global Index validates the significant strides we’ve made in bridging traditional financial markets with digital assets,” said Olivier Roussy Newton, CEO of DeFi Technologies. “We are honored to join this select group of forward-thinking companies and look forward to continuing to deliver value to our investors by executing on our growth strategy, which will inevitably result in more index inclusions.”

 

This milestone comes on the heels of DeFi Technologies’ recent addition to the MSCI Canada Small Cap Index, reinforcing its status as a prominent innovator within the digital asset ecosystem. It also reflects the growing acknowledgment and acceptance by major institutions of DeFi Technologies’ diverse, profitable, and rapidly expanding business model.

 

About VanEck and MVIS

 

VanEck is a renowned investment management firm with a storied history dating back to 1955. Headquartered in New York, it is one of the largest investment managers globally, with US$113.8 billion in assets under management as of December 31, 2024.

 

As a subsidiary of VanEck, MVIS develops, monitors, and markets a variety of indexes under the MarketVector™, MVIS®, and BlueStar® brands, with approximately US$28.76 billion in assets under management tied to its indexes as of recent reports. The MVIS Global Digital Assets Equity Index is a specialized benchmark designed to track the performance of companies directly involved in the digital assets sector.

 

For more information about the VanEck Digital Transformation ETF, please visit https://www.vaneck.com/us/en/investments/digital-transformation-etf-dapp/overview/

 

 

 

 

 

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the inclusion of the Company in the VanEck Digital Transformation ETF; investor interest and confidence in digital assets; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the removal of the Company from the VanEck Digital Transformation ETF; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

 

 

 

Exhibit 99.123

 

 

 

DeFi Technologies Announces Shareholder Call to Discuss 2024 Financial Results

 

TORONTO – March 26, 2025 – (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), today announces it will conduct a shareholder call on Monday March 31, 2025 at 12:00 p.m. EST to discuss its financial performance for the three month and twelve month period ending December 31, 2024.

 

IMPORTANT – To register for the webcast see below:

 

When: March 31, 2025

Time: 12:00 PM Eastern Time

Topic: DeFi Technologies 2024 Financials

 

Register in advance for this webinar:

https://zoom.us/webinar/register/WN_YpQiKECZQGKQ51DjvovWjw

 

After registering, you will receive a confirmation email containing information about joining the webinar.

 

Learn more about DeFi Technologies at defi.tech

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/  

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

 

 

 

About Reflexivity Research

 

Reflexivity Research LLC is a leading research firm specializing in the creation of high-quality, in-depth research reports for the bitcoin and digital asset industry, empowering investors with valuable insights. For more information please visit https://www.reflexivityresearch.com/

 


About Stillman Digital

 

Stillman Digital is a leading digital asset liquidity provider that offers limitless liquidity solutions for businesses, focusing on industry-leading trade execution, settlement, and technology. For more information, please visit https://www.stillmandigital.com

 

About Neuronomics AG

 

Neuronomics AG is a Swiss asset management firm specializing in AI-powered quantitative trading strategies. By integrating artificial intelligence, computational neuroscience and quantitative finance, Neuronomics delivers cutting-edge solutions that drive superior risk-adjusted performance in financial markets. For more information please visit https://www.neuronomics.com/

 

Cautionary note regarding forward-looking information:

 

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the financial results of the Company; the shareholder call; development of ETPs; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by DeFi Technologies and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited to the growth and development of decentralized finance and the digital asset sector; rules and regulations with respect to decentralized finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

 

 

Exhibit 99.124

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

For the years ended December 31, 2024 and 2023

 

(expressed in Canadian dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

206-5250 Solar Drive, Mississauga, ON, L4W 0G4

Phone: (647) 793-8100 | Fax: (905) 497-1190

Web: www.hdcpa.ca

 

Independent Auditors’ Report

 

 

To the Shareholders of DeFi Technologies Inc.

 

Opinion

 

We have audited the consolidated financial statements of DeFi Technologies Inc. and its subsidiaries (the “Group” or the “Company”), which comprise the consolidated statements of financial position as at December 31, 2024 and December 31, 2023, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.

 

In our opinion, these consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2024 and December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards {“IFRS”) as issued by the International Accounting Standards Board.

 

Basis for Opinion

 

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our opinion.

 

Material Uncertainty Related to Going Concern

 

We draw attention to Note 1 to the consolidated financial statements which describes the material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

Key Audit Matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2024. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

In addition to the matter described in the Material Uncertainty Related to Going Concern, we have determined the matters described below to be the key audit matters to be communicated in our auditor’s report.

 

1.Private Investments – Valuation

 

Description of the key audit matter:

 

The carrying value of Private Investments amounted to $53,740,153 as at December 31, 2024 (2023 -$43,540,534). The Company accounts for these investments at fair value through profit and loss. See Notes 5 and 21 in the consolidated financial statements for further details.

 

2

 

 

Why the matter is a key audit matter:

 

Private investments is a key audit matter as the assessment of the fair value requires management to apply judgement and estimates in assessing the fair value of the investment. The principal risks relate to the assessment of management’s methodology used to value the investment as well as assessing the fair value of the investment.

 

How our audit addressed the key audit matter:

 

We evaluated management’s assessment of the fair value of investments with reference to the Company’s accounting policy and IFRS. Specifically, our work included, but was not limited to, the following procedures:

 

●Obtaining management’s assessment of the fair value of the investment that was prepared with the assistance of their expert;
   
●Engaging an independent expert with the appropriate expertise to review management’s assessment and the key inputs and assumptions;
   
●Obtaining our expert’s independent fair value range of the private investments;
   
●Evaluating the work of the auditor’s expert to value investments including the valuation technique and assumptions used;
   
●Comparing the valuation from the expert to the valuation prepared by management; and
   
●Reviewing the adequacy of the presentation, classification and disclosures in the consolidated financial statements.

 

2.Equity investments in digital assets

 

Description of the key audit matter

 

During the year, the Company invested in digital asset funds with a fair value of $370,408,924 as at December 31, 2024. The underlying tokens within the funds are locked and will become unlocked and distributable according to a monthly unlocking schedule with the last release across all funds scheduled for January 2028. See Notes 6 and 7 in the consolidated financial statements for further details.

 

Why the matter is a key audit matter

 

The investment in digital asset funds is a key audit matter due to its significant magnitude relative to the consolidated financial statements and the non-routine nature of the transaction for the Company. Significant judgement was required from management in determining the appropriate IFRS to apply for this investment and determining the accounting policy in reference to the IFRS. There was also significant judgement required in estimating the fair value of the investment, particularly given the complexities introduced by the lack of marketability.

 

3

 

 

How our audit addressed the key audit matter

 

We evaluated management’s assessment of the accounting policy and valuation equity investments with reference to the applicable IFRS. Specifically our work included, but was not limited to, the following procedures:

 

●Obtaining an understanding of the nature of the funds and the fund administrators managing the funds;
   
●Obtaining and analyzing management’s accounting assessment of the investment in accordance with IFRS;
   
●Performing tests of details on the initial investment and transactions during the year;
   
●Obtaining confirmation from the fund administrators of the tokens within the funds and their fair value;
   
●Obtaining management’s calculation of the fair-value of the fund using a discount for lack of marketability;
   
●Engaging an independent expert to develop a range and point estimate of the discount for lack of marketability and comparing fair value using the expert’s inputs to management’s estimate;
   
●Reviewing the adequacy of the presentation, classification and disclosures in the consolidated financial statements.

 

3.Digital Assets, Digital Assets Loaned and Digital Assets Staked

 

Description of the key audit matter

 

The Company has digital assets with a carrying value of $398,846,527 as at December 31, 2024 (2023- $188,986,066), digital assets loaned of $55,568,531 as at December 31, 2024 (2023 – $270,362,684) and digital assets staked of $345,381,533 as at December 31, 2024 (2023 - $30,516,888). See Note 6 in the consolidated financial statements for further details.

 

Why the matter is a key audit matter

 

Digital assets are a key audit matter due to the significant magnitude of the holdings relative to the consolidated financial statements. Significant judgement was required by management in determining the appropriate accounting policy under IFRS, assessing the Company’s rights and ownership of the digital assets, and evaluating whether the entity has control over digital assets.

 

How our audit addressed the key audit matter

 

We evaluated management’s assessment of the accounting policy, existence, valuation and rights and ownership of digital assets with reference to the Company’s accounting policy. Specifically our work included, but was not limited to, the following procedures:

 

●Consulting with a subject matter expert regarding our planned audit response to address risks of material misstatement;
   
●Obtaining an understanding of the counterparties that had custody of digital assets;
   
●Reviewing service organization control reports, mapping service organization controls to audit risks and testing client-user entity controls;
   
●Obtaining and analyzing management’s accounting assessment of each counterparty and arrangement to determine whether the appropriate accounting policy was applied in accordance with IFRS;
   
●Performing a test of details on digital asset transactions from December 31, 2023 to December 31, 2024

 

4

 

 

●Confirming December 31, 2024 coin balances with the respective counterparties;
   
●Performing audit procedures to confirm existence, rights and ownership of digital assets;
   
●Testing the valuation of digital assets based on the Company’s accounting policy;
   
●Reviewing the adequacy of the presentation, classification and disclosures in the consolidated financial statements.

 

4.Goodwill – Impairment

 

Description of the key audit matter:

 

The carrying value of Goodwill amounted to $49,340,808 as at December 31, 2024 (2023 - $46,712,027). Under IAS 36, Goodwill shall be assessed for impairment annually. The Company performed an assessment of Goodwill for impairment and concluded that it was not impaired for the year-ended December 31, 2023 and December 31, 2024. See Note 10 in the consolidated financial statements for further details.

 

Why the matter is a key audit matter:

 

Goodwill is a key audit matter as the assessment of the carrying value requires management to apply judgement and estimates in assessing whether any impairment has arisen at year end, and in quantifying any such impairment. The principal risks relate to the assessment of management’s cash flow forecast and the methodology used to value the Goodwill.

 

How our audit addressed the key audit matter:

 

We evaluated management’s assessment of the carrying value of Goodwill performed with reference to the criteria of IAS 36 and the Company’s accounting policy. Specifically, our work included, but was not limited to, the following procedures:

 

●Evaluating whether the expert engaged by management to value Goodwill has the appropriate expertise;
   
●Engaging an expert to evaluate the work of the expert engaged by management to value Goodwill including the valuation techniques and assumptions used in the valuation;
   
●Analyzing, with the assistance of the expert, that historical information used by the valuation expert agreed to the historical financial statements and forecasted assumptions were supportable;
   
●Confirming that the forecasts used as basis for the valuation were appropriately approved by management and the board of directors; and
   
●Reviewing the adequacy of the disclosures in the consolidated financial statements.

 

Other Information

 

Management is responsible for the other information. The other information comprises:

 

●The information included in the Management’s Discussion and Analysis of Financial Conditions and Results of Operations for the year ended December 31, 2024.

 

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

5

 

 

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

 

We obtained the Management’s Discussion and Analysis of Financial Conditions and Results of Operations for the year ended December 31, 2024 prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

 

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

 

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

 

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

●Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
   
●Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
   
●Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

●Conclude on the appropriateness of management’s use of the going concern basis of accounting and, base on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

6

 

 

●Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
   
●Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2024, and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

The engagement partner on the audit resulting in this independent auditor’s report is Harpreet Dhawan.

 

  “Harpreet Dhawan” (Signed)
  HDCPA Professional Corporation
Mississauga, ON Chartered Professional Accountants,
March 30, 2025 Authorized to practice public accounting by CPA Ontario

 

7

 

 

DeFi Technologies Inc.

 

Table of Contents

 

Consolidated statements of financial position 9
   
Consolidated statements of operations and comprehensive loss 10
   
Consolidated statements of cash flows 11
   
Consolidated statements of changes in equity 12
   
Notes to the consolidated financial statements 13-67

 

8

 

 

DeFi Technologies Inc. 
Consolidated Statements of Financial Position 
(Expressed in Canadian dollars)

   Note  December 31,
2024		   December 31,
2023		 
      $   $ 
            
Assets           
Current           
Cash and cash equivalents  3,21   22,923,872    6,727,482 
Client cash deposits  3   15,346,080    - 
Prepaid expenses and other assets  4   2,585,451    1,563,860 
Public investments, at fair value through profit and loss  5,21,24   1,119,586    - 
Client digital assets  8   3,356,235    - 
Digital assets  6,14   398,364,913    188,342,579 
Digital assets loaned  6   55,568,531    270,362,684 
Digital assets staked  6,7   345,381,533    30,516,888 
Equity investments in digital assets, at FVTPL  6,7   181,757,532    - 
Total current assets      1,026,403,733    497,513,493 
              
Private investments, at fair value through profit and loss  5,21,24   53,740,154    43,540,534 
Digital assets  6   481,614    643,487 
Equity investments in digital assets, at FVTPL  6,7   188,651,392    - 
Equipment      130    7,679 
Intangible assets  10   2,104,816    3,542,888 
Goodwill  10   49,340,808    46,712,027 
Total assets      1,320,722,647    591,960,108 
Liabilities and shareholders’ equity             
Current liabilities             
Accounts payable and accrued liabilities  11,24,25   5,010,922    9,174,846 
Loans payable  12,21   13,947,681    56,210,709 
Trading liabilities  9   25,097,116    - 
ETP holders payable  13,15   1,253,515,501    508,130,490 
Total current liabilities      1,297,571,220    573,516,045 
Shareholders’ equity             
Common shares  19(b)   201,478,504    170,687,476 
Preferred shares      4,321,350    4,321,350 
Share-based payments reserves  20   35,867,473    28,631,887 
Accumulated other comprehensive income      3,254,826    (1,652,547)
Non-controlling interest      -    (4,871)
Deficit      (221,770,726)   (183,539,232)
Total equity      23,151,427    18,444,063 
Total liabilities and equity      1,320,722,647    591,960,108 
Nature of operations and going concern  1          
Commitments and contingencies  25          
Subsequent events  29          

 

Approved on behalf of the Board of Directors:    
     
“Olivier Roussy Newton”   “Stefan Hascoet”
Director   Director 

 

See accompanying notes to these consolidated financial statements

 

9

 

 

DeFi Technologies Inc. 
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian dollars)

      Year ended December 31, 
   Note  2024   2023 
      $   $ 
            
Revenues           
Realized and net change in unrealized gains on digital assets  14   345,243,593    323,958,866 
Realized and net change in unrealized losses on ETP payables  15   (482,892,054)   (332,100,866)
Unrealized gain on equity investments at FVTPL  7,16   132,474,754    - 
Staking and lending income  17   35,717,997    3,554,587 
Management fees      8,826,934    1,461,594 
Trading commissions      2,885,180    - 
Research revenue      1,963,433    - 
Realized gain (loss) on investments  5   154,765    (4,150)
Unrealized gain on investments  5   10,833,475    13,484,504 
Interest income      6,215    1,480 
Total revenues      55,214,292    10,356,015 
              
Expenses             
Operating, general and administration  18,24   50,320,325    9,975,267 
Share based payments  20   26,368,118    2,920,219 
Depreciation - equipment      7,548    12,945 
Amortization - intangibles  10   2,114,955    2,038,300 
Finance costs      3,868,425    4,161,136 
Fees and commissions      6,798,892    1,029,443 
Foreign exchange (gain) loss      (440,142)   10,338,575 
Impairment loss  10   4,962,021    - 
Total expenses      94,000,142    30,475,885 
Loss before other item      (38,785,850)   (20,119,870)
Gain (loss) on settlement of debt      133,881    (172,093)
Provision on accounts receivable      (389,533)   - 
Net loss for the year      (39,041,502)   (20,291,963)
Other comprehensive income             
Foreign currency translation gain      4,907,373    1,343,670 
Net income (loss) and comprehensive loss for the year      (34,134,129)   (18,948,293)
              
Net loss attributed to:             
Owners of the parent      (39,041,502)   (20,067,424)
Non-controlling interests      -    (4,871)
       (39,041,502)   (20,072,295)
              
Net income loss and comprehensive loss attributed to:             
Owners of the parent      (34,134,129)   (18,943,422)
Non-controlling interests      -    (4,871)
       (34,134,129)   (18,948,293)
              
Income (loss) per share             
Basic      (0.13)   (0.09)
              
Weighted average number of shares outstanding:             
Basic      295,591,423    223,084,360 

 

See accompanying notes to these consolidated financial statements

 

10

 

 

DeFi Technologies Inc. 
Consolidated Statements of Cash Flows 
(Expressed in Canadian dollars)

   Note  Year ended December 31, 
      2024   2023 
      $   $ 
Cash (used in) provided by operations:           
Net Income (loss) for the period     $(39,041,502)  $(20,291,963)
Adjustments to reconcile net (loss) income to cash (used in) operating activities:             
Share-based payments  20   26,368,118    2,920,219 
Loss on debt for shares      -    172,093 
Impairment loss  10   4,962,021    - 
Interest expense      3,808,425    4,161,136 
Interest paid      -    (3,517,580)
Depreciation - equipment      7,548    12,945 
Amortization - Intangible asset  10   2,114,955    2,038,300 
Realized loss on investments, net      (154,765)   4,150 
Unrealized gain on investments, net      (10,833,475)   (13,484,504)
Realized and net change in unrealized gains on digital assets  14   (345,243,593)   (323,958,866)
Realized and net change in unrealized loss on ETP  15   482,892,054    332,100,866 
Unrealized gain on equity instruments  16   (132,474,754)   - 
Staking and lending income  17   (35,717,997)   (3,554,587)
Management fees      (8,826,934)   (1,461,594)
ETP paid in digital assets      3,070,243    1,320,155 
Unrealized loss on foreign exchange      (4,868,358)   440,343 
       (53,938,014)   (23,098,887)
Adjustment for:             
Purchase of digital assets      (540,008,974)   (318,355,007)
Disposal of digital assets      717,306,612    244,656,544 
Purchase of equity investments in digital assets at FVTPL      (238,090,603)   - 
Purchase of investments      (1,360,400)   - 
Disposal of investments      757,531    13,180 
Treasury shares      (4,379,964)   - 
Change in amounts receivable      (14,194,593)   13,065 
Change in client digital assets      1,100,085    - 
Change in prepaid expenses and deposits      603,536    (945,069)
Change in accounts payable and accrued liabilities      (4,167,059)   5,197,664 
Change in trading liabilities      6,766,174    - 
Change in deferred revenue      (353,226)   - 
Net cash (used in) operating activities      (129,958,895)   (92,518,510)
Investing activities             
Cash received from acquisition of subsidiaries      14,548,500    - 
Net cash provided by investing activities      14,548,500    - 
Financing activities             
Proceeds from ETP holders      973,681,726    308,595,496 
Payments to ETP holders      (802,137,396)   (223,232,891)
Loan proceeds      -    4,629,099 
Loan repaid  12   (42,263,028)   - 
Proceeds from private placement      -    4,528,750 
Proceeds from option exercises  20   964,930    94,875 
Proceeds from exercise of warrants  20   5,213,215    - 
Normal course issuer bid shares repurchased  19   (4,379,964)   - 
Net cash provided by financing activities      131,079,483    94,615,329 
Effect of exchange rate changes on cash and cash equivalents      527,302    (275,502)
Change in cash and cash equivalents      16,196,390    1,821,317 
Cash, beginning of year      6,727,482    4,906,165 
Cash and cash equivalents, end of year     $22,923,872   $6,727,482 

 

See accompanying notes to these consolidated financial statements

 

11

 

 

DeFi Technologies Inc. 
Consolidated Statements of Changes in Equity
(Expressed in Canadian dollars)

                   Share-based payments                     
   Number of Common Shares   Common Shares   Number of Preferred Shares   Preferred Shares   Options   Deferred Shares Unit
(DSU)		   Treasury shares   Warrants   Share-based Payments Reserve   Accumulated other comprehensive income   Non-controlling interest   Deficit   Total 
                                                     
Balance, December 31, 2023   276,658,208   $170,687,476    4,500,000   $4,321,350   $17,968,263   $8,040,660   $27,453   $2,595,511   $28,631,887   $(1,652,547)  $(4,871)  $(183,539,232)  $18,444,063 
Acquisition of Reflxivity   5,000,000    3,100,000    -    -    -    -    -    -    -    -    -    -    3,100,000 
Acquisition of Solana IP   7,297,090    4,962,021    -    -    -    -    -    -    -    -    -    -    4,962,021 
Acquisition of Stillman Digital   2,500,000    6,893,336    -    -    -    -    -    -    -    -    -    -    6,893,336 
Warrants exercised   22,737,789    6,669,358    -    -    -    -    -    (1,456,144)   (1,456,144)   -    -    -    5,213,214 
Option expiry   3,912,405    2,537,460    -    -    (1,572,530)   -    -    -    (1,572,530)   -    -    -    964,930 
DSU exercised   6,432,281    6,270,234    -    -    -    (6,270,234)   -    -    (6,270,234)   -    -         - 
Warrants expired   -    -    -    -    -    -    -    (585)   (585)   -    -    585    - 
Option exercised   -    -    -    -    (1,099,656)   -    -         (1,099,656)   -    -    1,099,656    - 
DSU surrendered   -    -    -    -    -    (111,983)   -    -    (111,983)   -    -    70,376    (41,607)
NCIB   (1,840,600)   (3,882,817)   -    -    -    -    (27,453)   -    (27,453)   -    -    (360,609)   (4,270,879)
Share-based payments   -    -    -    -    7,588,290    10,185,881    8,593,947    -    26,368,118    -    -    (8,593,947)   26,368,118 
Treausry shares acquired   3,998,508    8,593,947    -    -    -    -    -    -    -    -    -    -    (4,352,511)
Treasury shares paid out   (5,437,992)   (4,352,511)   -    -    -    -    (8,593,947)   -    (8,593,947)   -    -    8,593,947    - 
Net loss and comprehensive loss   -    -    -    -    -    -    -    -    -    4,907,373    4,871    (39,041,502)   (34,129,258)
Balance, December 31, 2024   321,257,689   $201,478,504    4,500,000   $4,321,350   $22,884,367   $11,844,324   $-   $1,138,782   $35,867,473   $3,254,826   $-   $(221,770,726)  $23,151,427 
                                                                  
Balance, December 31, 2022   219,010,501   $166,151,401    4,500,000   $4,321,350   $20,317,312   $6,977,106   $27,453   $588,113   $27,909,984    (2,996,218)   -    (167,477,256)   27,909,261 
Private placement   11,812,500    873,815    -    -    -    -    -    243,330    243,330    -    -    -    1,117,145 
Warrants issued   -    -    -    -    -    -    -    772,855    772,855    -    -    -    772,855 
Shares issued for debt settlement   13,697,095    1,449,102    -    -    -    -    -         -    -    -    -    1,449,102 
Shares issued on convertible debt   30,000,000    1,585,525    -    -    -    -    -    1,414,476    1,414,476    -    -    -    3,000,001 
Shares issued on purchase of investment   805,812    128,898    -    -    -    -    -    -    -    -    -    -    128,898 
Options exercised   575,000    181,585    -    -    (86,710)   -    -    -    (86,710)   -    -    -    94,875 
Warrants expired   -    -    -    -    -    -    -    (423,261)   (423,261)   -    -    423,261    - 
Options cancelled   -    -    -    -    (3,138,267)   -    -    -    (3,138,267)   -    -    3,138,267    - 
DSUs exercised   757,500    317,150    -    -    -    (317,150)   -    -    (317,150)   -    -    -    - 
DSUs cancelled   -    -    -    -    -    (663,587)   -    -    (663,587)   -    -    663,587    - 
Share-based payments   -    -    -    -    875,928    2,044,291    -    -    2,920,219    -    -    -    2,920,219 
Net loss and comprehensive loss   -    -    -    -    -    -    -    -    -    1,343,670    (4,871)   (20,287,092)   (18,948,293)
Balance, December 31, 2023   276,658,408   $170,687,476    4,500,000   $4,321,350   $17,968,263   $8,040,660   $27,453   $2,595,513   $28,631,889   $(1,652,548)  $(4,871)  $(183,539,233)  $18,444,063 

 

See accompanying notes to these consolidated financial statements

 

12

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

1.Nature of operations and going concern

 

DeFi Technologies Inc. (the “Company” or “DeFi”), is a publicly listed company incorporated in the Province of British Columbia and continued under the laws of the Province of Ontario. On January 21, 2021, the Company up listed its shares to Cboe Canada Exchange (formerly the NEO Exchange) under the symbol of “DEFI”. DeFi is a Canadian technology company bridging the gap between traditional capital markets and decentralized finance. The Company generates revenues through the issuance of exchange traded products that synthetically track the value of a single DeFi protocol, investments in various companies and leading protocols across the decentralized finance ecosystem to build a diversified portfolio of decentralized finance assets, providing premium membership for research reports to investors and offering node management of decentralized protocols to support governance, security and transaction validation. The Company’s head office is located at 198 Davenport Road, Toronto, Ontario, Canada, M5R 1J2.

 

These consolidated financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. As at December 31, 2024, the Company has negative working capital deficiency of $271,167,487 (December 31, 2023 – negative working capital deficiency of $76,002,552), including cash of $22,923,872 (December 31, 2023 -$6,727,482) and for the year ended December 31, 2024 had a net loss and comprehensive loss of $34,134,129 (for the year ended December 31, 2023 – net loss and comprehensive loss of $18,948,293). The Company’s current source of operating cash flow is dependent on the success of its business model and operations and there can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. Management believes its working capital will be sufficient to support activities for the next twelve months and expects to raise additional funds when required and available. There can be no assurance that funds will be available to the Company with acceptable terms or at all. These matters constitute material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.

 

These consolidated financial statements do not reflect adjustments in the carrying value of the assets and liabilities, the reported revenues and expenses and the balance sheet classifications that would be necessary if the going concern assumption were not appropriate. These adjustments could be material.

 

International conflict and other geopolitical tensions and events, including war, military action, terrorism, trade disputes, and international responses thereto have historically led to, and may in the future lead to, uncertainty or volatility in global commodity and financial markets and supply chains. Volatility in digital asset prices and supply chain disruptions may adversely affect the Corporation’s business, financial condition, financing options, and results of operations.

 

2.Material accounting policy information

 

(a)Statement of compliance

 

These consolidated financial statements of the Company were prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS”) The policies as set out below were consistently applied to all the periods presented unless otherwise noted. These consolidated financial statements of the Company were approved for issue by the Board of Directors on March 30, 2025.

 

(b)Basis of consolidation

 

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiary after eliminating inter-entity balances and transactions.

 

These consolidated financial statements comprise the financial statements of the Company and its wholly owned subsidiaries Electrum Streaming Inc. (“ESI”), DeFi Capital Inc. (“DeFi Capital”), DeFi Holdings (Bermuda) Ltd. (“DeFi Bermuda”), Reflexivity LLC, Valour Inc., DeFi Europe AG, DeFi Middle East DMCC, Stillman Digital Inc. and Stillman Digital Bermuda Ltd. Valour Digital Securities Limited is 0% owned by consolidated on the basis of control. All material intercompany transactions and balances between the Company and its subsidiary have been eliminated on consolidation.

 

Intercompany balances and any unrealized gains and losses or income and expenses arising from intercompany transactions are eliminated in preparing the consolidated financial statements.

 

13

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(c)Basis of preparation and functional currency

 

These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments and investments that have been measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

 

Foreign currency transactions are recorded at the exchange rate as at the date of the transaction. At each statement of financial position date, monetary assets and liabilities in foreign currencies other than the functional currency are translated using the year end foreign exchange rate. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non- monetary assets and liabilities in foreign currencies other than the functional currency are translated using the historical rate. All gains and losses on translation of these foreign currency transactions and balances are included in the profit and loss. The functional currency for DeFi, DeFi Capital, and ESI is the Canadian dollar, and the functional currency for DeFi Bermuda, Reflexivity LLC, Valour Inc., DeFi Europe AG, Stillman Digital Inc., Stillman Digital Bermuda Ltd. and Valour Digital Securities Limited is the U.S Dollar. The functional currency of DeFi Middle East DMCC is the United Emirates Dirham.

 

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

●assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet,

 

●income and expenses for each statement of loss and comprehensive loss are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

 

●all resulting exchange differences are recognized in other comprehensive loss.

 

On consolidation, exchange differences arising from the translation of any net investment in foreign entities and of borrowings are recognized in other comprehensive loss. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

 

(d)Change in accounting policy

 

During the year ended December 31, 2023, the Company changed its accounting policy regarding the treatment for when the Company sells a portion of its digital asset holdings or when there’s redemptions of its ETP payables. The Company has adopted first in, first out (“FIFO”) to identify the units sold and determine the cost basis to use. As a result, for the year ended December 31, 2023 and 2022, realized gains (loss) on digital assets increase (decreased) by $54,543,334 and $(8,151,116), respectively and unrealized gains (loss) (decreased) increased by $(54,543,334) and $8,151,116, respectively. As a result, for the year ended December 31, 2023 and 2022, realized gains (loss) on ETP payables (decreased) increase by $(44,112,584) and $66,031,477, respectively and unrealized gains (loss) (decreased) increased by $(44,112,584 and $(66,031,477), respectively.

 

There were no changes to the consolidated statements of financial position, consolidated statements of operations and comprehensive loss or consolidated statements of cash flow.

 

14

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(e)Significant accounting judgements, estimates and assumptions

 

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.

 

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:

 

(i)Accounting for digital assets

 

Among its digital asset holdings, only USDC was classified by the Company as a financial asset. The rest of its digital assets were classified following the IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2 - Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss. Digital currencies consist of cryptocurrency denominated assets (see Note 6) and are included in current and long-term assets. Digital currencies are carried at their fair value determined by the spot rate less costs to sell. The cost to sell digital assets is nominal. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value is determined by taking the mid-point price at 17:30 CET digital asset exchanges consistent with the final terms for each exchange traded product (“ETP”). The primary digital asset exchanges used to value digital assets are Kraken, Bitfinex, Binance, Coinbase and Bitstamp. Where digital assets held do not have pricing on these exchanges, other exchanges would be used. On all material coins, Kraken, Bitfinex, Coinbase and Bitstamp were used. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Volmex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com. The Company revalues its digital assets quarterly. The Company’s principal market for trading cryptocurrency is Binance. However, we use a weighted average price of several markets in accordance with our ETP prospectus. The difference in pricing between our principal market and the weighted average price in accordance with our ETP prospectus has been determined by management to not be material.

 

(ii)Accounting for ETP holder payables

 

Financial liabilities at fair value through profit or loss held includes ETP holders payable. Liabilities arising in connection with ETPs issued by the Company referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company elected not to designate this as a hedging instrument. The ETPS are actively traded on the Spotlight Stock Market, the London Stock Exchange (“LSE”), and Germany Borse Frankfurt Zertifikate AG.

 

(iii)Fair value of financial derivatives

 

Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. Valuation technique such as Black Scholes model is used to value these instruments. Refer to Notes 5 and 21 for further details.

 

15

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(e)Significant accounting judgements, estimates and assumptions (continued)

 

(iv)Fair value of equity investment not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Refer to Notes 5, 7 and 16 for further details.

 

(v)Share-based payments

 

The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk- free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense. In the event services are provided to the Company by officers or consultants and settled in equity instruments, the Company has measured the fair value of the services received as the fair value of the equity instruments granted.

 

(vi)Business combinations and goodwill

 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Goodwill is assessed for impairment annually.

 

(vii)Estimated useful lives and impairment considerations

 

Amortization of intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

 

(viii)Impairment of non-financial assets

 

The Company’s non-financial assets include prepaid expenses, digital assets excluding USDC, equipment and right of use assets, intangibles and goodwill. Impairment of these non-financial assets exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. See Note 10 for the discussion regarding impairment of the Company’s non-financial assets.

 

(ix)Functional currency

 

The functional currency of the Company has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and the currencies in which expenses are settled, by each entity, as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency.

 

16

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(e)Significant accounting judgements, estimates and assumptions (continued)

 

(x)Assessment of transaction as an asset purchase or business combination

 

Assessment of a transaction as an asset purchase or a business combination requires judgements to be made at the date of acquisition in relation to determining whether the acquiree meets the definition of a business. The three elements of a business include inputs, processes and outputs. When the acquiree does not have outputs, it may still meet the definition of a business if its processes are substantive which includes assessment of whether the process is critical and whether the inputs acquired include both an organized workforce and inputs that the organized workforce could convert into outputs.

 

(xi)Control

 

Significant judgment is involved in the determination whether the Company controls another entity under IFRS 10. The Company is deemed to control an investee when it demonstrates: power over the investee, exposure, or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. There is judgement required to determine whether these criterions are met. The Company determined it controlled Valour Digital Securities Limited through its role as arranger.

 

(xii)Accounting for digital assets held as collateral

 

The Company has provided digital assets as collateral for loans provided by digital asset liquidity provider. These digital assets held as collateral are included with digital assets and valued at fair value consistent with the Company’s accounting policy for its digital assets. See note 2(e).

 

(xiii)Valuation of equity investments at FVTPL

 

Significant judgement is required in the determination of the fair value of the Company’s investments in Equity investments (collectively the “Funds”) in digital asset at FVTPL given the lock up periods applied to the digital cryptocurrencies owned by the Funds. The Company assesses the discount for lack of marketability applied by the Fund managers for reasonableness in their calculated net asset values. The Fund managers calculate the discount for lack of marketability (“DLOM”) using an option pricing model.

 

(f)Financial instruments

 

Financial assets and financial liabilities are recognized on the Company’s statement of financial position when the Company has become a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The Company’s financial instruments consist of cash, amounts receivable, public investments, private investments, derivative asset, accounts payable and accrued liabilities and ETP holders payable.

 

(i)Investments

 

Purchases and sales of investments where the Company cannot exert control or significant influence are recognized on a trade date basis. Public and private investments at fair value through profit or loss are initially recognized at fair value, with changes in fair value reported in profit (loss). At each financial reporting period, the Company’s management estimates the fair value of its investments based on the criteria below and reflects such valuations in the financial statements.

 

17

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Financial instruments (continued)

 

Transaction costs are expensed as incurred in the statements of loss. The determination of fair value requires judgment and is based on market information where available and appropriate. At the end of each financial reporting period, the Company’s management estimates the fair value of investments based on the criteria below and reflects such changes in valuations in the statements of loss. The Company is also required to present its investments (and other financial assets and liabilities reported at fair value) into three hierarchy levels (Level 1, 2, or 3) based on the transparency of inputs used in measuring the fair value, and to provide additional disclosure in connection therewith (see Note 21, “Financial instruments”). The three levels are defined as follows:

 

Level 1 – investment with quoted market price;

Level 2 – investment which valuation technique is based on observable market inputs; and

Level 3 – investment which valuation technique is based on non-observable market inputs.

 

Publicly traded investments:

 

1. Securities, including shares, options, and warrants which are traded on a recognized securities exchange and for which no sales restrictions apply are recorded at fair values based on quoted closing prices at the statement of financial position date or the closing price on the last day the security traded if there were no trades at the statement of financial position date. The Company utilizes the quoted closing prices. These are included in Level 1 as disclosed in Note 21.

 

2. Securities which are traded on a recognized securities exchange but which are escrowed or otherwise restricted as to sale or transfer are recorded at amounts discounted from market value. Shares that are received as part of a private placement that are subject to a standard four-month hold period are not discounted due the short term of the hold period. In determining the discount for such investments, the Company considers the nature and length of the restriction, business risk of the investee corporation, relative trading volume and price volatility and any other factors that may be relevant to the ongoing and realizable value of the investments. These are included in Level 2 in Note 21.

 

3. Warrants or options of publicly traded securities which do not have a quoted price are carried at an estimated fair value calculated using the Black-Scholes option pricing model if sufficient and reliable observable market inputs are available. These are included in Level 2 as disclosed in Note 21.

 

4. Securities which are traded on a recognized securities exchange but which do not have an active market are recorded at the most recent transaction price. These are included in Level 3 in Note 21.

 

The amounts at which the Company’s publicly traded investments could be disposed of may differ from carrying values based on market quotes, due to market price changes and the fair value was determined at a specific time, the value at which significant ownership positions are sold is often different than the quoted market price due to a variety of factors such as premiums paid for large blocks or discounts due to illiquidity. Such differences could be material.

 

Privately held investments:

 

1. Securities in privately held companies (other than options and warrants) are initially recorded at cost, being the fair value at the time of acquisition. At the end of each financial reporting period, the Company’s management estimates the fair value of investments based on the criteria below and reflects such valuations in the financial statements. These are included in Level 3 as disclosed in Note 21. Options and warrants of private companies are carried at fair value using valuation technique.

 

With respect to valuation, the financial information of private companies in which the Company has investments may not always be available, or such information may be limited and/or unreliable. Use of the valuation approach described below may involve uncertainties and determinations based on the Company’s judgment and any value estimated from these may not be realized or realizable. In addition to the events described below, which may affect a specific investment, the Company will take into account general market conditions when valuing the privately held investments in its portfolio. In the absence of occurrence of any of these events or any significant change in general market conditions indicates generally that the fair value of the investment has not materially changed.

 

18

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Financial instruments (continued)

 

2. An upward adjustment is considered appropriate and supported by pervasive and objective evidence such as significant subsequent equity financing by an unrelated investor at a transaction price higher than the Company’s carrying value; or if there have been significant corporate, political or operating events affecting the investee company that, in management’s opinion, have a positive impact on the investee company’s prospects and therefore its fair value. In these circumstances, the adjustment to the fair value of the investment will be based on management’s judgment and any value estimated may not be realized or realizable. Such events include, without limitation:

 

●political changes in a country in which the investee company operates which, for example, reduce the corporate tax burden, or to an extent that, it was not previously allowed, or reduce or eliminate the need for approvals;
   
●receipt by the investee company of approvals, which allow the investee company to proceed with its project(s);
   
●release by the investee company of positive operational results, which either proves or expands their investee’s prospects; and
   
●important positive management changes by the investee company that the Company’s management believes will have a very positive impact on the investee company’s ability to achieve its objectives and build value for shareholders.

 

3. Downward adjustments to carrying values are made when there is evidence of a decline in value as indicated by the assessment of the financial condition of the investment based on third party financing, operational results, forecasts, and other developments since acquisition, or if there have been significant corporate, political or operating events affecting the investee company that, in management’s opinion, have a negative impact on the investee company’s prospects and therefore its fair value. The amount of the change to the fair value of the investment is based on management’s judgment and any value estimated may not be realized or realizable. Such events include, without limitation:

 

●political changes in a country in which the investee company operates which increases the tax burden on companies;
   
●denial of the investee company’s application for approvals which prohibit the investee company from proceeding with its projects;
   
●the investee company releases negative operating results;
   
●changes to the management of the investee company take place which the Company believes will have a negative impact on the investee company’s ability to achieve its objectives and build value for shareholders;
   
●the investee company is placed into receivership or bankruptcy; and
   
●based on financial information received from the investee company, it is apparent to the Company that the investee company is unlikely to be able to continue as a going concern.

 

The resulting values may differ from values that would be realized had a ready market existed. The amounts at which the Company’s privately held investments could be disposed of may differ from the carrying value assigned. Such differences could be material.

 

Equity investments in digital assets at fair value through profit and loss

 

Investments in equity instruments at fair value through profit or loss - Included in investments in equity instruments at fair value through profit or loss are investments in a US private company (LLC), and a U.S. Limited Liability Partnership via a Cayman Island domiciled feeder Limited Liability Partnership.

 

19

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Financial instruments (continued)

 

a)Investments

 

Management accounted for such investments at fair value to profit or loss under IFRS 9, because the Company does not exercise significant influence over the investee. The Company does not have any contractual right to appoint any representative to the investee’s board of directors. In addition, the Company does not have any participation in policymaking processes and does not have any material transactions with the investee. The fair value of investments in investment funds which are not quoted in an active market is determined by using net asset value as determined by the investment fund’s administrator and include a discount for lack of marketability (“DLOM”). Management deems the net asset value to be the fair value after considering key factors such as the liquidity of the investment fund or its underlying investments, any restrictions on redemptions and basis of accounting.

 

The Company classifies equity investments it intends to sell within twelve months as current and those where the expectation is to hold for periods longer than a year as non-current. These are included in Level 3 disclosed in Note 21.

 

b)Financial assets other than investments at fair value and liabilities Financial assets

 

Initial recognition and measurement

 

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either fair value through profit or loss (“FVPL”) or fair value through other comprehensive income (“FVOCI”), and “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

 

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

 

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. Other accounts receivable held for collection of contractual cash flows are measured at amortized cost.

 

Subsequent measurement – financial assets at amortized cost

 

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.

 

Subsequent measurement – financial assets at FVPL

 

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the statements of financial position with changes in fair value recognized in other income or expense in the statements of earnings (loss). The Company’s investments are classified as financial assets at FVPL.

 

Subsequent measurement – financial assets at FVOCI

 

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

 

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the statements of comprehensive income (loss). When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive income or loss and is not reclassified to profit or loss.

 

20

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Financial instruments (continued)

 

(ii)Financial assets other than investments at fair value and liabilities

 

Financial assets

 

Dividends from such investments are recognized in other income in the statements of earnings (loss) when the right to receive payments is established.

 

Derecognition

 

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.

 

Impairment of financial assets

 

The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have been grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

 

(iii)Financial assets other than investments at fair value and liabilities

 

Financial liabilities

 

Initial recognition and measurement

 

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. ETP holders payable are designated as financial liability at fair value through profit or loss on initial recognition. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company’s financial liabilities also include accounts payable and liabilities and loans payable, which are measured at amortized cost. All financial liabilities are recognized initially at fair value and in the case of long-term debt, net of directly attributable transaction costs.

 

Subsequent measurement – financial liabilities at amortized cost

 

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.

 

Subsequent measurement – financial liabilities at FVTPL

 

Financial liabilities measured at FVTPL include financial liabilities management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial liabilities measured at FVTPL are carried at fair value in the consolidated statements of financial position with changes in fair value recognized in other income or expense in the consolidated statements of loss.

 

Derecognition

 

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the statements of earnings (loss).

 

(g)Cash

 

Cash is comprised of cash on hand and deposits that generally mature within 90 days from the date of acquisition. Deposits are held in Canadian chartered bank, financial institutions controlled by a Canadian chartered bank, and broker and custodians in Switzerland. The Company also holds client cash deposits for trading purposes in the United States and Bermuda and has classified these deposits as client cash deposits on the statement of financial position.

 

21

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(h)Revenue recognition

 

Revenue is recognized at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for transferring services to a customer. For each contract with a customer, the Company: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct service to be delivered; and recognizes revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the services promised. Revenue is recognized only when it is probable that the economic benefits associated with the transaction will flow to the Company. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognized as an expense, rather than as an adjustment of the amount of revenue originally recognized.

 

Management fees

 

The Company recognizes revenue from management fees earned on various ETP products. The management fee percentage is outlined in each ETP prospectus. The management fee is calculated daily based on the daily ETP net asset value and is recognized daily when the management fee is calculated. The management fee is deducted from the net asset value of the ETPs. The management fees are valued in the underlying ETPs base currency and converted into USD daily.

 

Trading commissions

 

The Company primarily generates revenue through commission fees charged on the Stillman Digital trading platform. The revenues are all recognized at a point in time upon the trade execution and settlement. The commission rates vary and depend on size of trade, asset and client. There is no general right of return in such arrangements.

 

Other revenues

 

The Company earns revenue from aggregating small individual trades during the day to facilitate hedging and optimize liquidity and hedging them periodically. These are computed as net fiat receivables and are measured based on the average daily USD rates at the end of each day.

 

Research revenues

 

The Company recognizes revenue from research reports as the reports are provided to customers.

 

Public and private investments

 

Realized gains and losses on the disposal of investments and unrealized gains and losses in the value of investments are reflected in the statement of loss on a trade date basis. Upon disposal of an investment, previously recognized unrealized gains or losses are reversed, so as to recognize the full realized gain or loss in the period of disposition. All transaction costs are expensed as incurred.

 

22

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(h)Lending, staking and node revenue

 

Lending and Staking

 

The Company earns a yield based on digital assets that are lent or staked with various reputable digital asset exchanges. The Company transfers digital asset to either staking account within the exchange platform and into staking custody accounts. The Company transfers the digital assets to those staking accounts and the counterparty delivers staking and lending rewards in return. The digital assets rewards are based on the rewards offered at the time the Company enters into staking or lending arrangements. The transaction price is an interest rate offered for the digital asset deposit. Over the period that the digital assets are staked or lent, the digital assets rewards are deposited into the Company’s custody accounts. The rewards are based on the amount of digital assets staked or lent and the rate offered by the custodian at that time.

 

Staking and lending rewards are recognized as revenue as they are earned over the period the digital assets are staked or loaned. Staking allows the Company to earn income through a process that is used to verify cryptocurrency transactions. It involves committing holdings to support a blockchain network and confirming transactions. Cryptocurrencies that allow staking use a “consensus mechanism” called Proof of Stake, which is the way they ensure that all transactions are verified and secured without a bank or payment processor in the middle.

 

(i)Validator Node revenue

 

Validator Node Revenue

 

Validator Node revenue is earned as transactions are validated on a blockchain. When transactions are validated on the blockchain, the Company receives rewards from that blockchain. The transaction price are the rewards earned by the Company as transactions are validated by the Company’s node. The Company receives rewards for these services provided to the blockchain. The blockchain token rewards are only earned when the Company validates transactions that take place on the blockchain. When a transaction is validated by the Company’s node, rewards are deposited to the Company’s account. As the tokens are earned, revenue is calculated by summing up the tokens earned each day and multiplying the value of reward tokens for that day.

 

(j)Leases

 

At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company, as a lessee, recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made to branches or office premises. The right-of-use asset is subsequently amortized using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

 

The lease liability is subsequently measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in net income if the carrying amount of the right-of-use asset has been reduced to zero. The Company presents right-of-use assets and lease liabilities in the Consolidated Statement of Financial Position. The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

23

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(l)Operating segments

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Chief Executive Officer and Chief Operating Officer. See Note 26 for details.

 

(m)Income (loss) per share

 

Basic income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of the Company’s common shares outstanding during the period. Diluted income (loss) per share is calculated by dividing the applicable net income (loss) by the sum of the weighted-average number of common shares outstanding if dilutive common shares had been issued during the period. The calculation of diluted income (loss) per share assumes that outstanding stock options and warrants with an average exercise price below market price of the underlying shares are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average market price for the period. Diluted income per share for the year ended December 31, 2024 and 2023 all stock options and warrants were anti-dilutive and excluded from the calculation of dilutive loss per share.

 

(n)Comprehensive income (loss)

 

Total comprehensive income (loss) comprises all components of profit or loss and other comprehensive income (loss). Other comprehensive income (loss) includes gains and losses from translating the financial statements of an entity’s whose functional currency differs from the presentation currency.

 

(o)Income taxes

 

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

 

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

24

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(p)Share-based payments

 

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. Fair value is measured at grant date and each tranche is recognized on a graded-vesting basis over the period in which options 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 the equity reserve.

 

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. For options that expire unexercised, the recorded value is transferred to deficit.

 

(q)Digital Assets

 

The IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2- Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss.

 

Digital assets consist of cryptocurrency denominated assets (see Note 6) and are included in current assets. Digital assets are measured using unadjusted quoted prices taken from active markets, where available. Fair value measurement for digital assets with available active market prices has been classified as Level 1 in the fair value hierarchy. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase and other exchanges consistent with the final terms for each ETP. The Company revalues its digital assets quarterly.

 

Disclosure

 

The Company applies the disclosure requirements in the IFRS Standard applicable to its holding of cryptocurrencies. Accordingly, the Company applies the disclosure requirements in IAS 2 – Inventories for holdings of cryptocurrencies. If an entity measures its holding in cryptocurrencies at fair value, IFRS 13 Fair Value Measurement specifies applicable disclosure requirements. In applying IAS 1 Presentation of Financial Statements, the Company discloses judgements that its management has made regarding its accounting for holdings of cryptocurrencies if those are part of the judgements that had a significant effect on the amounts recognized in the consolidated financial statements.

 

The Company has evaluated the impact of the Agenda Paper and has determined that cryptocurrencies with an active market should be classified as digital assets and measured at fair value through profit or loss.

 

Increases and decreases in the fair value of digital assets are recognized through profit or loss. Digital assets are derecognized when the Company has transferred substantially all the risks and rewards of ownership on disposal.

 

25

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(r)Digital Asset Loaned

 

Initial recognition and measurement

 

The Company enters into loan agreements with various digital asset exchanges to earn yield based on the digital assets that are lent. At the time the Company enters into the loan agreement, the digital asset is derecognized from digital assets as the borrower obtains the rights to direct the use of the digital asset and the Company recognizes this as digital assets loaned, measured at the fair value of the loaned digital asset.

 

Subsequent measurement

 

During the term of the digital asset loan, the digital asset loaned is measured at the fair value based on the fair market value of loaned digital assets with any gains / (losses) resulting from remeasuring the digital asset loaned to the realized and net change in unrealized gains and losses on digital assets.

 

Derecognition

 

At the end of the digital asset loan, the digital asset loaned is derecognized and re-recorded as digital assets at the carrying amount of the digital asset loaned.

 

(s)Client Digital Assets

 

The Company records the safeguarding of customer digital assets in accordance with IAS 38. On initial recognition, the Company records the client funds deposited and the associated financial liability at fair value plus transaction costs that are directly attributable to their acquisition or issuance. Changes in the fair value of client digital assets and liabilities are recognized in the profit or loss. Generally there is no gain or loss on remeasurement as the recognized asset is equal the fair value of the liability.

 

(t)Intangible assets

 

Intangible assets consist of brand names, customer relationships and technology. The Company has estimated the brand names will contribute cash flows for between 5-10 years, and customer relationships and technology will contribute to cash flows for 5 years.

 

Intangible assets are carried at cost less accumulated amortization and impairment losses.

 

Impairment

 

Impairments are recorded when the recoverable amounts of assets are less than their carrying amounts. The recoverable amount is the higher of an asset’s fair value less costs to dispose or its value in use. Impairment losses are evaluated for potential reversals of impairment when events or changes in circumstances warrant such consideration.

 

The carrying values of all intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

26

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(u)Goodwill

 

Goodwill arising on a business acquisition is recognized as an asset at the date that control is acquired (the “acquisition date”). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the fair value of the identifiable net assets.

 

Goodwill is not amortized but is reviewed for impairment at least annually or sooner if indicators of impairment exist. Goodwill is tested for impairment at the group level representing the lowest level at which management monitors it, the operating segment level. Any impairment loss is recognized immediately in profit or loss and is not subsequently reversed.

 

No impairment losses have been recognized in the consolidated statements of loss related to goodwill.

 

For the year ended December 31, 2024 and 2023, the Company did not experience any triggering events or additional information that the goodwill’s recoverable amount was significantly different than its carrying amount.

 

(v)Share capital

 

Financial instruments issued by the Company are classified as share capital only to the extent that they do not meet the definition of a financial liability. The Company’s common shares are classified as equity instruments. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Repurchases by the Company of its own common shares under a Normal Course Issuer Bid (“NCIB”) are accounted for in accordance with IAS 32, Financial Instruments: Presentation. Upon reacquiring common shares under a NCIB, the Company deducts from equity the purchase price of these common shares and any costs to acquire such common shares. Any such common shares held by the Company are considered treasury shares until they are cancelled.

 

(w)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. 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.

 

(x)New and future accounting change

 

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods on or after January 1, 2025 or later periods. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following amendments were adopted by the Company on January 1, 2024. The adoption of these amendments had no significant impact on the Company’s financial statements.

 

In January 2020, IAS 1 – Presentation of Financial Statements was amended to provide a more general approach to classification of liabilities, based on contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. This amendment did not have a significant impact on the consolidated financial statements.

 

IFRS 18 - In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements to improve reporting of financial performance. The new standard replaces IAS 1 Presentation of Financial Statements. IFRS 18 introduces new categories and required subtotals in the statement of profit and loss and also requires disclosure of management-defined performance measures. It also includes new requirements for the location, aggregation and disaggregation of financial information. The standard is effective for annual reporting periods beginning on or after January 1, 2027, including interim financial statements. Retrospective application is required and early adoption is permitted.

 

27

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

3.Cash and cash equivalents

 

   31-Dec-24   31-Dec-23 
Cash at banks  $13,643,192   $306,920 
Cash at brokers   9,240,610    6,417,725 
Cash at digital currency exchanges   40,070    2,837 
   $22,923,872   $6,727,482 

 

The Company also holds client cash deposits for trading purposes in the United States and Bermuda and has classified these deposits as client cash deposits on the statement of financial position. As at December 31, 2024, the balance in client cash deposits was $15,346,080 (December 31, 2023 - $nil).

 

4.Prepaid expenses and other assets

 

   31-Dec-24   31-Dec-23 
Prepaid insurance  $59,687   $42,335 
Prepaid expenses   1,935,316    1,467,489 
Other assets   590,448    54,036 
   $2,585,451   $1,563,860 

 

5.Investments, at fair value through profit and loss

 

At December 31, 2024, the Company’s investment portfolio consisted of one publicly traded investment and nine private investments for a total estimated fair value of $54,859,741 (December 31, 2023 – nine private investments for a total estimated fair value of 43,540,534).

 

During the year ended December 31, 2024, the Company had a realized gain of $154,765 and an unrealized gain of $14,133,138 (December 31, 2023 – realized loss of $4,683 and an unrealized gain of $318,080) on private and public investments.

 

Public Investments

 

          Estimated    
Private Issuer  Note   Security description  Cost   Fair Value   % of FV 
Brazil Potash Corp.  (i)   404,200 common shares  $1,998,668   $1,119,587    100.0%
Total public investments     $1,998,668   $1,119,587    100.0%

 

(i)Investments in related party entities

 

Private Investments

 

At December 31, 2024, the Company’s nine private investments had a total fair value of $53,740,153.

 

          Estimated    
Private Issuer  Note   Security description  Cost   Fair Value   % of FV 
3iQ Corp.      61,712 common shares  $86,319   $432,331    0.9%
Amina Bank AG  (i)   3,906,250 non-voting shares   34,498,750    51,020,502    94.9%
Earnity Inc.      85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation      201,633 preferred shares   630,505    719,522    1.3%
Neuronomics AG      724 common shares   128,898    128,898    0.2%
SDK:meta, LLC      1,000,000 units   3,420,000    -    0.0%
Skolem Technologies Ltd.      16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation      Rights to certain preferred shares and warrants   37,809    -    0.0%
ZKP Corporation  (i)   370,370 common shares   1,385,800    1,438,900    2.7%
Total private investments         $40,496,515   $53,740,153    100.0%

 

(i)Investments in related party entities

 

28

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

5.Investments, at fair value through profit and loss

 

At December 31, 2023, the Company’s nine private investments had a total fair value of $43,540,534.

 

          Estimated    
Private Issuer  Note   Security description  Cost   Fair Value   % of FV 
3iQ Corp.      187,007 common shares  $261,605   $1,216,890    2.8%
Brazil Potash Corp.  (i)   404,200 common shares   1,998,668    2,138,380    4.9%
Earnity Inc.      85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation      201,633 preferred shares   630,505    661,366    1.5%
Neuronomics AG      724 common shares   128,898    128,898    0.3%
SDK:meta, LLC      1,000,000 units   3,420,000    -    0.0%
Amina Bank AG (formerly SEBA Bank AG)  (i)   3,906,250 non-voting shares   34,498,750    39,395,000    90.5%
Skolem Technologies Ltd.      16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation      Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments         $41,284,669   $43,540,534    100.0%

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked

 

As at December 31, 2024, the Company’s digital assets consisted of the below digital currencies, with a fair value of $799,796,591 (December 31, 2023 - $489,865,638). Digital currencies are recorded at their fair value on the date they are acquired and are revalued to their current market value at each reporting date. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase and other exchanges consistent with the final terms for each ETP. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Volmex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

29

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The Company’s holdings of digital assets consist of the following:

 

   December 31,
2024		   December 31,
2023		 
   Quantity   $   Quantity   $ 
Binance Coin (BNB)   2,558.9747    2,617,180    236.4452    97,710 
Bitcoin (BTC)   2,705.7708    329,504,025    2,271.3329    108,983,280 
Ethereum (ETH)   20,676.9254    101,295,967    21,537.4066    65,956,320 
EthereumPoW (ETHW)   200.0000    1    0.2000    1 
Cardano (ADA)   69,671,396.7593    87,114,485    54,210,783.1700    43,306,306 
Polkadot (DOT)   2,766,149.1833    27,151,899    1,666,147.7880    18,371,365 
Solana (SOL)   43,414.4191    12,452,742    1,682,112.4900    235,733,109 
Shyft   4,879,446.3958    6,431    4,539,407.2792    78,314 
Uniswap (UNI)   421,450.3048    8,219,818    296,352.0602    2,932,687 
USDC        361,677         673 
USDT        7,585,222         111,856 
Litecoin   -    -    17.3931    1,719 
DOGE   17,545,096.4535    8,213,542    220,474.3947    26,652 
Cosmos (ATOM)   735.9223    6,626    11,700.0000    171,497 
Avalanche (AVAX)   125,979.5440    6,636,473    248,151.6644    13,148,105 
Matic (MATIC)   1,500.9042    878    0.0003    - 
Ripple (XRP)   17,223,963.4000    52,429,399    76,029.7317    62,737 
Enjin (ENJ)   127,360.9806    40,200    432,342.3671    223,237 
Tron (TRX)   341,529.3057    128,081    118,490.5094    16,581 
Terra Luna (LUNA)   205,057.0760    -    202,302.5360    - 
Shiba Inu (SHIB)   142,074,547.6000    4,309    -    - 
Pyth   3,444,248.6000    1,261,838    2,500,000.0000    503,669 
AAVE   2,333.3875    1,058,152    -    - 
ALGO   90,930.8700    43,426    -    - 
APE   283.1000    487    -    - 
APT   287,849.7000    3,691,358    -    - 
AR   14,202.0100    338,059    -    - 
ARB   24.0000    25    -    - 
AVA   1,450.0000    110    -    - 
BAT   32,967.8500    10,991    -    - 
BCH   25.4800    15,935    -    - 
CHZ   391.6800    46    -    - 
COMP   52.2300    5,482    -    - 
Core   3,995,185.7910    6,187,871    -    - 
CRV   10,295.1200    13,392    -    - 
EOS   13,419.9100    14,927    -    - 
FET   561,613.1000    1,053,850    -    - 
FIL   8,471.8100    60,365    -    - 
FTM   1,307,990.0000    1,315,188    -    - 
FTM   34,663.2600    33,767    -    - 
GALA   100,726.8700    5,000    -    - 
GRT   1,620.3700    464    -    - 
HBAR   49,611,593.1918    19,977,385    -    - 
ICP   1,436,614.1074    20,927,162    -    - 
IMX   10,992.0200    20,640    -    - 
INJ   56,329.4200    1,634,770    -    - 
JUP   499,299.1000    608,664    -    - 
KSM   470.3400    22,361    -    - 
LDO   36,961.1000    98,756    -    - 
LINK   239,057.7313    7,097,367    -    - 
LRC   5,178.2400    1,428    -    - 
LTC   541.8400    81,122    -    - 
MANA   3,609.4800    2,409    -    - 
MKR   0.1100    235    -    - 
NEAR   1,300,877.8800    9,510,609    -    - 
OP   15,436.4300    39,203    -    - 
PAXG   0.6900    2,619    -    - 
Pendle   31,265.4000    229,438    -    - 
POL   183,654.4400    119,366    -    - 
QNT   1,086.7000    165,278    -    - 
RENDERSOL   162,158.1000    1,622,358    -    - 
RUNE   91,192.7000    609,491    -    - 
SAND   2,749.0000    2,146    -    - 
SEI   2,078,991.0000    1,225,003    -    - 
STX   203,450.0000    140,195    -    - 
SUI   10,785,375.0000    65,997,975    -    - 
SUSHI   39,426.6800    76,360    -    - 
TAO   9,851.6400    6,393,515    -    - 
TON   405,657.4300    3,261,134    -    - 
W   722,403.0000    307,581    -    - 
WBTC   -    309    -    - 
WLD   49,314.1000    152,723    -    - 
Current        799,314,977         489,725,820 

 

30

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

   December 31,
2024		   December 31,
2023		 
   Quantity   $   Quantity   $ 
Blocto   275,385.0716    1,085    264,559.7030    10,503 
Boba Network   250,000.0000    -    250,000.0000    - 
Clover   500,000.0000    45,915    450,000.0000    19,831 
Maps   285,713.0000    -    285,713.0000    - 
Mobilecoin   2,855.5045    -    2,855.5045    - 
Oxygen   400,000.0000    -    400,000.0000    - 
Saffron.finance   86.2100    2,729    86.2100    2,619 
Sovryn   15,458.9500    6,509    15,458.9500    12,863 
Wilder World   148,810.0000    143,120    148,810.0000    94,002 
Volmex Labs   2,925,878.0000    -    2,925,878.0000    - 
Other Coins (Meme coins)   121,424,013.5200    282,256    -    - 
Long-Term        481,614         139,818 
Total Digital Assets        799,796,591         489,865,638 

 

   December 31, 2024   December 31, 2023 
  $   $ 
Current digital assets        
Digital assets   398,364,913    188,846,248 
Digital assets loaned   55,568,531    270,362,684 
Digital assets staked   345,381,533    30,516,888 
Total current digital assets   799,314,977    489,725,820 
Non-current digital assets          
Digital assets   481,614    139,818 
Total non-current digital assets   481,614    139,818 
Total digital assets   799,796,591    489,865,638 

 

31

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

In addition to the above noted digital assets, the Company has the following equity investments at fair value through profit and loss (“FVTPL”). See Note 7 for further details.

 

   Current   Long Term   Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   216,379.2216   $44,442,849    244,331.9458   $50,184,152    460,711.1675   $94,627,001 
Fund A - Avalance (AVAX)   223,905.1900   $8,663,344    707,540.4100   $27,376,168    931,445.6000   $36,039,512 
    440,284.4116   $53,106,193    951,872.3558   $77,560,320    1,392,156.7675   $130,666,513 
Fund B - Solana (SOL)   626,365.7000   $128,651,339    540,869.9000   $111,091,072    1,167,235.6000   $239,742,411 
Total       $181,757,532        $188,651,392        $370,408,924 

 

The continuity of digital assets for the years ended December 31, 2024 and 2023:

 

   December 31, 2024   December 31, 2023 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   540,008,974    318,355,007 
Digital assets disposed   (717,306,612)   (244,656,544)
Digital assets earned from staking, lending and fees   35,717,997    3,554,587 
Realized gain (loss) on digital assets   396,824,120    (1,017,247)
Net change in unrealized gains and losses on digital assets   80,894,227    324,976,115 
Foreign exchange gain (loss)   (26,207,754)   (15,548,363)
   $799,796,591   $489,865,638 

 

Digital assets held by counterparty for the years ended December 31, 2024 and 2023 area as follows:

 

   December 31, 2024   December 31, 2023 
Counterparty A  $9,955,300   $421,687,911 
Counterparty B   17,836    30,592,947 
Counterparty C   1,035,685    2,775,287 
Counterparty D   96,294    11,785,440 
Counterparty E   10,082,451    8,633,491 
Counterparty F   9,798,485    837,948 
Counterparty G   -    8,840,988 
Counterparty H   84,086,732    - 
Counterparty I   -    - 
Counterparty J   -    - 
Counterparty K   180,133,894    - 
Counterparty L   -    - 
Counterparty M   5,450,286    - 
Other   10,702,768    248,294 
Self custody   488,436,860    4,463,332 
Total  $799,796,591   $489,865,638 

 

32

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of December 31, 2024, digital assets held by lenders as collateral consisted of the following:

 

   Number of coins     
   on loan   Fair Value 
Bitcoin   365.4480   $10,082,451 
Total   365.4480   $10,082,451 

 

As at December 31, 2024, the 380 Bitcoin held by Genesis Global Capital LLC (“Genesis”) as collateral against a loan has been written down to $10,082,451 (US$7,007,055), the fair value of the loan and interest held with Genesis.

 

As of December 31, 2023, digital assets held by lenders as collateral consisted of the following:

 

   Number of coins     
   on loan   Fair Value 
Bitcoin   1,158.2614    46,860,266 
Ethereum   9,263.7800    28,369,770 
Total   10,422.0414   $75,230,036 

 

As at December 31, 2023, the 475 Bitcoin held by Genesis as collateral against a loan has been written down to $8,690,623 (US$6,570,862), the fair value of the loan and interest held with Genesis.

 

In the normal course of business, the Company enters into open-ended lending arrangements with certain financial institutions, whereby the Company loans certain fiat and digital assets in exchange for interest income. The Company can demand the repayment of the loans and accrued interest at any time. The digital assets on loan are included in digital assets balances above.

 

Digital Assets loaned

 

As of December 31, 2024, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 3.25% to 5.5% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.4% to 9.7% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2024, digital assets on loan consisted of the following:

 

   Number of coins       Fair Value 
   on loan   Fair Value   Share 
Digital assets on loan:            
Bitcoin (BTC)   120.0000   $16,374,593    29%
Ethereum (ETH)   8,000.0000    39,193,938    71%
Total   8,120.0000   $55,568,531    100%

 

As of December 31, 2023, digital assets on loan consisted of the following:

 

   Number of        Fair Value 
   coins
on loan		   Fair Value   Share 
Digital on loan:            
Ethereum   7,000.0000    21,437,084    8%
Cardano   8,500,000.0000    6,790,228    3%
Polkdot   1,373,835.0000    15,148,250    6%
Solana   1,572,441.0000    220,363,625    82%
Avalanche   125,009.0000    6,623,496    2%
Total   11,578,285.0000   $270,362,684    100%

 

33

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of December 31, 2024, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest  Number of coins       Fair Value 
   rates  on loan   Fair Value   Share 
Digital assets on loan:               
Counterparty F  4.75%   2,000.0000    9,798,485    18%
Counterparty H  3.25% to 5.50%   6,120.0000    45,770,047    82%
Total      8,120.0000   $55,568,531    100%

 

As of December 31, 2023, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest  Number of      
   rates  coins
on loan		   Fair Value 
Digital on loan:           
Counterparty A  2.4% to 9.7%   11,578,285.0000    270,362,684 
Total      11,578,285.0000   $270,362,684 

 

As of December 31, 2024, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31,
2024		 
Digital assets on loan:       
Counterparty F  UAE   18%
Counterparty H  United States   82%
Total      100%

 

As of December 31, 2023, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on loan:       
Counterparty A  Cayman Islands   100%
Total      100%

 

The Company’s digital assets on loan are exposed to credit risk. The Company limits its credit risk by placing its digital assets on loan with high credit quality financial institutions that have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company’s due diligence procedures may include, but are not limited to, review of the financial position of the borrower, review of the internal control practices and procedures of the borrower, review of market information, and monitoring the Company’s risk exposure thresholds. As of December 31, 2024 and 2023, the Company does not expect a material loss on any of its digital assets on loan. While the Company intends to only transact with counterparties that it believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

Digital Assets Staked

 

As of December 31, 2024, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 2.95% to 9.7% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 3.15% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

34

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of December 31, 2024, digital assets staked consisted of the following:

 

   Number of         
   coins
staked		   Fair Value  

Fair Value

Share

 
Digital assets on staked:            
Bitcoin   1,803.0000    246,028,259    71%
Cardano   57,965,407.1384    72,480,183    21%
Etherium   32.0000    156,776    0%
Core   3,415,479.8499    5,290,004    2%
Polkadot   1,941,230.3100    19,057,413    6%
Solana   10,526.4620    2,368,899    1%
Total   63,334,478.7603   $345,381,533    100%

 

As of December 31, 2023, digital assets staked consisted of the following:

 

   Number of        Fair Value 
   coins
staked		   Fair Value   Share 
Digital on staked:            
Cardano   38,201,004.7950    30,516,888    100%
Total   38,201,004.7950   $30,516,888    100%

 

As of December 31, 2024, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest  Number of      
   rates  coins
staked		   Fair Value 
Digital on staked:           
Counterparty M  4.00%   32.0000    156,776 
Self custody  3% to 8.02%   63,334,478.7603    345,224,758 
Total      63,334,510.7602   $345,381,533 

 

As of December 31, 2023, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest  Number of      
   rates  coins
staked		   Fair Value 
Digital on staked:           
Counterparty B  3.15%   38,201,004.7950    30,516,888 
Total      38,201,004.7950   $30,516,888 

 

As of December 31, 2024, digital assets staked were concentrated with counterparties as follows:

 

   Geography  December 31,
2024		 
Digital on staked:       
Self custody  Switzerland   100%
Total      100%

 

As of December 31, 2023, digital assets staked were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on staked:       
Counterparty B  Switzerland   100%
Total      100%

 

35

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

6.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The Company’s digital assets staked are exposed to market risk, liquidity risk, lockup duration risk, loss or theft of assets and return duration risk. The Company places allocation limits by counterparty and only deals with high credit quality financial institutions that are believed to have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company’s due diligence procedures may include, but are not limited to, review of the financial position of the counterparty, review of the internal control practices and procedures of the counterparty, review of market information, and monitoring the Company’s risk exposure thresholds. As of December 31, 2024 and 2023, the Company does not expect a material loss on any of its digital assets staked. While the Company intends to only transact with counterparties that it believes to meets the Company staking policy criteria, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

7.Equity investments in digital assets at fair value through profit and loss (“FVTPL”)

 

   Current   Long Term   Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   216,379.2216   $44,442,849    244,331.9458   $50,184,152    460,711.1675   $94,627,001 
Fund A - Avalance (AVAX)   223,905.1900   $8,663,344    707,540.4100   $27,376,168    931,445.6000   $36,039,512 
    440,284.4116   $53,106,193    951,872.3558   $77,560,320    1,392,156.7675   $130,666,513 
                               
Fund B - Solana (SOL)   626,365.7000   $128,651,339    540,869.9000   $111,091,072    1,167,235.6000   $239,742,411 
Total       $181,757,532        $188,651,392        $370,408,924 

 

Fund A

 

During the year ended December 31, 2024, the Company through a subsidiary, invested US$61,741,683 in three tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company (“Fund A”). The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana and 931,446 Avalanche at US$11 per Avalanche.

 

The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The Avalanche acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Avalanche is locked and will become distributable on the same unlocking schedule as the Avalanche. The Avalanche will be released in weekly increments July 10, 2025 and continuing through July 1, 2027.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

Fund B

 

During the year ended December 31, 2024, the Company invested through a subsidiary, $153,516,846 (US$112,072,453) in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company (“Fund B” and together with Fund A the “Equity Investments in Digital Assets”).

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period and thereafter until such Solana is sold by the fund manager or an in-kind distribution in the limited partners of the fund. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25 % of the Solana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

36

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

8.Client digital assets

 

On October 7, the Company acquired 100% interest in Stillman Digital Bermuda Ltd. Client digital assets are comprised of digital assets in custody with Stillman Digital. As at December 31, 2024, Stillman Digital’s client digital assets consisted of the below digital currencies, with a fair value of $3,356,235.

 

   December 31,
2024		   December 31,
2023		 
   Quantity   $   Quantity   $ 
Binance Coin (BNB)   0.1974    201              -            - 
Bitcoin (BTC)   4.8104    801,253    -    - 
Ethereum (ETH)   25.1001    120,759    -    - 
Cardano (ADA)   2,049.2100    2,508    -    - 
Polkadot (DOT)   28.8530    275    -    - 
Solana (SOL)   1,333.3800    363,843    -    - 
USDC   237,564.9400    341,832    -    - 
USDT   26,690.3319    38,324    -    - 
DOGE   147,934.5500    67,409    -    - 
Cosmos (ATOM)   3.2564    29    -    - 
Avalanche (AVAX)   1,206.8100    61,471    -    - 
Matic (MATIC)   24.1100    13    -    - 
Ripple (XRP)   274,300.0100    830,507    -    - 
Enjin (ENJ)   100.0000    30    -    - 
Tron (TRX)   463.6000    170    -    - 
1INCH   574.1916    315    -    - 
AAVE   0.9000    402    -    - 
ALGO   999.9991    477    -    - 
ARB   1,027.5800    1,065    -    - 
BAT   60.4000    20    -    - 
BCH   0.3773    236    -    - 
CHZ   190.0000    22    -    - 
COMP   2.6530    278    -    - 
CRV   35.0000    45    -    - 
EURC   139,109.2000    220,172    -    - 
FTM   256.7697    251    -    - 
GALA   0.6200    0    -    - 
GRT   813.1900    233    -    - 
HBAR   74,568.6800    28,791    -    - 
IMX   0.0177    0    -    - 
KSM   0.6000    28    -    - 
LDO   1,557.7460    3,950    -    - 
LINK   1,265.1500    36,317    -    - 
LRC   104.0710    29    -    - 
LTC   746.4658    111,813    -    - 
MANA   36.7100    24    -    - 
MKR   0.0863    185    -    - 
NEAR   2.5000    18    -    - 
OP   8.0000    20    -    - 
POL   94.9910    35    -    - 
QNT   1,968.4087    299,096    -    - 
SAND   41.3300    32    -    - 
SUSHI   21.3100    41    -    - 
TON   1.0148    2    -    - 
XLM   47,618.2000    23,303    -    - 
XTZ   163.8638    303    -    - 
YFI   0.0091    105    -    - 
Total client digital assets        3,356,235         - 

 

37

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

9.Acquisitions

 

Reflexivity

 

On February 6, 2024, the Company acquired 100% interest in Reflexivity LLC (“Reflexivity”) by issuing 5,000,000 common shares. Reflexivity is a private company incorporated in the United States that operates a premier private research firm that specializes in producing cutting-edge research reports for the cryptocurrency industry. The primary reason for this business combination is to gain exposure to Reflexivity’s subscriber base.

 

Details of the consideration for acquisition, net assets acquired and goodwill are as follows:

 

Purchase price consider paid:    
Fair value of shares issued  $3,100,000 
Fair value of shares issued  $3,100,000 
Fair value of assets and liabilities assumed:     
Cash  $299,457 
Amounts receivable   16,987 
Prepaid expenses   20,092 
Client relationships   350,490 
Brand name   126,531 
Technology   158,163 
Deferred tax liability   (168,286)
Accounts payable   (1,296)
Customer prepayment   (330,919)
Goodwill   2,628,781 
Total net assets aquired  $3,100,000 

 

The goodwill acquired as part of the Reflexivity acquisition is made up of assembled workforce and implied goodwill related to Reflexivity’s management and staff experiences and Reflexivity’s reputation in the industry. It will not be deductible for tax purposes.

 

No material acquisition costs are recognized in the statement of operations. As Reflexivity was acquired on February 7, 2024, there is not a material difference in the amounts consolidated from February 7, 2024 and its full calendar year 2024 results.

 

Stillman Digital

 

On October 7, 2024, the Company acquired 100% interest in Stillman Digital Inc. and Stillman Digital Bermuda Ltd. (collectively “Stillman Digital”) by issuing 2,500,000 common shares. Stillman Digital Inc. is a private company incorporated in the United States and Stillman Digital Bermuda Ltd. Is a private company incorporated in Bermuda. Stillman Digital is a global liquidity provider that provides digital asset products and services in electronic trade execution, market making and OTC block trading. The primary reason for this business combination is to gain access to Stillman Digital’s trading platform.

 

Under the terms of the transaction, 2,500,000 common shares were issued on the close of the transaction. 1,000,000 of the common shares issued are subject to a lock-up schedule, with 25% released on each of the 3, 6, 9, and 12-month anniversaries from October 7, 2024.

 

38

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

9.Acquisitions (continued)

 

Details of the consideration for acquisition, net assets acquired and goodwill are as follows:

 

Purchase price consider paid:    
Fair value of shares issued  $6,893,336 
Fair value of shares issued  $6,893,336 
Fair value of assets and liabilities assumed:     
Cash  $14,095,519 
Amounts receivable   2,681,750 
Prepaid expenses   65,286 
Digital assets   4,456,366 
Client relationships   41,699 
Securities   4,104,255 
Accounts payable   (18,364,875)
Other liabilities   (186,664)
Total net assets aquired  $6,893,336 

 

The goodwill acquired as part of the Stillman Digital’s acquisition is made up o f assembled workforce and implied goodwill related to Stillman Digital’s management and staff experiences and Stillman Digital’s reputation in the industry. It will not be deductible for tax purposes.

 

Had the acquisition taken place on January 1, 2024, the Company would have consolidated $9,849,248 of revenues and net income of $5,820,340. As the acquisition took place October 7, 2024, the Company consolidated revenues of $2,885,180 and net income of $974,635. No material acquisition costs are recognized in the statement of operations.

 

10.Intangibles assets and goodwill

 

Cost  Client
relationships		   Technology   Brand
Name		   Total 
Balance, December 31, 2023  $-   $-   $42,789,968   $42,789,968 
Acquisition of Reflexivty LLC   350,490    158,163    126,531    635,184 
Acquisition of Solana IP   -    4,962,021    -    4,962,021 
Acquisition of Stillman Digital   41,699    -    -    41,699 
Balance, December 31, 2024  $392,189   $5,120,184   $42,916,499   $48,428,872 

 

Accumulated Amortization          Brand
Name		   Total 
Balance, December 31, 2022  $-   $-   $(37,208,780)  $(37,208,780)
Amortization   -    -    (2,038,300)   (2,038,300)
Balance, December 31, 2023  $-   $-   $(39,247,080)  $(39,247,080)
Amortization   (29,208)   (26,361)   (2,059,386)   (2,114,955)
Impairment loss   -    (4,962,021)   -    (4,962,021)
Balance, December 31, 2024  $(29,208)  $(4,988,382)  $(41,306,466)  $(46,324,056)
                     
Balance, December 31, 2023  $-   $-   $3,542,888   $3,542,888 
Balance, December 31, 2024  $362,981   $131,802   $1,610,033   $2,104,816 

 

39

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

10.Intangibles assets and goodwill (continued)

 

On February 9, 2024, the Company acquired intellectual property by issuing 7,297,090 common shares of the Company. The intellectual property acquired encompasses a suite of sophisticated features, including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by the Company. At the time of acquisition, the intangible assets were in an early stage of research and development, with significant uncertainties surrounding its future market demand, sales price and production costs, and as such, on February 9, 2024, the Company recognized an impairment loss of $4,962,021.

 

Impairment test of brand name

 

During the year ended December 31, 2023, as the result of the excess of consideration paid over the fair value of the brand name acquired from Defi Capital and Valour Inc., the Company carried out a review of the recoverable amount of that brand name, which is used in its governance business line in Canada and ETP business line on Cayman Islands. The review led to the recognition of an impairment loss of $nil (December 31, 2024 - $Nil), which has been recognized in profit or loss.

 

Goodwill

 

The continuity of the goodwill acquired as part of the acquisitions is as follows:

 

Cost  Total 
Balance, December 31, 2023 and December 31, 2022  $46,712,027 
Acquisition of Reflexivty LLC   2,628,781 
Balance, December 31, 2024  $49,340,808 

 

Impairment test of goodwill

 

The Company tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The review led to the recognition of an impairment loss of $Nil (December 31, 2023 - $Nil). The recoverable amount of each of the Company’s CGUs has been assessed by reference to the value in use (“VIU”).

 

The key assumptions used included in the year ended December 31, 2024 impairment test: AUM long term growth rate of 2%, annualized rate of staking return of 6.5%, percentage of AUM staked of 65%, expense growth rate of 2.4% and the discount rate used of 27.5%. December 31, 2023: AUM long term growth rate of 2%, percentage of AUM staked of 77.8%, expense growth rate of 3% and a discount rate of 27.7% The expected future cash flows were projected for five years in both the 2024 and 2023 test.

 

The directors and management have considered and assessed reasonably possible changes for other key assumptions and have not identified any instances that could cause the carrying amount of the ETP CGU to exceed its recoverable amount.

 

40

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

11.Accounts payable and accrued liabilities

 

   31-Dec-24   31-Dec-23 
Corporate payables  $4,863,976   $4,443,937 
Digital asset liquidity provider   -    4,402,557 
Related party payable (Note 21)   146,945    328,352 
   $5,010,921   $9,174,846 

 

12.Loans payable

 

As of December 31, 2024, loan principal of $8,633,400 (US$6,000,000) (December 31, 2023 - $52,242,700 (US$39,500,000)) was outstanding. The US$6,000,000 loan payable is held with Genesis. On January 20, 2023, Genesis declared bankruptcy and currently is not allowing withdrawals and not extending new loans. On March 15, 2023, the Court ruled that the Genesis debtors may not sell, buy, trade in crypto assets without prior consent by the creditors. The Court also allowed for the payment of some service providers required for upholding the operations but nothing beyond that. The Company’s loan with Genesis is an open term loan. The Genesis loan and interest payable is $10,082,451 (US$7,007,055) and secured with 365 BTC.

 

The Company has a C$3,865,230 (December 31, 2023: $Nil) margin loan from a crypto liquidity provider. The loan is secured by the equity in the Company’s margin trading account. The crypto liquidity provider charges fluctuating interest rates typically ranging between 9% and 15% annually.

 

On March 23, 2023, the Company entered into a loan agreement with an institutional investment firm that specializes in long-term asset backed financing for secured loan of $4,316,700 (US$3,000,001). The loan is secured by 158.2614 BTC. The Company paid a 1% origination fee to the lender. The principal is due eighteen months from the closing date. Interest payments of US$24,375 are due quarterly with the first payment due on June 23, 2023. As of December 31, 2024, the loan principal of $3,865,230 (US$2,686,239) (December 31, 2023 - $3,967,801 (US$3,000,001)) was outstanding.

 

41

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

13.ETP holders payable

 

The fair market value of the Company’s ETPs as at December 31, 2024 and 2023 were as follows:

 

   December 31,
2024		   December 31,
2023		 
   $   $ 
Valour Bitcoin Zero EUR   33,675,413    13,325,026 
Valour Bitcoin Zero SEK   292,973,088    113,727,038 
Valour Ethereum Zero EUR   3,299,649    1,426,174 
Valour Ethereum Zero SEK   94,096,713    64,723,237 
Valour Polkadot EUR   266,431    217,017 
Valour Polkadot SEK   25,292,105    18,056,128 
Valour Cardano EUR   403,928    105,209 
Valour Cardano SEK   85,098,922    43,131,123 
Valour Uniswap EUR   359,416    132,960 
Valour Uniswap SEK   7,742,117    2,780,982 
Valour Binance EUR   77,649    1,560 
Valour Binance SEK   1,849,520    - 
Valour Solana EUR   13,362,389    4,215,658 
Valour Solana SEK   435,042,882    232,410,677 
Valour Cosmos EUR   3,890    159,572 
Valour Digital Asset Basket 10 EUR   740,846    301,427 
Valour Digital Asset Basket 10 SEK   2,987,958    42,770 
Valour Bitcoin Carbon Neutral EUR   26,686    5,288 
Valour Avalanche EUR   409,362    137,447 
Valour Avalanche SEK   31,866,987    13,034,136 
Valour Enjin EUR   15,380    197,061 
Valour Ripple SEK   51,740,886    - 
Valour Toncoin SEK   3,187,385    - 
Valour Chainlink SEK   6,967,176    - 
Valour ICP SEK   6,453,827    - 
Valour Bitcoin Staking SEK   6,605,270    - 
Valour Hedera SEK   11,450,219    - 
Valour Hedera EUR   3,544,510    - 
Valour CORE SEK   3,324,935    - 
Valour BTC Staking EUR   165,503    - 
Valour Short BTC SEK   309,178    - 
Valour Near SEK   9,465,391    - 
Valour Bitcoin Physical Carbon Neutral USD   1,167,020    - 
Valour Ethereum Physical Staking USD   484,628    - 
Valour ICP USD   14,456,000    - 
Valour BCIX STOXX USD   1,652,286    - 
Valour Hedera Physical Staking USD   6,421,180    - 
Valour Bittensor SEK   6,337,137    - 
Valour Dogecoin SEK   7,931,992    - 
Valour SUI SEK   65,980,127    - 
Valour Fantom SEK   1,315,088    - 
Valour Injective SEK   1,634,348    - 
Valour Jupiter SEK   608,341    - 
Valour Kaspa SEK   763,408    - 
Valour Lido SEK   98,687    - 
Valour Pendle SEK   226,088    - 
Valour PYTH SEK   498,518    - 
Valour Render SEK   1,605,632    - 
Valour SEI SEK   1,220,425    - 
Valour Starnet SEK   140,191    - 
Valour THOR SEK   598,757    - 
Valour Woldcoin SEK   152,109    - 
Valour W SEK   306,616    - 
Valour AAVE SEK   1,049,677    - 
Valour Aerodome SEK   551,225    - 
Valour Akash SEK   447,874    - 
Valour Aptos SEK   3,684,532    - 
Valour Arweace SEK   324,469    - 
Valour ASI SEK   1,053,535    - 
    1,253,515,501    508,130,490 

 

42

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

13.ETP holders payable (continued)

 

The Company’s ETP certificates are unsecured and trade on the Spotlight Stock Market, the LSE, and Germany Borse Frankfurt Zertifikate AG. The Company’s ETP certificates traded on the Nordic Growth Market (“NGM”) until September 2024. ETPs issued by the Company referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company’s policy is always to hedge 100% of the market risk by holding the underlying digital asset. Hedging is done continuously and in direct correspondence to the issuance of certificates to investors.

 

14.Realized and net change in unrealized gains and (losses) on digital assets

 

   Year ended December 31, 
   2024   2023 
Realized gains / (loss) on digital assets  $420,177,621   $(1,017,247)
Unrealized gains / (loss) on digital assets   (74,934,028)   324,976,113 
   $345,243,593   $323,958,866 

 

15.Realized and net change in unrealized gains and (losses) on ETP payables

 

   Year ended December 31, 
   2024   2023 
Realized gains / (loss) on ETPs  $(372,117,165)  $15,580,180 
Unrealized gains / (loss) on ETPs   (110,774,889)   (347,681,046)
   $(482,892,054)  $(332,100,866)

 

16.Realized and net change in unrealized gains and (losses) on investments in equity instruments through FVTPL

 

   Year ended December 31, 
   2024   2023 
Unrealized gains / (loss) on equity investments   132,474,754    - 

 

17.Staking and lending income

 

For the years ended  December 31,
2024		   December 31,
2023		 
Validator nodes   9,364,296    15,235 
Equity investments in digital assets at FVTPL   18,598,539    - 
All other counterparties   7,755,161    3,539,352 
Total  $35,717,997   $3,554,587 

 

18.Expenses by nature

 

   Year ended December 31, 
   2024   2023 
Compensation and consulting  $35,335,887   $5,569,354 
Travel and promotion   8,373,218    718,366 
General and administration   2,739,300    1,467,975 
Accounting and legal   3,679,312    2,000,363 
Regulatory and transfer agent   192,608    219,209 
   $50,320,325   $9,975,267 

 

43

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

19.Share Capital

 

a)As at December 31, 2024 and 2023, the Company is authorized to issue:

 

I.Unlimited number of common shares with no par value;

 

II.20,000,000 preferred shares, 9% cumulative dividends, non-voting, non-participating, non-redeemable, non- retractable, and non-convertible by the holder. The preferred shares are redeemable by the Company in certain circumstances.

 

b)Issued and outstanding shares

 

Balance, December 31, 2022   219,010,501   $166,151,401.00 
Private placement financings   11,812,500    1,117,145 
Shares issued for debt settlement   13,697,095    1,449,102 
Warrant allocation   -    243,330 
Options exercised   575,000    181,585 
DSU exercised   757,500    317,151 
Issued on convertible debt   30,000,000    1,585,524 
Shares issued on acquisition of investment   805,612    128,898 
Balance, December 31, 2023   276,658,208   $170,687,476.00 
Acquisition of Refelxivty LLC (see Note 8)   5,000,000    3,100,000 
Acquisition of Solana IP (see Note 9)   7,297,090    4,962,021 
Acquisition of Stillman Digital Inc & Stillman Bermuda Inc. (see Note 9)   2,500,000    6,893,336 
DSU exercised   6,432,281    6,270,234 
Options exercised   3,912,405    2,537,460 
Warrant exercised   22,737,789    6,669,358 
Treausry shares acquired   3,998,508    8,593,947 
Treasury shares paid out   (5,437,992)   4,352,511 
NCIB   (1,840,600)   3,882,817 
Balance, December 31, 2024   321,257,689   $201,478,504.00 

 

During the year ended December 31, 2023, the Company issued 13,697,095 common shares at an issue price of $0.11 per share to settle existing debt with consultants and management resulting in a loss on settlement of debt in the amount of $172,093. Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

On October 24, 2023, the Company issued convertible debt in exchange for $3,000,000, the notes mature two years from issuance and accrue interest at 8% per annum. Upon conversion or at the maturity of the note the notes were convertible for an equal number of common shares and share purchase warrants, of the Company with an exercise price of $0.20. An officer of the Company subscribed for $361,250 convertible debt.

 

On November 6, 2023, the conversion option was exercised resulting in the issuance of 30,000,000 common shares of the Company and 30,000,000 warrants, each warrant entitles the holder to acquire one additional common share of the Company at an exercise price of $0.20 for a period of 60 months following the closing date. At the issue date, the fair value of the warrants was estimated at $0.10 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 151.9%; risk-free interest rate of 3.87% and an expected life of 5 years. As a result of the conversion option, an officer of the Company received 3,612,500 common shares and 3,612,500 warrants for his convertible debenture.

 

On November 6, 2023, the Company issued 805,612 common shares of the Company in exchange for a $128,898 investment in Neuronomics AG. The shares were valued based on the closing price of the Company’s stock at the date of the exchange. An officer of the Company received 402,808 common shares in exchange for 362 shares of Neuromomics AG.

 

44

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

19.Share Capital (continued)

 

b)Issued and outstanding shares (continued)

 

On November 22, 2023, the Company closed a non-brokered private placement financing and issued 11,812,500 units for gross proceeds of $1,890,000 at a price of $0.16 per unit, each unit consists of one common shares of the company and one warrant, each warrant entitles the holder to acquire one additional common share of the Company at an exercise price of $0.23 for a period of 24 months following the closing date. An officer of the Company subscribed 3,125,000 units for $335,167. At the issue date, the fair value of the warrants was estimated at $0.16 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 139.6%; risk-free interest rate of 4.40% and an expected life of 2 years.

 

On June 11, 2024, under the terms of the NCIB, the Company may, if considered advisable, purchase its common shares in open market transactions through the facilities of the exchange and/or other Canadian alternative trading platforms, not to exceed up to 10 per cent of the public float for the common shares as of June 3, 2024, or 26,996,392 common shares, purchased in aggregate. The price that the company will pay for the common shares shall be the prevailing market price at the time of purchase and all purchased common shares will be cancelled by the company. In accordance with exchange rules, daily purchases (other than pursuant to a block purchase exception) on the exchange under the NCIB cannot exceed 25 per cent of the average daily trading volume on the exchange, as measured from Dec. 1, 2023, to May 31, 2024. The NCIB shall commence on June 10, 2024, and run through June 9, 2025, or on such earlier date as the NCIB is complete.

 

During the year ended December 31, 2024, the Company purchased and cancelled 1,840,600 shares at an average price of $2.11 (December 31, 2023 – no shares purchased or cancelled).

 

20.Share-based payments reserves

 

Stock options, DSUs and Warrants

 

   Options   DSU   Warrants     
       Weighted                   Weighted         
       average                  average         
   Number of   exercise   Value of   Number of   Value of   Number of   exercise   Value of   Total 
   Options   prices   options   DSU   DSU   warrants   prices   warrants   Value 
December 31, 2022   17,777,500   $1.27    20,317,312    6,370,000   $6,977,106    16,740,486   $0.20   $588,111   $27,882,529 
Granted   8,900,000    0.10    875,928    4,359,286    2,044,291    41,812,500    0.21    2,430,661    5,350,880 
Exercised   (575,000)   0.15    (86,710)   (757,500)   (317,150)   -    -    -    (403,860)
Expired / cancelled   (2,697,500)   1.11    (3,138,269)   (327,500)   (663,587)   (12,684,560)   0.03    (423,261)   (4,225,117)
December 31, 2023   23,405,000   $0.72   $17,968,261    9,644,286   $8,040,660    45,868,426   $0.30   $2,595,511   $28,604,432 
Granted   9,461,187    0.80    7,588,292    10,914,007    10,185,881    -    -    -    17,774,173 
Exercised   (3,912,405)   0.28    (1,099,656)   (6,432,281)   (6,270,234)   (22,737,789)   0.06    (1,456,144)   (8,826,034)
Expired / cancelled   (700,000)   2.25    (1,572,530)   (1,000,000)   (111,983)   (5,637)   -    (585)   (1,685,098)
December 31, 2024   28,253,782   $0.72   $22,884,367    13,126,012   $11,844,324    23,125,001   $0.20   $1,138,782   $35,867,473 

 

 

Stock option plan

 

The Company has an ownership-based compensation scheme for executives and employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, officers, directors and consultants of the Company may be granted options to purchase common shares with the exercise prices determined at the time of grant. The Company has adopted a Floating Stock Option Plan (the “Plan”), whereby the number of common shares reserved for issuance under the Plan is equivalent of up to 10% of the issued and outstanding shares of the Company from time to time.

 

Each employee share option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

 

45

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

20.Share-based payments reserves (continued)

 

On March 12, 2024, the Company granted 125,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.69 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $79,575 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 149.1%; risk-free interest rate of 3.71%; and an expected average life of 5 years.

 

On April 23, 2024, the Company granted 250,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.77 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $163,325 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.79%; and an expected average life of 5 years.

 

On May 1, 2024, the Company granted 250,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.77 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $172,950 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.63%; and an expected average life of 5 years.

 

On May 21, 2024, the Company granted 200,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $1.03 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $190,380 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.79%; and an expected average life of 5 years.

 

On June 4, 2024, the Company granted 4,000,000 stock options to a company controlled by management of Valour Inc. to purchase common shares of the Company for the price of $1.26 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $4,658,000 using the Black - Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.5%; risk-free interest rate of 4.08%; and an expected average life of 5 years.

 

On July 29, 2024, the Company granted 3,667,187 stock options to a company controlled by management to purchase common shares of the Company for the price of $2.17 for a period of five years from the date of grant. The options shall vest (a) on December 31, 2024 and (b) upon a company controlled by management having entered into a contract with an employee or consultant of the Corporation or its subsidiaries to transfer the underlying shares subject to the option, subject to performance hurdles. These options have an estimated grant date fair value of $8,142,000 using the Black- Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 156.0%; risk-free interest rate of 3.20%; and an expected average life of 5 years. No agreement had been entered as at December 31, 2024 and as such, the options have not vested.

 

On July 13, 2023, the Company granted 1,000,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.115 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $105,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.47%; and an expected average life of 5 years.

 

On November 24, 2023, the Company granted 2,650,000 stock options to a consultant and directors of the Company to purchase common shares of the Company for the price of $0.29 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $731,400 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 151.7%; risk- free interest rate of 3.83%; and an expected average life of 5 years. Directors of the received 2,500,000 options.

 

46

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

20.Share-based payments reserves (continued)

 

On December 4, 2023, the Company granted 4,500,000 stock options to an officer of the Company to purchase common shares of the Company for the price of $0.45 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $2,162,700 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 151.9%; risk-free interest rate of 3.54%; and an expected average life of 5 years.

 

On December 11, 2023, the Company granted 750,000 stock options to a consultant and directors of the Company to purchase common shares of the Company for the price of $0.52 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $308,700 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 153.1%; risk- free interest rate of 3.53%; and an expected average life of 5 years. Directors of the Company received 500,000 options.

 

The Company recorded $7,588,292 of share-based payments related to stock options during year ended December 31, 2024 (year ended December 31, 2023 - $875,928).

 

The following share-based payment arrangements were in existence at December 31, 2024:

 

Number   Number   Grant  Expiry  Exercise   Fair value at grant   Grant date share   Expected   Expected life  Expected
dividend		   Risk-free
interest		 
outstanding   exercisable   date  date  price   date   price   volatility   (yrs)  yield   rate 
 145,095    145,095   16-Nov-20  16-Nov-25  $0.09    11,492   $0.09    139%  5   0%   0.46%
 1,000,000    1,000,000   22-Mar-21  22-Mar-26  $1.58    1,906,500   $2.12    146%  5   0%   0.99%
 2,060,000    2,060,000   9-Apr-21  9-Apr-26  $1.58    3,293,116   $1.78    145%  5   0%   0.95%
 2,800,000    2,800,000   18-May-21  18-May-26  $1.22    3,150,560   $1.25    146%  5   0%   0.95%
 1,000,000    1,000,000   18-May-21  18-May-26  $1.22    1,125,200   $1.25    146%  5   0%   0.95%
 1,950,000    1,950,000   25-May-21  25-May-26  $1.11    1,944,540   $1.11    146%  5   0%   0.86%
 1,150,000    1,150,000   13-Aug-21  13-Aug-26  $1.58    1,461,305   $1.43    144%  5   0%   0.84%
 250,000    250,000   21-Sep-21  21-Sep-26  $1.70    380,375   $1.70    144%  5   0%   0.85%
 250,000    250,000   13-Oct-21  13-Oct-26  $2.10    470,375   $2.10    144%  5   0%   1.27%
 500,000    500,000   9-Nov-21  9-Nov-26  $3.92    1,758,050   $3.92    144%  5   0%   1.37%
 500,000    500,000   9-May-22  9-May-27  $2.00    591,950   $1.34    146%  5   0%   2.76%
 500,000    500,000   20-May-22  20-May-27  $1.00    334,300   $0.75    147%  5   0%   2.70%
 500,000    500,000   17-Oct-22  17-Oct-27  $0.17    75,350   $0.17    150%  5   0%   3.60%
 1,000,000    750,000   13-Jul-23  13-Jul-28  $0.115    105,000   $0.12    149%  5   0%   3.71%
 750,000    750,000   24-Nov-23  24-Nov-28  $0.29    207,000   $0.29    152%  5   0%   3.83%
 4,500,000    4,500,000   4-Dec-23  4-Dec-28  $0.45    2,162,700   $0.45    152%  5   0%   3.54%
 125,000    125,000   11-Dec-23  11-Dec-28  $0.52    51,450   $0.52    153%  5   0%   3.53%
 125,000    125,000   12-Mar-24  12-Mar-29  $0.69    79,575   $0.69    154%  5   0%   3.47%
 250,000    125,000   23-Apr-24  23-Apr-29  $0.77    163,325   $0.77    154%  5   0%   3.79%
 250,000    125,000   1-May-24  1-May-29  $0.77    172,950   $0.77    154%  5   0%   3.63%
 200,000    100,000   21-May-24  21-May-29  $1.03    190,380   $1.03    154%  5   0%   3.79%
 4,000,000    2,000,000   4-Jun-24  4-Jun-29  $1.26    4,658,000   $1.26    155%  5   0%   4.08%
 3,667,187    3,667,187   29-Jul-24  29-Jul-29  $2.17    8,141,522   $2.39    156%  5   0%   3.20%
 100,000    25,000   4-Nov-24  4-Nov-29  $2.28    210,240   $2.30    150%  5   0%   3.04%
 46,500    -   4-Nov-24  4-Nov-29  $2.28    97,762   $2.30    150%  5   0%   3.04%
 100,000    -   6-Dec-24  6-Dec-29  $4.50    482,410   $5.24    151%  5   0%   2.81%
 35,000    -   6-Dec-24  6-Dec-29  $4.50    168,844   $5.24    151%  5   0%   2.81%
 500,000    -   6-Dec-24  6-Dec-29  $4.50    2,412,050   $5.24    151%  5   0%   2.81%
 28,253,782    24,897,282               35,806,319                        

 

47

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

20.Share-based payments reserves (continued)

 

The weighted average remaining contractual life of the options exercisable at December 31, 2024 was 3.04 years (December 31, 2023 – 3.46 years).

 

Warrants

 

As at December 31, 2024, the Company had share purchase warrants outstanding as follows:

 

   Number
outstanding &		   Grant  Expiry  Exercise   Fair value
at grant		   Grant date
share		   Expected   Expected life  Expected
dividend		   Risk-free interest 
   exercisable   date  date  price   date   price   volatility   (yrs)  yield   rate 
Warrants   20,000,000   06-Nov-23  06-Nov-28  $0.20    942,984   $0.17    151.9%  5   0%   3.87%
Warrants   3,125,000   22-Nov-23  22-Nov-25  $0.23    204,459   $0.33    139.6%  2   0%   4,40%
Warrant issue costs                   (8,662)                       
    23,125,000               1,138,781                        

 

Deferred Share Units Plan (DSUs)

 

On August 15, 2021, the Company adopted the DSUs plan. Eligible participants of the DSU Plan include any director, officer, employee or consultant of the Company. The Board fixes the vesting terms it deems appropriate when granting DSUs. The number of DSUs that may be granted under the DSU Plan may not exceed 5% of the total issued and outstanding Common Shares at the time of grant.

 

On May 21, 2024, the Company granted 1,000,000 DSUs to an employee of Valour. These DSUs have a grant day fair value of $1,185,000 and vest immediately.

 

On May 21, 2024, the Company granted 1,500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $1,777,500 and vest in six months from the grant day.

 

On May 21, 2024, the Company granted 200,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $237,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On July 29, 2024, the Company granted 3,964,007 DSUs to a company controlled by management. These DSUs have a grant day fair value of $9,473,750 and vest (a) on December 31, 2024 and (b) upon a company controlled by management thereof having entered into a contract with an employee or consultant of the Corporation or its subsidiaries to transfer the underlying shares subject to the option, subject to performance hurdles. No agreement had been entered as at December 31, 2024 and as such, the DSUs have not vested in relation to the 3,964,007 DSUs and no expense was recorded during the year ended December 31, 2024.

 

On July 29, 2024, the Company granted 475,000 DSUs to officers and directors of the Company. These DSUs have a grant date fair value of $1,135,250 and vest in four equal installments every six months following the grant date, with the first installment vesting six months after the grant date.

 

On September 24, 2024, the Company granted 1,125,000 DSUs to officers and consultants of the Company. These DSUs have a grant day fair value of $3,319,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is three months from the grant day.

 

On November 4, 2024, the Company granted 100,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $210,000 and vest in four equal installments every month, with the first instalment vesting on the date that is one month from the grant day.

 

On November 21, 2024, the Company granted 1,000,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $3,380,000 and 250,000 vest three months from the grant date 500,000 vest six months from the grant date and the remaining 250,000 vest nine months from the grant date.

 

On November 21, 2024, the Company granted 950,000 DSUs to consultants of the Company. These DSUs have a grant day fair value of $3,211,000 and vest immediately

48

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

20.Share-based payments reserves (continued)

 

On December 6, 2024, the Company granted 100,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $524,000 and vest in four equal installments every month, with the first instalment vesting on the date that is one month from the grant day.

 

On December 6, 2024, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $2,620,000 and vest upon the closing of a merger and acquisition transaction by the Company with a Target Company as described in a finder agreement between the Company and the consultant.

 

On February 1, 2023, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $107,500 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On February 1, 2023, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $107,500 and vest immediately.

 

On July 13, 2023, the Company granted 1,000,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $145,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On November 24, 2023, the Company granted 1,434,286 DSUs to consultants of the Company. These DSUs have a grant day fair value of $277,500 and vest immediately.

 

On November 24, 2023, the Company granted 925,000 DSUs to officers and consultants of the Company. These DSUs have a grant day fair value of $145,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day. Officers of the Company received 400,000 DSUs.

 

The Company recorded $10,185,881 in share-based compensation related to DSUs during the year ended December 31, 2024 (year ended December 31, 2023 - $2,044,291).

 

49

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments

 

Financial assets and financial liabilities as at December 31, 2024 and 2023 are as follows:

 

   Asset /
(liabilities)
at amortized
cost		   Assets /
(liabilities)
at fair value
through
profit/(loss)		   Total 
December 31, 2023            
Cash  $6,727,482   $-   $6,727,482 
Private investments   -    43,540,534    43,540,534 
USDC   -    1,586    1,586 
Accounts payable and accrued liabilities   (9,174,846)   -    (9,174,846)
Loan payable   (56,210,709)   -    (56,210,709)
ETP holders payable   -    (508,130,490)   (508,130,490)
December 31, 2024               
Cash  $22,923,872   $-   $22,923,872 
Client Cash Deposits   15,346,080    -    15,346,080 
Digital assets   -    799,796,591    799,796,591 
Equity investmetnts   -    370,408,924    370,408,924 
Public investments   -    1,119,586    1,119,586 
Private investments   -    53,740,154    53,740,154 
Accounts payable and accrued liabilities   (5,010,922)   -    (5,010,922)
Loan payable   (13,947,681)   -    (13,947,681)
Trading liabilities   -    (25,097,116)   (25,097,116)
ETP holders payable   -    (1,253,515,501)   (1,253,515,501)

 

The Company’s financial instruments are exposed to several risks, including market, liquidity, credit and currency risks. There have been no significant changes in the risks, objectives, policies and procedures from the previous year. A discussion of the Company’s use of financial instruments and their associated risks is provided below:

 

Credit risk

 

Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash carries an investment grade rating as assessed by external rating agencies. The Company maintains all or substantially all of its cash with a major financial institution domiciled in Canada, the United States and Europe. Deposits held with this institution may exceed the amount of insurance provided on such deposits.

 

Regulatory Risks

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company. Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation.

 

50

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

Custodian Risks

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line as well as for digital assets underlying Valour Cayman ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investments declines, resulting in losses upon disposition. In addition, some of the investments the Company holds are lightly traded public corporations or not publicly traded and may not be easily liquidated. The Company generates cash flow from proceeds from the disposition of its investments and digital assets. There can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. All of the Company’s assets, liabilities and obligations are due within one to three years.

 

The Company manages liquidity risk by maintaining adequate cash balances and liquid investments and digital assets. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial and non-financial assets and liabilities. As at December 31, 2024, the Company had current assets of $1,026,403,733 (December 31, 2023 - $497,513,493) to settle current liabilities of $1,297,571,219 (December 31, 2023 -$573,516,045).

 

51

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

The following table shows the Company’s source of liquidity by assets / (liabilities) as at December 31, 2024 and 2023:

 

December 31, 2024

 

   Total   Less than 1 year   1-3 years 
Cash  $22,923,872   $22,923,872   $- 
Client cash deposits   15,346,080    15,346,080    - 
Public Investments   1,119,586    1,119,586    - 
Prepaid expenses   2,585,451    2,585,451    - 
Digital assets   799,796,591    799,314,977    481,614 
Private investments   53,740,154         53,740,154 
Equity investments   370,408,924    181,757,532    188,651,392 
Accounts payable and accrued liabilities   (5,010,922)   (5,010,922)   - 
Loan payable   (13,947,681)   (13,947,681)   - 
Trading liabilities   (25,097,116)   (25,097,116)     
ETP holders payable   (1,253,515,501)   (1,253,515,501)   - 
Total assets / (liabilities) - December 31, 2024  $(31,650,562)  $(274,523,722)  $242,873,160 

 

December 31, 2023

 

   Total   Less than 1 year   1-3 years 
Cash  $6,727,482   $6,727,482   $- 
Amounts receivable   -    -    - 
Prepaid expenses   1,563,860    1,563,860    - 
Digital assets   489,865,638    489,222,151    643,487 
Private investments   43,540,534    -    43,540,534 
Accounts payable and accrued liabilities   (9,174,846)   (9,174,846)   - 
Loans payable   (56,210,709)   (56,210,709)   - 
ETP holders payable   (508,130,490)   (508,130,490)   - 
Total assets / (liabilities) - December 31, 2023  $(31,818,531)  $(76,002,552)  $44,184,021 

 

52

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21Financial instruments (continued)

 

Digital assets included in the table above are non-financial assets except USDC. For the purposes of liquidity risk analysis, these non-financial assets were included as they are mainly utilized to pay off any redemptions related to ETP holders payable, a financial liability. The lent and staked digital assets fall under the “less than 1 year” bucket.

 

Market risk

 

Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate because of changes in market prices.

 

(a)Price and concentration risk

 

The Company is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favorable prices. In addition, most of the Company’s investments are in the technology and resource sector. At December 31, 2024, one investments made up approximately 3.4% (December 31, 2023 – two investments of 7.0%) of the total assets of the Company.

 

For the year ended December 31, 2024, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $5.1 million, or $0.02 per share.

 

For the year ended December 31, 2023, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $4.2 million, or $0.02 per share.

 

(b)Interest rate risk

 

The Company’s cash is subject to interest rate cash flow risk as it carries variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash balances on hand at December 31, 2024, a 1% change in interest rates could result in approximately $229,000 change in net loss.

 

(c)Currency risk

 

Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company’s operations are exposed to foreign exchange fluctuations, which could have a significant adverse effect on its results of operations from time to time. The Company’s foreign currency risk arises primarily with respect to United States dollar, Euro, Swiss Franc, Swedish Krona and British Pound. Fluctuations in the exchange rates between this currency and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. The Company reduces its currency risk by maintaining minimal cash balances held in foreign currency.

 

As at December 31, 2024 and 2023, the Company had the following financial and non-financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:

 

December 31, 2024

 

   United States   British   Swiss   Swedish Krona   Euro   Dirham 
Cash  $17,034,759   $-   $5,141,507   $9,818,189   $3,645,348   $88,135 
Client cash deposits   15,346,080    -    -    -    -    - 
Private investments   1,119,587    -    51,020,502    -    -    - 
Prepaid investment   2,585,451    -    -    -    -    - 
Digital assets   799,796,591    -    -    -    -    - 
Accounts payable and accrued liabilities   (4,204,771)   (79,738)   (356,130)   -    (22,392)   - 
Loan payable   (13,947,681)   -    -    -    -    - 
Trading liabilities   (25,097,116)   -    -    -    -    - 
ETP holders payable   (1,253,515,501)   -    -    -    -    - 
Net assets (liabilities)  $(460,882,601)  $(79,738)  $55,805,880   $9,818,189   $3,622,956   $88,135 

 

53

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

(c)Currency risk (continued)

 

December 31, 2023

 

   United States   British   Swiss   Euro 
Cash  $6,668,518   $-   $-   $- 
Other assets   47,159    -    -    - 
Private investments   4,016,636    -    39,395,000    - 
Prepaid investment   1,509,824    -    -    - 
Digital assets   489,865,637    -    -    - 
Accounts payable and accrued liabilities   (3,080,229)   (74,466)   (101,828)   (21,939)
Loan payable   (56,210,709)               
ETP holders payable   (508,130,490)   -    -    - 
Net assets (liabilities)  $(65,313,654)  $(74,466)  $39,293,172   $(21,939)

 

A 10% increase (decrease) in the value of the Canadian dollar against all foreign currencies in which the Company held financial instruments as of December 31, 2024 would result in an estimated increase (decrease) in net income of approximately $35,222,000, (December 31, 2023 - $2,601,500).

 

(d)Digital currency risk factors: Perception, Evolution, Validation and Valuation

 

A digital currency does not represent an intrinsic value or a form of credit. Its value is a function of the perspective of the participants within the marketplace for that digital currency. The price of the digital currency fluctuates as a result of supply and demand pressures that accumulate in the market for it.

 

Having a finite supply (in the case of many but not all digital currencies), the more people who want to own that digital currency, the more the market price increases and vice-versa.

 

The most common means of determining the value of a digital currency is through one or more cryptocurrency exchanges where that digital currency is traded. Such exchanges publicly disclose the “times and sales” of the various listed pairs. As the marketplace for digital currencies evolves, the process for assessing value will become increasingly sophisticated.

 

(e)Fair value of financial instruments

 

The Company has determined the carrying values of its financial instruments as follows:

 

i.The carrying values of cash, amounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

 

ii.Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 in the Company’s December 31, 2023 financial statements.

 

iii.Digital assets classified as financial assets relate to USDC which is measured at fair value.

 

54

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

The following table illustrates the classification and hierarchy of the Company’s financial instruments, measured at fair value in the statements of financial position as at December 31, 2024 and 2023.

 

   Level 1   Level 2   Level 3     
Investments, fair value  (Quoted Market price)   (Valuation
technique-
observable
market Inputs)		   (Valuation technique-
non- observable
market inputs)		   Total 
Privately traded investments  $-   $-   $53,740,154   $53,740,154 
Digital assets   -    799,796,591         799,796,591 
Client digital assets   -    3,356,235    -    3,356,235 
Equity investments   -         370,408,927    370,408,927 
Publicly traded investments   1,119,587    -    -    1,119,587 
December 31, 2024  $1,119,587   $803,152,826   $424,149,081   $1,228,421,494 
Privately traded investments  $-   $-   $43,540,534   $43,540,534 
Digital assets   -    489,865,638    -    489,865,638 
December 31, 2023  $-   $489,865,638   $43,540,534   $533,406,172 

 

Level 1 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 1 during the years ended December 31, 2024 and 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   December 31,   December 31, 
Investments, fair value for the year ended  2024   2023 
Balance, beginning of year  $-   $      - 
Transferred from level 1   1,119,587    - 
Balance, end of year  $1,119,587   $- 

 

Level 2 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 2 during the years ended December 31, 2024 and 2023. These financial instruments are measured at fair value utilizing non- observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   December 31,   December 31, 
Investments, fair value for the year ended  2024   2023 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   540,008,974    318,355,007 
Client digital assets acquired   3,356,235    - 
Digital assets disposed   (717,306,612)   (244,656,544)
Digital assets earned from staking, lending and fees   35,717,997    3,554,587 
Realized gain (loss) on digital assets   396,824,120    (1,017,247)
Net change in unrealized gains and losses on digital assets   80,894,227    324,976,115 
Foreign exchange loss   (26,207,753)   (15,548,365)
   $803,152,826   $489,865,638 

 

55

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

Level 3 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the years ended December 31, 2024 and 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   December 31,   December 31, 
Investments, fair value for the year ended  2024   2023 
Opening balance  $43,540,534   $30,015,445 
Purchases   370,408,927    128,898 
Transferred to Level 1   (1,119,587)   - 
Realized gain (loss)   154,767    - 
Unrealized gain/(loss)   11,164,440    13,396,191 
   $424,149,081   $43,540,534 

 

Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly traded companies.

 

As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results.

 

56

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at December 31, 2024 and 2023.

 

             Range of
          Significant  significant
       Valuation  unobservable  unobservable
Description  Fair vaue   technique  input(s)  input(s)
3iQ Corp.  $432,331   Recent financing  Marketability of shares  0% discount
Equity Investments in digital   370,408,927   Recent financing  Discount for lack of marketability  25% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   719,522   Recent financing  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Amina Bank   51,020,502   Market approach  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
ZKP Corporation   1,438,900   Recent financing  Marketability of shares  0% discount
September 30, 2024  $424,149,080          
3iQ Corp.  $1,216,890   Recent financing  Marketability of shares  0% discount
Brazil Potash Corp.   2,138,380   Recent financing  Marketability of shares  0% discount
               
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   661,366   Recent financing  Marketability of shares  0% discount
SEBA Bank AG   39,395,000   Market approach  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
December 31, 2023  $43,540,534           

 

3iQ Corp. (“3iQ”)

 

On March 31, 2020, the Company acquired 187,007 common shares of 3iQ as part of the Company’s acquisition of Valour. As at December 31, 2024, the valuation of 3iQ was based on the recent transaction which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of 3iQ will result in a corresponding +/- $43,233 (December 31, 2023 - $121,689) change in the carrying amount.

 

Amina Bank AG (“Amina”)

 

On January 14, 2022, the Company invested $34,498,750 to acquire 3,906,250 non-votes shares of Amina. As at December 31, 2024, the valuation of Amina was based on a market approach which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of Amina will result in a corresponding +/- $5,102,050 (December 31, 2023 +/- $3,939,500) change in the carrying amount.

 

57

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

Earnity Inc. (“Earnity”)

 

On April 13, 2021, the Company subscribed $50,076 (US$40,000) to acquire certain rights to certain future equity of Earnity. As at December 31, 2024, the valuation of Earnity was determined to be nil based on Earnity ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at December 31, 2024, a +/- 10% change in the fair value of Earnity will result in a corresponding+/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Luxor Technology Corporation (“LTC”)

 

On December 29, 2020, the Company subscribed $128,060 (US$100,000) to acquire certain rights to the preferred shares of LTC. The transaction was closed on February 15, 2021. On May 11, 2021, the Company subscribed additional rights of US$62,500 ($75,787). As at December 31, 2024, the valuation of LTC was based on a previous financing which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024. a +/- 10% change in the fair value of LTC will result in a corresponding +/- $71,952 (December 31, 2023 - $66,137) change in the carrying amount.

 

SDK:Meta LLC

 

On June 3, 2021, the Company entered into a share exchange agreement with SDK exchanging 1,000,000 membership units of SDK with 3,000,000 shares of the Company valuing the investment at $3,420,000. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at December 31, 2024, the valuation of SDK:Meta LLC was $nil (December 31, 2023 - $nil). Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at December 31, 2024, a +/- 10% change in the fair value of SDK:Meta LLC will result in a corresponding+/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Skolem Technologies Ltd. (“STL”)

 

On December 29, 2020, the Company invested $25,612 (US$20,000) to acquire certain rights to the preferred shares of STL. On October 29, 2021, the Company rights were converted into 16,354 series A preferred shares. As at December 31, 2024, the valuation of STL was determined to be nil based on STL ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of STL will result in a corresponding+/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

VolMEX Labs Corporation (“VLC”)

 

On February 23, 2021, the Company invested $37,809 (US$30,0000 to acquire certain rights to the preferred shares of VLC. As at December 31, 2024, the valuation of VLC was nil. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of VLC will result in a corresponding +/- nil (December 31, 2023 - $nil) change in the carrying amount.

 

ZKP Corporation (“ZKP”)

 

On August 2, 2024, the Company invested $1,385,800 (US$1,000,000) to acquire shares of ZKP. As at December 31, 2024, the valuation of ZKP was based on the recent financing price. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of ZXP will result in a corresponding +/- $143,890 change in the carrying amount.

 

Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at December 31, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $37,040,893 change in the carrying amount.

 

58

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

22.Digital asset risk

 

(a)Digital currency risk factors: Risks due to the technical design of cryptocurrencies

 

The source code of many digital currencies, such as Bitcoin, is public and may be downloaded and viewed by anyone. As with all code, there may be a bug in the respective code which is yet to be found and repaired and can ultimately jeopardize the integrity and security of one or more of these networks.

 

Should miners for reasons yet unknown cease to register completed transactions within blocks which have been detached from the block chain, the confidence in the protocol and network will be reduced, which will reduce the value of the digital currency associated with that protocol, and the ETP payable balances that are valued with reference to the respective digital asset.

 

Protocols for most digital assets or cryptocurrencies are public open-source software, they could be particularly vulnerable to hacker attacks, which could be damaging for the digital currency market and may be the cause for investors to choose other currencies or assets to invest in.

 

(b)Digital currency risk factors: Ownership, Wallets

 

Rather than the actual cryptocurrency (which are “stored” on the blockchain), a cryptocurrency wallet stores the information necessary to transact the cryptocurrency. Those digital credentials are needed so one can access and spend the underlying digital assets. Some use public-key cryptography in which two cryptographic keys, one public and one private, are generated and stored in a wallet. There are several types of wallets:

 

-Hardware wallets are USB-like hardware devices with a small screen built specifically for handling private keys and public keys/addresses.

 

-Paper wallets are simply paper printouts of private and public addresses.

 

-Desktop wallets are installable software programs/apps downloaded from the internet that hold your private and public keys/addresses.

 

-Mobile wallets are wallets installed on a mobile device and are thus always available and connected to the internet.

 

-Web wallets are hot wallets that are always connected to the internet that can be stored in a browser or can be “hosted” by third party providers such as an exchange.

 

(c)Digital currency risk factors: Political, regulatory risk and technology in the market of digital currencies

 

The legal status of digital currencies, inter alia Bitcoin varies between different countries. The lack of consensus concerning the regulation of digital currencies and how such currencies shall be handled tax wise causes insecurity regarding their legal status. As all digital currencies remain largely unregulated assets, there is a risk that politics and future regulations may negatively impact the market of digital currencies and companies operating in such market. It is impossible to estimate how politics and future regulations may affect the market. However, future regulations and changes in the legal status of the digital currencies is a political risk which may affect the price development of the tracked digital currencies.

 

The perception (and the extent to which it is held) that there is significant usage of the digital assets in connection with criminal or other illicit purposes, could materially influence the development and regulation of digital assets (potentially by curtailing the same).

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack.

 

59

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

23.Capital management

 

The Company considers its capital to consist of share capital, share based payments reserves and deficit. The Company’s objectives when managing capital are:

 

a)to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments;

 

b)to give shareholders sustained growth in value by increasing shareholders’ equity; while

 

c)taking a conservative approach towards financial leverage and management of financial risks.

 

The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:

 

a)raising capital through equity financings; and

 

b)realizing proceeds from the disposition of its investments

 

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million. There were no changes to the Company’s capital management during the year ended December 31, 2024.

 

24.Related party disclosures

 

a)The consolidated financial statements include the financial statements of the Company and its subsidiaries and its respective ownership listed below:

 

   % equity 
   interest 
DeFi Capital Inc.   100 
DeFi Holdings (Bermuda) Ltd.   100 
Electrum Streaming Inc.   100 
Reflexivity LLC   100 
Valour Inc.   100 
DeFi Europe AG   100 
DeFi Middle East DMCC   100 
Stillman Digital Inc.   100 
Stillman Bermuda Ltd.   100 
Valour Digital Securities Limited   0 

 

60

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

24.Related party disclosures (continued)

 

b)Compensation of key management personnel of the Company

 

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non- executive) of the Company. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. The remuneration of directors and other members of key management personnel during the years ended December 31, 2024 and 2023 were as follows:

 

   Three months ended
December 31,		   Year ended
December 31,		 
   2024   2024   2024   2023 
Short-term benefits  $1,310,040   $161,664   $29,516,112   $1,475,096 
Shared-based payments   10,167,428    67,498    12,977,714    264,829 
   $11,477,468   $229,162   $42,493,826   $1,739,925 

 

As at December 31, 2024, the Company had $nil (December 31, 2023 - $147,485) owing to its current key management, and $394,274 (December 31, 2023 - $314,136) owing to its former key management and a member of key management owes the Company $143,890 (December 31, 2023 - $nil). Such amounts are unsecured, non-interest bearing, with no fixed terms of payment or “due on demand”

 

c)During the years ended December 31, 2024 and 2023, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

 

   Three months ended
December 31,		   Year ended
December 31,		 
   2024   2023   2024   2023 
2227929 Ontario Inc.  $30,000   $30,000   $120,000   $120,000 
   $30,000   $30,000   $120,000   $120,000 

 

The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at December 31, 2024, the Company had a payable balance of $327,700 (December 31, 2023 - $226,000) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former director and former officer of the Company, is also a director of 2227929 Ontario Inc.

 

For the year ended December 31, 2024, the Company incurred $59,439 (December 31, 2023 - $173,917) in legal fees to a firm in which a director of the Company is a partner. At December 31, 2024, the Company had recorded $nil in accounts payable and accrued liabilities related to these legal expenses (December 31, 2023 – $165,868) incurred in the ordinary course of business with this law firm.

 

During the year ended December 31, 2024, Valour purchased 1,320,130 USDT for EUR1,213,237 from a former director of Valour.

 

During the year ended December 31, 2024, the Company paid management US$20,000,000 and 3,998,508 DeFi shares valued at US$6,273,870 related to DeFi Alpha trading profits.

 

During the year ended December 31, 2023, Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

61

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

24.Related party disclosures (continued)

 

During the year ended December 31, 2023, the Company also issued 2,724,941 common shares of the Company to former key management at an issue price of $0.11 per share to settle existing debt of $231,620 resulting in a loss on settlement of debt in the amount of $68,124.

 

Included in accounts payable and accrued liabilities were expenses of GBP 44,228 ($79,964) (December 31, 2023 - $74,466) of expenses owed to Vik Pathak, a former director and officer of the Company.

 

See Note 20.

 

The Company has a diversified base of investors. To the Company’s knowledge, no one holds more than 10% of the Company’s shares on a basic share and partially diluted share basis as at December 31, 2024.

 

d)The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of December 31, 2024 and 2023.

 

      Estimated 
Investment  Nature of relationship to invesment  Fair value 
Brazil Potash Corp.  Officer (Ryan Ptolemy) of Investee  $1,119,587 
Aminna Bank AG *  Former Director (Olivier Roussy Newton) of investee   51,020,502 
ZKP*  Director (Olivier Roussy Newton) of investee   1,438,900 
Total investment - December 31, 2024     $53,578,989 

 

*Private companies

 

      Estimated 
Investment  Nature of relationship to invesment  Fair value 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $2,138,380 
Aminna Bank AG (formerlt SEBA Bank AG)*  Former Director (Olivier Roussy Newton) of investee   39,395,000 
Total investment - December 31, 2023     $41,533,380 

 

*Private companies

 

25.Commitments and contingencies

 

The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $2,375,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these consolidated financial statements. Minimum commitments remaining under these contracts were approximately $905,000, all due within one year.

 

The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

 

62

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

26.Operating segments

 

The Company operates in various business lines based on where the subsidiaries operate. Valour operates the Company’s ETPs business line which involves issuing ETPs, hedging against the underlying digital asset, lending and staking of digital assets and management fees earned on the ETPs. DeFi Bermuda operates the Company’s Venture portfolio and node business lines. DeFi Alpha is a specialized trading desk with the sole focus of identifying low-risk arbitrage opportunities within the crypto ecosystem. The Reflexivity operates the Company’s research firm and Stillman and Stillman Bermuda operate the trading platform.

 

Information about the Company’s assets by segment is detailed below.

 

December 31, 2024  DeFi   Reflexivity   Stillman
Digital		   Valour Inc.   Total 
Cash   2,548,289    217,449    1,662,490    18,495,644    22,923,872 
Client cash deposits        -    15,346,080    -    15,346,080 
Public investments, at fair value through profit and loss   1,119,586    -    -    -    1,119,586 
Prepaid expenses   788,162    103,606    1,007,990    685,693    2,585,451 
Digital assets   763,338    228,237    8,227,158    790,577,858    799,796,591 
Equity instruments   -    -    -    370,408,924    370,408,924 
Client digital assets   -    -    3,356,235    -    3,356,235 
Property, plant and equipment   -    -    -    130    130 
Other non-current assets   51,868,922    -    -    53,316,856    105,185,778 
Total assets   57,088,297    549,292         1,233,485,105    1,320,722,647 
Accounts payable and accrued liabilities   3,363,664    279,114    830,101    538,043    5,010,922 
Loans payable   -    -    -    13,947,681    13,947,681 
Trading liabilities   -    -    25,097,116    -    25,097,116 
ETP holders payable   -    -    -    1,253,515,501    1,253,515,501 
Total liabilities   3,363,664    279,114    25,927,217    1,268,001,225    1,297,571,220 

 

December 31, 2023  DeFi   DeFi
Bermuda		   Valour Inc.   Total 
Cash   59,069    -    6,668,412    6,727,481 
Amounts receivable   6,878    -    47,159    54,037 
Prepaid expenses   77,521    -    1,432,303    1,509,824 
Digital assets   503,669    218,131    488,500,351    489,222,151 
Property, plant and equipment   -         7,679    7,679 
Other non-current assets   -    -    94,438,937    94,438,937 
Total assets   647,137    218,131    591,094,840    591,960,108 
Accounts payable and accrued liabilities   2,976,405    29,440    6,169,001    9,174,846 
Loans payable   -    -    56,210,709    56,210,709 
Trading liabilities   -    -    -    - 
ETP holders payable   -    -    508,130,490    508,130,490 
Total liabilities   2,976,405    29,440    570,510,200    573,516,045 

 

63

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

26.Operating segments (continued)

 

Information about the Company’s revenues and expenses by segment is detailed below:

 

   DeFi   Reflexivity   DeFi Bermuda   Stillman Digital   Defi Alpha1   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digital assets   259,669    73,580    (35,011)   -    132,121,555    212,823,799    345,243,593 
Realized and net change in unrealized gains and (losses) on ETP payables   -    -    -    -    -    (482,892,054)   (482,892,054)
Staking and lending income   -    -    -    -    -    35,717,997    35,717,997 
Trading commissions   -    -    -    2,885,180    -    -    2,885,180 
Management fees   -    -    -    -    -    8,826,934    8,826,934 
Research revenue   -    1,963,433    -    -    -    -    1,963,433 
Realized (loss) on investments, net   -    -    -    -    -    154,765    154,765 
Unrealized (loss) on investments, net   4,827,461    -    -    -    -    6,006,014    10,833,475 
Unrealized gain on equity investments   -    -    -    -    -    132,474,754    132,474,754 
Interest income   5,385    -    -    830    -    -    6,215 
Total revenue   5,092,515    2,037,013    (35,011)   2,886,010    132,121,555    (86,887,791)   55,214,292 
Expenses                                   
Operating, general and administration   9,948,895    1,652,218    12,719    1,568,626    27,172,254    9,965,613    50,320,325 
Share based payments   17,774,171    -    -    -    -    8,593,947    26,368,118 
Depreciation - property, plant and equipment   -    -    5,073    -    -    2,475    7,548 
Amortization - intangibles   2,114,955    -    -    -    -    -    2,114,955 
Finance costs   -    -    -    1,295    -    3,867,130    3,868,425 
Transaction costs   44,498    -    -    341,445    857,048    5,555,901    6,798,892 
Foreign exchange (gain) loss   124,291    -    -    (472,863)   -    (91,570)   (440,142)
Impairment loss   4,962,021    -    -    -    -    -    4,962,021 
Total expenses   34,968,831    1,652,218    17,792    1,438,503    28,029,302    27,893,496    94,000,142 
Income (loss) before other item   (29,876,316)   384,795    (52,802)   1,447,507    104,092,253    (114,781,287)   (38,785,850)
Gain on settlement of debt   (133,881)   -    -    -    -    -    (133,881)
Provision on accounts receivable   (5,331)   -    -    394,864    -    -    389,533 
Net income (loss) for the year   (29,737,105)   384,795    (52,802)   1,052,643    104,092,253    (114,781,287)   (39,041,502)
Other comprehensive income (loss)                                   
Foreign currency translation (loss) gain   -    (29,329)   14,404    456,573    -    4,465,725    4,907,373 
Net (loss) income and comprehensive (loss) income for the period   (29,737,105)   355,466    (38,398)   1,509,216    104,092,253    (110,315,561)   (34,134,129)

 

64

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

26.Operating segments (continued)

 

For the year ended December 31, 2023  DeFi   DeFi
Bermuda		   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digital assets   503,669    122,096    323,333,102    323,958,867 
Realized and net change in unrealized gains and (losses) on ETP payables   -    -    (332,100,866)   (332,100,866)
Realized (loss) of derivative asset   -    -    -    - 
Staking and lending income   -    164    3,539,188    3,539,352 
Management fees   -    -    1,461,594    1,461,594 
Node revenue   -    15,235    -    15,235 
Realized (loss) on investments, net   -    -    (4,150)   (4,150)
Unrealized (loss) on investments, net   13,466,082    (40,872)   59,294    13,484,504 
Interest income   1,480    -    -    1,480 
Total revenue   13,971,231    96,622    (3,711,838)   10,356,015 
Expenses                    
Operating, general and administration   3,476,710    33,863    6,464,694    9,975,267 
Share based payments   2,920,219    -    -    2,920,219 
Depreciation - property, plant and equipment   -    10,470    2,475    12,945 
Amortization - intangibles   2,038,300    -    -    2,038,300 
Finance costs   8,789    -    4,152,347    4,161,136 
Transaction costs   -    -    1,029,442    1,029,442 
Foreign exchange (gain) loss   (34,696)   -    10,373,271    10,338,575 
Income (loss) before other item   5,561,909    52,289    (25,734,067)   (20,119,869)
Loss on settlement of debt   (172,093)             (172,093)
Income (loss) before other item   5,389,816    52,289    (25,734,067)   (20,291,962)
Other comprehensive loss                    
Foreign currency translation (loss) gain   -    (4,611)   1,348,281    1,343,670 
Net (loss) income and comprehensive (loss) income for the period   5,389,816    47,678    (24,385,786)   (18,948,292)

 

1DeFi Alpha is division within Valour Inc. looking for arbitrage trading opportunities. It does not have its own statement of financial position but leverages Valour Inc’s equity for its trades. The CODM only reviews DeFi Alpha’s trading operating results. DeFi Alpha revenue disclosed I the table above is a non- IFRS calculation based on reporting provided to the CODM to assess performance. The total of DeFi Alpha and Valour Inc. realized gain/loss is in accordance with IFRS.

 

27.Earning per share

 

The following table presents the calculation of basic and fully diluted earnings per common share for the years ended December 31, 2024:

 

   Year ended December 31, 
   2024   2023 
Numerator:        
Net (loss) income  $(39,041,502)  $(20,291,963)
Denominator:          
Weighted average number of common shares - basic   295,591,423    223,084,360 
Basic and diluted earnings per share  $(0.13)  $(0.09)

 

65

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

28.Taxation

 

a)Provision for Income Taxes

 

The reconciliation of the combined Canadian Federal and Provincial statutory income tax rate of 26.5% (2023: 26.5%) to the effective tax rate is as follows:

 

   2024   2023 
   $   $ 
(Loss) before income taxes   (34,134,129)   (20,291,963)
           
Expected income tax recovery based on statutory rate   (9,046,000)   (5,377,000)
Adjustment to expected income tax recovery:          
Change in foreign exchange rates   -    - 
Permanent differences   (16,063,000)   2,130,873 
Provision to return adjustment   (130,000)   (284,000)
Share based compensation   6,988,000    728,000 
Other        (90,000)
Change in unrecorded deferred tax asset   18,251,000    2,892,127 
Deferred income tax provision (recovery)   -    - 

 

b)Deferred Income Tax

 

Deferred taxes are a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities.

 

   2024   2023 
   $   $ 
Non-capital loss carry-forwards   37,058,000    49,321,000 
Undepreciated capital cost (UCC)   33,000    33,000 
Reserves   410,000    360,000 
Share issue costs   102,000    207,000 
Exploration and evaluation assets   7,002,000    7,002,000 
Investments        40,985,000 
Intangible assets   3,528,000      
Capital losses carried forward   23,348,000    23,348,000 
Total   71,481,000    121,256,000 

 

The Company has approximately $52,378,000 of non-capital loss carry forwards in Canada which may be used to reduce the taxable income of future years. These losses expire from 2026 to 2043.

 

66

 

 

DeFi Technologies Inc.

Notes to the consolidated financial statements

For the years ended December 31, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

29.Subsequent events

 

Neuronomics AG Acquisition

 

On January 10, 2025, the Company closed an investment to acquire 10% of Neuronomics AG for US$288,727 (CHF 262,684). On March 7, 2025, the Company announced that it increased its stake in Neuronomics AG, a Swiss asset management firm specializing in artificial intelligence and model driven quantitative trading strategies from 10% to 52.5%.

 

In connection with the acquisition, the Company issued 186,304 common shares of the Company, plus additional cash considerations, to the selling shareholders of Neuronomics AG. 152,433 of the Payment Shares are subject to a lock-up schedule, with 50% released in three months and the remainder released in six months. No finder fees were paid in connection with the Acquisition. Closing of the Acquisition is subject to the acceptance of Cboe Canada Exchange.

 

CoreFi Strategy Binding Letter of Intent

 

On February 4, 2025, DeFi entered a binding letter agreement with CoreFi Strategy Corp. (“CoreFi”) and Orinswift Ventures (the “LOI”) to facilitate a reverse takeover (the “RTO”).

 

CoreFi Strategy, inspired by models like MicroStrategy, offers a regulated, leveraged approach to Bitcoin yield and CORE. The Core blockchain supports Bitcoin staking and a vibrant EVM-compatible ecosystem, securing over 5,700 Bitcoin staked, $850M+ total value locked, and a rapidly growing user base.

 

Transaction Overview

 

The RTO will be completed through a definitive agreement that is to be negotiated by the parties, which will contain customary representations and warranties for similar transactions, and is expected to be structured as a three-corned amalgamation whereby a newly incorporated subsidiary of Orinswift will amalgamate with CoreFi, resulting in Orinswift acquiring all securities of CoreFi, and CoreFi securityholders becoming securityholders of Orinswift, as the resulting issuer following closing of the Transaction (the “Resulting Issuer”). The final structure for the Transaction is subject to satisfactory tax, corporate and securities law advice for each of Orinswift, CoreFi, and DeFi.

 

Pursuant to the LOI the Core Foundation will contribute US$20 million in CORE Tokens to strengthen CoreFi’s treasury in exchange for 30% of the Resulting Issuer Additionally, CoreFi plans to raise US$20 million in concurrent financing to accelerate its growth in Bitcoin Finance (BTCfi) technologies. DeFi will provide advisory services, intellectual property development and intellectual property licenses in exchange for 30% of the Resulting Isser.

 

 

67

 

 

Exhibit 99.125

 

 

 

 

 

 

 

 
MANAGEMENT’S DISCUSSION AND ANALYSIS
 

 

 

 

Year ended December 31, 2024

 

 

 

 

 

 

 

Background

 

 

This Management’s Discussion and Analysis (“MD&A”) has been prepared based on information available to DeFi Technologies Inc. (“we”, “our”, “us”, “DeFi” or the “Company”) containing information through March 30, 2025, unless otherwise noted.

 

The MD&A provides a detailed analysis of the Company’s operations and compares its financial results for the three months and year ended December 31, 2024 and 2023. The December 31, 2024 annual audited consolidated financial statements and related notes of DeFi have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS”). Please refer to the notes of the December 31, 2024 annual audited consolidated financial statements for disclosure of the Company’s significant accounting policies. The Company’s presentation currency is the Canadian dollar. Unless otherwise noted, all references to currency in this MD&A refer to Canadian dollars.

 

Additional information, including our press releases, have been filed electronically through “SEDAR+ and is available online under the Company’s SEDAR profile at www.sedarplus.com.

 

Cautionary Statement Regarding Forward Looking Information

 

 

This MD&A contains “forward-looking information” within the meaning of that term under Canadian securities laws. This information relates to future events or future performance and reflects the Company’s expectations and assumptions regarding such future events and performance. Forward-looking information can be identified by the use of words such as, but not limited to, “plans”, “expects”, “project”, “predict”, “potential”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved.

 

In particular, all statements, other than statements of historical facts, included in this MD&A that address activities, events or developments that management of the Company expects or anticipates will or may occur in the future contain forward-looking information, including but not limited to, statements with respect to:

 

●financial, operational and other projections and outlooks as well as statements or information concerning future operation plans, objectives, performance, revenues, growth, acquisition strategies, profits or operating expenses of the Company and its subsidiaries;

 

●details and expectations regarding the Company’s investments in the decentralized finance (“DeFi”) industry and the Company’s Equity Investments in Digital Assets (as defined herein);

 

●expectations regarding revenue growth due to changes in the Company’s business strategy;

 

●expansion and growth of the Company’s Asset Management, Ventures and Infrastructure business lines;

 

●development of ETPs and partnerships and joint ventures with other companies;

 

●growth of assets under management (“AUM”);

 

2

 

●listing of ETPS;

 

●identifying and capitalizing on low-risk arbitrage opportunities within the digital asset market;

 

●digital asset staking, lending or trading transactions;

 

●listing of the Common Shares on Nasdaq;

 

●the AsiaNext MOU;

 

●the NSE MOU;

 

●SolFi Technologies;

 

●CoreFi Technologies;

 

●anticipated lending and staking income and management fees charged on ETPs;

 

●hedging activities;

 

●investment performance of ETPs, DeFi protocols and digital assets underlying ETPs and portfolio companies that the Company has invested in;

 

●future development of laws and regulations governing the DeFi industry;

 

●requirements for additional capital and future financing options;

 

●publishing and marketing plans;

 

●the availability of attractive investments that align with the Company’s investment strategy;

 

●future outbreaks of infectious diseases;

 

●the impact of climate change; and

 

●other expectations of the Company.

 

3

 

Forward-looking information involves various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Important factors that could cause actual results to differ materially from the Company’s expectations are described in the Company’s documents filed from time to time with the applicable regulatory authorities and such factors include, but are not limited to, risks related to the staking and lending of cryptocurrencies, DeFi protocol tokens, or other digital assets; risks relating to momentum prising and volatility of cryptocurrencies, DeFi protocol tokens, and other digital assets; cybersecurity threats, security breaches and hacks; the relative novelty of cryptocurrency exchanges and other trading venues; regulatory risks; hedging risk; the U.S. classification of crypto assets and the Investment Company Act of 1940; the issuance of crypto ETPs in the EU and non-EU countries; risk related the Company’s Ventures portfolio exposure; risks associated with banks cutting off services to businesses that provide cryptocurrency related services; the impact of geopolitical events; the further development and acceptance of digital and DeFi networks; risks and uncertainties associated with custodians of digital assets; risk of loss, theft or destruction of cryptocurrencies; risks associated with the irrevocability of transactions; risks associated with the potential failure to maintain the cryptocurrency networks; risks associated with the potential manipulation of blockchain; risks that miners may cease operations; risks related to insurance; risks related to the concentration of investments; risks related to competition; risk related to investments in private issuers and illiquid securities; risks related to cash flow, revenue and liquidity; risks related to the Company’s dependence on management personnel; risks related to macro-economic conditions; risks related to the availability or opportunities and competition for investments; risks related the share prices of investments; risks related to additional financing requirements; risks related to the return on investments; risks related to the management of the Company’s growth; social , political, environmental, and economic risks in the countries in which the Company’s investment interests are located; risks related to the due diligence process undertaken by the Company in connection with investment opportunities; risks related to exchange-rate fluctuations; risks related to non-controlling interests; risks related to changes in legislation and regulations; risks associated with the Company’s limited operating history and no history of operating revenue and cash flow; risks associated with the Company having limited cash flow and funds in reserve which may not be sufficient to fund its ongoing activities at all times; risks associated with conflicts of interest; risks associated with the volatility of the Common Shares market price; risks associated the future dilution of shareholders interest in the Company; and risks associated with the Company’s history of never paying dividends; and other risks described herein including under the heading “Risks and Uncertainties”.

 

When relying on forward-looking information to make decisions, readers should ensure that the preceding information, the risks and uncertainties described in “Risks and Uncertainties” and the other contents of this MD&A are all carefully considered. The forward-looking information contained herein is current as of the date of this MD&A, and, except as may be required by applicable law, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking information contained herein to reflect any change in expectations, estimates and projections with regard thereto or any changes in events, conditions or circumstances on which any information is based. Readers should not place undue importance on such forward-looking information and should not rely upon this information as of any other date. In addition to the disclosure contained herein, for more information concerning the Company’s various risks and uncertainties, please refer to the Company’s public filings available under its profile on SEDAR+ at www.sedarplus.ca and at www.cboe.ca.

 

With regard to all information included herein relating to companies in the Company’s Venture portfolio, the Company has relied on information provided by the investee companies and on publicly available information disclosed by the respective companies.

 

4

 

Restatement of Previously Issued Condensed Interim Consolidated Financial Statements

 

 

The Company reassessed the application of IFRS on the accounting for the valuation of the Company’s holdings in 3iQ and Seba Bank AG as well as the valuation of Valour’s Genesis loan and collateral. As a result of the restatement: (i) digital assets was reduced by $8,780,131 to $95,833,386; and (ii) private investments, at fair value through profit and loss was reduced by $10,995,500 to $30,312,394 as at September 30, 2023, with a retained earnings impact at September 30, 2023 of $19,775,631. For more details, please refer to Note 25 of the condensed consolidated interim financial statements of the Company for three and nine months ended September 30, 2024 and 2023. The change in accounting is considered the correction of an error for accounting purposes and, as such, required a restatement of the financial statements for the three and nine months ended September 30, 2023.

 

Due to the accounting error, the Company’s management has concluded that there was a material weakness in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements and Management’s Discussion and Analysis will not be prevented or detected on a timely basis.

 

Change in Valuation and classification of Equity Investments in Digital Assets, at FVTPL

 

 

During our audit of the Fiscal 2024 Financial Statements, we determined that locked tokens held by the Company were incorrectly accounted for in the Company’s June 30, 2024 and September 30, 2024 financial statements (the “Affected Periods”).

 

The Company plans to restate the financial statements with respect to the Affected Periods. As a result, the financial statements for the Affected Periods should not be relied upon and similarly, any previously issued or filed reports, press releases, investor presentations or other Company communications describing the financial results or other financial information in connection with the Affected Periods should no longer be relied upon

 

During its quarter-ended June 30, 2024, the Company acquired interests two private investments funds designed to acquire 1,614,608.41 Solana and 931,445.6 Avalanche tokens from a bankrupt company.

 

5

 

The Company reassessed the application of IFRS on the accounting for Equity Investments, at fair value through profit and loss (“FVTPL”) and determined that the appropriate accounting treatment is to classify the investments in the funds directly as financial assets as defined by IAS 32 and within the scope of IFRS 9. This is because such investments represent an equity interest in another entity rather than a direct interest in the underlying tokens. The tokens owned by the funds are subject to a lock up schedule extending to 2028 and as a result the Company has classified its equity investments as current and non-current reflecting the value of tokens which will unlock in the coming twelve months (current) and those that will unlock between 2026 through 2028 (non-current).

 

The investments are accounted for at FVTPL. Fair value is measured in accordance with IFRS 13 and includes a discount for lack of marketability (“DLOM”) on the locked tokens underlying the investments. The DLOM at December 31, 2024 is $124,490,360 (US$86,517,729). This discount will amortize to zero by 2028 when the final tokens are unlocked.

 

Due to the accounting error, the Company’s management has concluded that there was a material weakness in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements and Management’s Discussion and Analysis will not be prevented or detected on a timely basis.

 

Overview of the Company

 

 

The Company is a publicly listed issuer on the CBOE Canada trading under the symbol “DEFI”. The Company is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance. The Company’s mission is to expand investor access to industry-leading decentralized technologies which it believes lie at the heart of the future of finance. On behalf of its shareholders and investors, it identifies opportunities and areas of innovation and builds and invests in new technologies and ventures in order to provide trusted, diversified exposure across the decentralized finance ecosystem. The Company does so through five distinct business lines: Asset Management, DeFi Alpha, Stillman Digital, DeFi Ventures, and Reflexivity Research LLC.

 

The Company’s condensed consolidated interim financial statements have been prepared in accordance with IFRS applicable to a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying condensed consolidated interim financial statements.

 

Investment Pillars

 

 

DeFi generates revenue through five core pillars:

 

Valour Asset Management

 

The Company through its wholly-owned subsidiary Valour Inc. (“Valour”), and Valour Digital Securities Limited (“VDSL” and together with Valour Cayman, “Valour”) is developing Exchange Traded Products (“ETPs”) that synthetically track the value of a single DeFi protocol or a basket of protocols. ETPs simplify the ability for retail and institutional investors to gain exposure to DeFi protocols or basket of protocols as it removes the need to manage a wallet, two-factor authentication, various logins, and other intricacies that are linked to managing a decentralized finance protocol portfolio.

 

6

 

DeFi Alpha

 

Defi Alpha, a specialized arbitrage trading desk with the sole focus is to identify low-risk arbitrage opportunities within the crypto ecosystem. The Defi Alpha trading desk is strategically designed to focus on identifying and capitalizing upon arbitrage opportunities within the dynamic digital assets market. Utilizing advanced algorithmic strategies and in-depth market analysis, the trading desk aims to generate alpha by exploiting inefficiencies and discrepancies in digital asset pricing. The primary focus is on arbitrage trading opportunities in both centralized and decentralized markets, ensuring minimal market or protocol exposure to mitigate downside revenue volatility.

 

Stillman Digital

 

Stillman Digital is a leading digital asset liquidity provider that offers limitless liquidity solutions for businesses, focusing on industry-leading trade execution, settlement and technology.

 

DeFi Ventures

 

The Company, whether by itself or through its subsidiaries, invests in various companies and leading protocols across the decentralized finance ecosystem to build a diversified portfolio of decentralized finance assets.

 

Reflexivity Research LLC

 

The Company’s Research Reflexivity LLC line of business specializes in producing cutting-edge research reports for the cryptocurrency industry. Reflexivity has also focused on creating a large third-party distribution channel for its research, which has been accomplished by partnering with platforms such as TradingView, eToro and others.

 

The Company notes that it previously disclosed a six business line named DeFi Instructure whereby the Company offered node management of decentralized protocols to support governance, security and transaction validation on networks. The Company stopped providing these services during 2025 and only earned nominal revenues of $4,891 validating transactions on the Shyft network. The Company confirms that the discontinuance of DeFi Infrastructure will not have an effect on the current operations.

 

Highlights For The year ended December 31, 2024 and subsequent events:

 

 

●On February 7, 2024, the Company has completed its acquisition of Reflexivity Research LLC (“Reflexivity”), a premier private research firm that specializes in producing research reports for the digital asset industry. Reflexivity, co-founded by Anthony Pompliano and Will Clemente, offers crypto-native research designed for traditional finance investors. Reflexivity’s research is distributed via their homepage, a premium membership portal, and an email list of over 55,000 investors which generates a positive cash flow for Reflexivity.

 

●On February 9, 2024, the Company completed the acquisition of intellectual property (IP) from prominent Solana developer Stefan Jorgensen. The IP acquired encompasses a suite of sophisticated features, including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by both Defi Technologies and Valour.

 

7

 

●On February 20, 2024, Valour  launched its physical-backed staking exchange-traded product (ETP) for the Internet Computer Protocol (ICP) token. The Valour Internet Computer Protocol ETP (ISIN: GB00BS2BDN04) provides retail and institutional investors with trusted, secure and diversified exposure to the innovative and fast-growing Internet Computer ecosystem. The Internet Computer adds autonomous serverless cloud functionality to the public Internet -- making it possible to build almost any system or service entirely on a decentralized network. Developers and enterprises no longer have to rely on legacy information technology systems that are susceptible to hacks and downtime. The Internet Computer is a tamper-proof and unstoppable network, a new paradigm of computing power.

 

●On March 18, 2024, Valour partnered with Bitcoin Suisse AG and Stoxx in launching the innovative 1Valour Stoxx Bitcoin Suisse Digital Asset Blue Chip ETP. This pioneering product marks a significant step forward in the digital asset market, providing a diversified investment approach to the top blue-chip digital assets in a simple and secure manner.

 

●On April 8, 2024, the Company opened a new trading desk in the United Arab Emirates (UAE). As part of this strategic initiative, the Company aims to expand its assets under management (AUM) by launching 15 new ETP products in 2024, in addition to the 17 already listed in Europe, followed by another 30 in 2025.

 

●On April 17, 2024, Valour entered into a collaboration with the Core Foundation to develop innovative ETPs (exchange-traded products) that leverage Core Chain’s unique blockchain capabilities, introducing a first-of-its-kind yield-bearing BTC ETP and a novel Core ETP. The yield-bearing BTC ETP will offer yield directly from Core Chain’s block rewards. This groundbreaking initiative marks a first in the market, as the previously passive BTC asset becomes productive and yield-bearing without moving off the bitcoin network.

 

●On April 18, 2024, the Company launched the first short spot bitcoin (BTC) ETP.

 

●On May 7, 2024, Valour successfully repaid US$19.5 million in outstanding loans. As of April 30, 2024, and due to favourable business conditions, Valour has fully repaid balances of US$6 million and US$13.5 million, which were secured by Bitcoin (BTC) and Ethereum (ETH) collateral, respectively. No further equity or debt was raised to repay the loan. The loans, which were structured with open-term tenures allowing for flexible repayment, were fully repaid on April 30, 2024. This strategic financial management will result in substantial savings for the Company.

 

●On May 13, 2024, Valour launched three new ETPs. Among these offerings are the Valour Internet Computer (ICP) ETP and the Valour Toncoin (TON) ETP, the first of their kind in the Nordics. These are accompanied by the Valour Chainlink (LINK) ETP, providing simplified access to cutting-edge digital assets. Trading of all three ETPs commenced on May 10, 2024, with a 1.9 percent management fee.

 

●On June 4, 2024, Valour announced it has broadened its partnership with justTrade, a leading German on-line brokerage platform. The recently launched 1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip ETP is now available for German savings plans through justTRADE.

 

●On June 10, 2024, the Company announced it has adopted Bitcoin as its primary treasury reserve asset and has purchased 110 Bitcoin to initiate this strategy.

 

●On June 11, 2024, the Company announced it has deployed a Core Chain validator node to act as an independent validator for the network. The launch of the node is part of the Company’s Defi Infrastructure business line, contributing to the mission of decentralized finance. The Company will also stake 1,498 Bitcoin on the Core Chain.

 

8

 

●On June 19, 2024, Valour launched the Valour Hedera (HBAR) ETP (exchange-traded product). The Valour Hedera (HBAR) ETP (ISIN: CH1213604585) provides secure and straightforward access to Hedera’s native cryptocurrency, HBAR. Hedera is renowned for its energy-efficient public distributed ledger technology, which utilizes the leaderless, asynchronous Byzantine Fault Tolerance (“aBFT”) hashgraph consensus algorithm.

 

●On June 28, 2024, Valour launched two new ETPs, the Valour CORE (CORE) ETP and the Valour Hedera (HBAR) ETP, on the Spotlight Stock Market in Sweden. The Valour CORE (CORE) SEK (ISIN: CH1213604593) offers investors exposure to the native token of the Core blockchain, CORE. Core Chain’s Satoshi Plus consensus mechanism uniquely combines the decentralization and security of Bitcoin’s Delegated Proof of Work (“DPoW”) with the scalability and flexibility of Ethereum’s Delegated Proof of Stake (“DPoS”).

 

●On July 17, 2024, Valour launched an ETP (exchange-traded product) for the Near Protocol token on the Spotlight Stock Market in Sweden. The Valour Near (NEAR) ETP (ISIN: CH1213604577) provides retail and institutional investors with trusted, secure and diversified exposure to the innovative and fast-growing Near ecosystem, enabling participation in a decentralized Web platform that aims to redefine the future of digital finance.

 

●On July 18, 2024, the Company expanded its digital asset treasury strategy purchasing an additional 94.34 Bitcoin, bringing its total Bitcoin holdings to 204.34 Bitcoin. Additionally, the Company has acquired 12,775 Solana tokens and 1,484,148 Core tokens, with plans to actively participate in Core DAO’s staking facility.

 

●On July 30, 2024, the Company formed a strategic partnership with Zero Computing, a pioneer in verifiable computation on Ethereum and Solana. This partnership aims to build critical infrastructure to enhance the arbitrage discovery and execution capabilities of Defi Technologies’ specialized trading desk, DeFi Alpha, and advance capabilities for capturing zero-knowledge enabled maximal extractable value (MEV).

 

●On July 31, 2024, the Company appointed Andrew Forson to its board of directors. Andrew Forson is an experienced financial and risk engineer, software architect, and trust and estate practitioner. Currently, he serves as the head of ventures and investments for the Hashgraph Group, the commercialization and enablement arm of Hedera, where he has been instrumental in driving strategic investments and fostering innovation in the digital asset sector.

 

●On August 6, 2024, Valour signed a memorandum of understanding (MOU) with the Nairobi Securities Exchange (NSE) and SovFi Inc. to facilitate the creation, issuance and trading of digital asset exchange-traded products in the African market.

 

●On September 30, 2024, Valour introduced their groundbreaking asset-backed ethereum exchange-traded products, also known as exchange-traded notes (ETNs), on the London Stock Exchange. The Valour ethereum-physical-staking ETP (ticker: 1VET; ISIN: GB00BRBMZ190) is a fully backed, non-leveraged, passive investment product providing direct exposure to ethereum as the underlying crypto asset. The ETP is secured by the respective cryptocurrency held in cold storage by regulated crypto custodians.

 

●On October 4, 2024, the Company’s completed its acquisition of Stillman Digital Inc. and Stillman Digital Bermuda Ltd., a leading global liquidity provider offering industry-leading trade execution, settlement and technology services. Stillman Digital’s core products and services include electronic trade execution, OTC (over-the-counter) block trading and market-making.

 

9

 

●On October 10, 2024, Valour listed the Valour Sui (SUI) ETP on the Spotlight Stock Market. The Valour Sui (SUI) ETP provides a secure and straight-forward way for investors to gain exposure to Sui, a rapidly growing Layer 1 blockchain optimized for on-chain use cases through its unique consensus mechanism and object-centric data model. With a market cap of $5.37-billion, Sui ranks among the top 20 digital assets worldwide.

 

●On October 18, 2024, Valour a leading issuer of exchange-traded products (ETPs) providing simplified access to digital assets, transferred 19 ETPs from the Nordic Growth Market (NGM) to the Spotlight Stock Market in Stockholm, Sweden. This decision represents a significant step in Valour’s growth strategy within the Nordic market and strengthens its position in the ETP segment, particularly for digital asset-related instruments.

 

●On October 30, 2024, Valour listed the first-ever Valour Bittensor (TAO) ETP in the Nordics on the Spotlight Stock Market. This launch provides investors with seamless access to TAO, the token that fuels Bittensor’s decentralized machine learning protocol. With a market cap of $3.9-billion, TAO ranks No. 25 among digital assets globally.

 

●On November 5, 2024, the Company announced that Valour introduced a new physically backed, high-yield Bitcoin (“BTC”) ETP for German investors in collaboration with Core Foundation.

 

●On November 22, 2024, Valour signed an MOU with AsiaNext and SovFi to list and expand its digital asset exchange-listed products (“ETPs”) on AsiaNext’s Singapore-licensed securities exchange, enhancing institutional access across Asia Pacific. This strategic step in Valour’s global expansion plan includes the Middle East and Africa as key target markets. With digital asset demand via ETPs surging, Valour aims to launch 20 new ETPs in the coming weeks, adding to its existing 28 offerings. Valour plans to passport these ETPs into new jurisdictions, positioning Valour to capitalise on the immense growth potential of rapidly adopting markets, where its first-mover advantage will drive leadership in the evolving digital asset and ETP space

 

●On November 26, 2024, Valour introduced the Valour Dogecoin (DOGE) ETP (ISIN: CH1108679320) on Sweden’s Spotlight Stock Market, marking the first Dogecoin ETP available in the Nordics. This launch expands Valour’s suite of digital asset products, offering investors exposure to Dogecoin, which currently holds a market capitalization of approximately $59.5 billion, ranking it as the 7th largest digital asset globally. Dogecoin is an open-source, peer-to-peer digital currency that originated as a lighthearted alternative to Bitcoin. Created in December 2013 by software engineers Billy Markus and Jackson Palmer, it features the Shiba Inu dog from the “Doge” meme as its logo. Despite its humorous beginnings, Dogecoin has developed a robust community and gained significant traction in the cryptocurrency market. It operates on a decentralized network, utilizing blockchain technology to facilitate secure and swift transactions. Similar to Bitcoin, the Dogecoin blockchain uses proof-of- work consensus mechanism, requiring miners to solve complex mathematical problems to validate transactions and secure the network. Miners are rewarded with Dogecoin for their efforts, contributing to the coin’s circulation and security. Dogecoin is often used for tipping content creators online and has been employed in various charitable initiatives, reflecting its community-driven ethos.

 

●On December 10, 2024, the Company announced that it signed a letter of intent to acquire a 10% stake in Swiss Asset Management firm Neuronomics AG. This acquisition strengthens DeFi Technologies’ asset management and trading capabilities, diversifying revenue streams while complementing DeFi Alpha, the Company’s specialized arbitrage trading desk. Neuronomics utilizes advanced AI-driven quantitative strategies that have delivered exceptional risk-adjusted performance. By significantly outperforming benchmarks, Neuronomics positions DeFi Technologies for continued growth in the asset management sector and the wider cryptocurrency market.

 

●On December 12, 2024, Valour launched 20 new digital asset ETPs on the Spotlight Stock Market, marking the largest single-day ETP launch in the Valour’s history and expanding its portfolio to over 60 ETPs listed across European exchanges.

 

●On December 18, 2024, Valour listed the 1Valour Hedera Physical Staking ETP (ISIN: GB00BRC6JM96) on Euronext Amsterdam under its Valour Digital Securities Limited (“VDSL”) base prospectus. This listing expands the reach of Valour’s innovative Hedera HBAR ETP, providing broader access for European investors seeking exposure to Hedera’s native token, HBAR.

 

10

 

Subsequent events

 

Neuronomics AG Acquisition

 

On January 10, 2025, the Company closed an investment to acquire 10% of Neuronomics for US$288,727 (CHF 262,684). On March 7, 2025, the Company announced that it increased its stake in Neuronomics AG, a Swiss asset management firm specializing in artificial intelligence and model driven quantitative trading strategies from 10% to 52.5%.

 

In connection with the acquisition, the Company issued 186,304 common shares of the Company, plus additional cash considerations, to the selling shareholders of Neuronomics. 152,433 of the Payment Shares are subject to a lock-up schedule, with 50% released in three months and the remainder released in six months. No finder fees were paid in connection with the Acquisition.

 

CoreFi Strategy Binding Letter of Intent

 

On February 4, 2025, DeFi entered a binding letter agreement with CoreFi Strategy and Orinswift Ventures (the “LOI”) to facilitate a reverse takeover (the “RTO”).

 

CoreFi Strategy, inspired by models like MicroStrategy, offers a regulated, leveraged approach to Bitcoin yield and CORE. The Core blockchain supports Bitcoin staking and a vibrant EVM-compatible ecosystem, securing over 5,700 Bitcoin staked, $850M+ total value locked, and a rapidly growing user base.

 

Transaction Overview

 

The RTO will be completed through a definitive agreement that is to be negotiated by the parties, which will contain customary representations and warranties for similar transactions, and is expected to be structured as a three-corned amalgamation whereby a newly incorporated subsidiary of Orinswift will amalgamate with CoreFi, resulting in Orinswift acquiring all securities of CoreFi, and CoreFi securityholders becoming securityholders of Orinswift, as the resulting issuer following closing of the Transaction (the “Resulting Issuer”). The final structure for the Transaction is subject to satisfactory tax, corporate and securities law advice for each of Orinswift, CoreFi, and DeFi.

 

Pursuant to the LOI the Core Foundation will contribute US$20 million in CORE Tokens to strengthen CoreFi’s treasury in exchange for 30% of the Resulting Issuer Additionally, CoreFi plans to raise US$20 million in concurrent financing to accelerate its growth in Bitcoin Finance (BTCfi) technologies. DeFi will provide advisory services, intellectual property development and intellectual property licenses in exchange for 30% of the Resulting Isser.

 

11

 

Outlook

 

The Company plans to launch at least 40 additional ETPs by the end of 2025. Geographic expansion of its ETP products is underway in: United Kingdom, Africa, Singapore and the UAE.

 

On September 16, 2024, the Company filed a Form 40-F Registration Statement with the United States Securities and Exchange Commission (the “SEC”), in connection with its application to list its common shares on The Nasdaq Stock Market. The listing of the Company’s common shares on the Nasdaq remains subject to the approval the Nasdaq and the satisfaction of all applicable listing and regulatory requirements, including the Form 40-F being declared effective by the SEC. The Company continue to progress its application to list its common shares on the Nasdaq. The Company would be registered with the SEC as a “Foreign Private Issuer” and continue to report under IFRS.

 

Digital Assets, Digital assets loaned and Digital assets Staked

 

As at December 31, 2024, the Company’s digital assets consisted of the below digital currencies, with a fair value of $799,796,591 (December 31, 2023 - $489,865,638). Digital currencies are recorded at their fair value on the date they are acquired and are revalued to their current market value at each reporting date. Fair value is determined by taking the mid-point price at 17:30 CET digital asset exchanges consistent with the final terms for each ETP. The primary digital asset exchanges used to value digital assets are Kraken, Bitfinex, Binance, Coinbase and Bitstamp. Where digital assets held do not have pricing on these exchanges, other exchanges would be used. On all material coins, Kraken, Bitfinex, Coinbase and Bitstamp were used. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Vomex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

12

 

The Company’s holdings of digital assets consist of the following:

 

   December 31,
2024		   December 31,
2023		 
   Quantity   $   Quantity   $ 
Binance Coin (BNB)   2,558.9747    2,617,180    236.4452    97,710 
Bitcoin (BTC)   2,705.7708    329,504,025    2,271.3329    108,983,280 
Ethereum (ETH)   20,676.9254    101,295,967    21,537.4066    65,956,320 
EthereumPoW (ETHW)   200.0000    1    0.2000    1 
Cardano (ADA)   69,671,396.7593    87,114,485    54,210,783.1700    43,306,306 
Polkadot (DOT)   2,766,149.1833    27,151,899    1,666,147.7880    18,371,365 
Solana (SOL)   43,414.4191    12,452,742    1,682,112.4900    235,733,109 
Shyft   4,879,446.3958    6,431    4,539,407.2792    78,314 
Uniswap (UNI)   421,450.3048    8,219,818    296,352.0602    2,932,687 
USDC        361,677         673 
USDT        7,585,222         111,856 
Litecoin   -    -    17.3931    1,719 
DOGE   17,545,096.4535    8,213,542    220,474.3947    26,652 
Cosmos (ATOM)   735.9223    6,626    11,700.0000    171,497 
Avalanche (AVAX)   125,979.5440    6,636,473    248,151.6644    13,148,105 
Matic (MATIC)   1,500.9042    878    0.0003    - 
Ripple (XRP)   17,223,963.4000    52,429,399    76,029.7317    62,737 
Enjin (ENJ)   127,360.9806    40,200    432,342.3671    223,237 
Tron (TRX)   341,529.3057    128,081    118,490.5094    16,581 
Terra Luna (LUNA)   205,057.0760    -    202,302.5360    - 
Shiba Inu (SHIB)   142,074,547.6000    4,309    -    - 
Pyth   3,444,248.6000    1,261,838    2,500,000.0000    503,669 
AAVE   2,333.3875    1,058,152    -    - 
ALGO   90,930.8700    43,426    -    - 
APE   283.1000    487    -    - 
APT   287,849.7000    3,691,358    -    - 
AR   14,202.0100    338,059    -    - 
ARB   24.0000    25    -    - 
AVA   1,450.0000    110    -    - 
BAT   32,967.8500    10,991    -    - 
BCH   25.4800    15,935    -    - 
CHZ   391.6800    46    -    - 
COMP   52.2300    5,482    -    - 
Core   3,995,185.7910    6,187,871    -    - 
CRV   10,295.1200    13,392    -    - 
EOS   13,419.9100    14,927    -    - 
FET   561,613.1000    1,053,850    -    - 
FIL   8,471.8100    60,365    -    - 
FTM   1,307,990.0000    1,315,188    -    - 
FTM   34,663.2600    33,767    -    - 
GALA   100,726.8700    5,000    -    - 
GRT   1,620.3700    464    -    - 
HBAR   49,611,593.1918    19,977,385    -    - 
ICP   1,436,614.1074    20,927,162    -    - 
IMX   10,992.0200    20,640    -    - 
INJ   56,329.4200    1,634,770    -    - 
JUP   499,299.1000    608,664    -    - 
KSM   470.3400    22,361    -    - 
LDO   36,961.1000    98,756    -    - 
LINK   239,057.7313    7,097,367    -    - 
LRC   5,178.2400    1,428    -    - 
LTC   541.8400    81,122    -    - 
MANA   3,609.4800    2,409    -    - 
MKR   0.1100    235    -    - 
NEAR   1,300,877.8800    9,510,609    -    - 
OP   15,436.4300    39,203    -    - 
PAXG   0.6900    2,619    -    - 
Pendle   31,265.4000    229,438    -    - 
POL   183,654.4400    119,366    -    - 
QNT   1,086.7000    165,278    -    - 
RENDERSOL   162,158.1000    1,622,358    -    - 
RUNE   91,192.7000    609,491    -    - 
SAND   2,749.0000    2,146    -    - 
SEI   2,078,991.0000    1,225,003    -    - 
STX   203,450.0000    140,195    -    - 
SUI   10,785,375.0000    65,997,975    -    - 
SUSHI   39,426.6800    76,360    -    - 
TAO   9,851.6400    6,393,515    -    - 
TON   405,657.4300    3,261,134    -    - 
W   722,403.0000    307,581    -    - 
WBTC   -    309    -    - 
WLD   49,314.1000    152,723    -    - 
Current        799,314,977         489,725,820 

 

13

 

   December 31,
2024		   December 31,
2023		 
   Quantity   $   Quantity   $ 
Blocto   275,385.0716    1,085    264,559.7030    10,503 
Boba Network   250,000.0000    -    250,000.0000    - 
Clover   500,000.0000    45,915    450,000.0000    19,831 
Maps   285,713.0000    -    285,713.0000    - 
Mobilecoin   2,855.5045    -    2,855.5045    - 
Oxygen   400,000.0000    -    400,000.0000    - 
Saffron.finance   86.2100    2,729    86.2100    2,619 
Sovryn   15,458.9500    6,509    15,458.9500    12,863 
Wilder World   148,810.0000    143,120    148,810.0000    94,002 
Volmex Labs   2,925,878.0000    -    2,925,878.0000    - 
Other Coins (Meme coins)   121,424,013.5200    282,256    -    - 
Long-Term        481,614         139,818 
Total Digital Assets        799,796,591         489,865,638 

 

   December 31,
2024		   December 31,
2023		 
   $   $ 
Current digital assets        
Digital assets   398,364,913    188,846,248 
Digital assets loaned   55,568,531    270,362,684 
Digital assets staked   345,381,533    30,516,888 
Total current digital assets   799,314,977    489,725,820 
Non-current digital assets        
Digital assets   481,614    139,818 
Total non-current digital assets   481,614    139,818 
Total digital assets   799,796,591    489,865,638 

 

The continuity of digital assets for the years ended December 31, 2024 and 2023:

 

   December 31,
2024		   December 31,
2023		 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   540,008,974    318,355,007 
Digital assets disposed   (717,306,612)   (244,656,544)
Digital assets earned from staking, lending and fees   35,717,997    3,554,587 
Realized gain (loss) on digital assets   396,824,120    (1,017,247)
Net change in unrealized gains and losses on digital assets   80,894,227    324,976,115 
Foreign exchange gain (loss)   (26,207,754)   (15,548,363)
   $799,796,591   $489,865,638 

 

14

 

Digital assets held by counterpart for the years ended December 31, 2024 and 2023:

 

   December 31,
2024		   December 31,
2023		 
Counterparty A  $9,955,300   $421,687,911 
Counterparty B   17,836    30,592,947 
Counterparty C   1,035,685    2,775,287 
Counterparty D   96,294    11,785,440 
Counterparty E   10,082,451    8,633,491 
Counterparty F   9,798,485    837,948 
Counterparty G   -    8,840,988 
Counterparty H   84,086,732    - 
Counterparty I   -    - 
Counterparty J   -    - 
Counterparty K   180,133,894   - 
Counterparty L   -    - 
Counterparty M   5,450,286    - 
Other   10,702,768    248,294 
Self custody   488,436,860    4,463,332 
Total  $799,796,591   $489,865,638 

 

As of December 31, 2024, digital assets held lenders as collateral consisted of the following:

 

   Number of
coins on loan		   Fair Value 
Bitcoin   365.4480   $10,082,451 
Total   365.4480   $10,082,451 

 

As at December 31, 2024, the 365.44 Bitcoin held by Genesis Global Capital LLC (“Genesis”) as collateral against a loan has been written down to $10,082,451 (US$7,007,055), the fair value of the loan and interest held with Genesis.

 

As of December 31, 2023, digital assets held lenders as collateral consisted of the following:

 

   Number of
coins on loan		   Fair Value 
Bitcoin   1,158.2614    46,860,266 
Ethereum   9,263.7800    28,369,770 
Total   10,422.0414   $75,230,036 

 

As at December 31, 2023, the 475 Bitcoin held by Genesis as collateral against a loan has been written down to $8,690,623 (US$6,570,862), the fair value of the loan and interest held with Genesis.

 

In the normal course of business, the Company enters into open-ended lending arrangements with certain financial institutions, whereby the Company loans certain fiat and digital assets in exchange for interest income. The Company can demand the repayment of the loans and accrued interest at any time. The digital assets on loan are included in digital assets balances above.

 

15

 

Digital Assets loaned

 

As of December 31, 2024, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 3.25% to 5.5% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.4% to 9.7% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2024, digital assets on loan consisted of the following:

 

   Number of
coins on loan		   Fair Value   Fair Value Share 
Digital assets on loan:            
Bitcoin (BTC)   120.0000   $16,374,593    29%
Ethereum (ETH)   8,000.0000    39,193,938    71%
Total   8,120.0000   $55,568,531    100%

 

As of December 31, 2023, digital assets on loan consisted of the following:

 

   Number of
coins on loan		   Fair Value   Fair Value Share 
Digital on loan:            
Ethereum   7,000.0000    21,437,084    8%
Cardano   8,500,000.0000    6,790,228    3%
Polkdot   1,373,835.0000    15,148,250    6%
Solana   1,572,441.0000    220,363,625    82%
Avalanche   125,009.0000    6,623,496    2%
Total   11,578,285.0000   $270,362,684    100%

 

As of December 31, 2024, the digital assets on loan by significant borrowing counterparty is as follows:

 

   Interest rates  Number of
coins on loan		   Fair Value 
Digital assets on loan:           
Counterparty F  4.75%   2,000.0000    9,798,485 
Counterparty H  3.25% to 5.50%   6,120.0000    45,770,047 
Total      8,120.0000   $55,568,531 

 

16

 

As of December 31, 2023, the digital assets on loan by significant borrowing counterparty is as follows:

 

   Interest rates  Number of
coins on loan		   Fair Value 
Digital on loan:           
Counterparty A  2.4% to 9.7%   11,578,285.0000    270,362,684 
Total      11,578,285.0000   $270,362,684 

 

As of December 31, 2024, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31,
2024		 
Digital assets on loan:       
Counterparty F  UAE   18%
Counterparty H  United States   82%
Total      100%

 

As of December 31, 2023, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on loan:       
Counterparty A  Cayman Islands   100%
Total      100%

 

The Company’s digital assets on loan are exposed to credit risk. The Company limits its credit risk by placing its digital assets on loan with high credit quality financial institutions that have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company’s due diligence procedures may include, but are not limited to, review of the financial position of the borrower, review of the internal control practices and procedures of the borrower, review of market information, and monitoring the Company’s risk exposure thresholds. As of December 31, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets on loan. While the Company intends to only transact with counterparties that it believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

The table below presents the ratio of Total AUM Loaned to Total AUM:

 

2024 Quarterly AUM Loaned vs. 2024 Total Quarterly AUM

 

 

 

Note: Includes the Company’s investments in Equity investments in digital assets at FVTPL

 

17

 

Digital Assets Staked

 

As of December 31, 2024, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 2.95% to 9.7% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 3.15% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of December 31, 2024, digital assets staked consisted of the following:

 

   Number of
coins staked		   Fair Value   Fair Value
Share		 
Digital assets on staked:            
Bitcoin   1,803.0000    246,028,259    71%
Cardano   57,965,407.1384    72,480,183    21%
Etherium   32.0000    156,776    0%
Core   3,415,479.8499    5,290,004    2%
Polkadot   1,941,230.3100    19,057,413    6%
Solana   10,526.4620    2,368,899    1%
Total   63,334,478.7603   $345,381,533    100%

 

As of December 31, 2023, digital assets staked consisted of the following:

 

   Number of
coins staked		   Fair Value   Fair Value Share 
Digital on staked:            
Cardano   38,201,004.7950    30,516 888    100%
Total   38,201,004.7950   $30,516,888    100%

 

As of December 31, 2024, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates  Number of
coins staked		   Fair Value 
Digital on staked:           
Counterparty M  4.00%   32.0000    156,776 
Self custody  3% to 8.02%   63,334,478.7603    345,224,758 
Total      63,334,510.7602   $345,381,533 

 

As of December 31, 2023, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates  Number of
coins staked		   Fair Value 
Digital on staked:           
Counterparty B  3.15%   38,201,004.7950    30,516,888 
Total      38,201,004.7950   $30,516,888 

 

As of December 31, 2024, digital assets staked were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on staked:       
Counterparty B  Switzerland   100%
Total      100%

 

As of December 31, 2023, digital assets staked were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on staked:       
Counterparty B  Switzerland   100%
Total      100%

 

18

 

The Company’s digital assets staked are exposed to market risk, liquidity risk, lockup duration risk, loss or theft of assets and return duration risk. The Company places allocation limits by counterparty and only deals with high credit quality financial institutions that are believed to have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company’s due diligence procedures may include, but are not limited to, review of the financial position of the counterparty, review of the internal control practices and procedures of the counterparty, review of market information, and monitoring the Company’s risk exposure thresholds. As of December 31, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets staked. While the Company intends to only transact with counterparties that it believes to meets the Company staking policy criteria, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

The below table presents the ratio of Total AUM Staked to Total AUM:

 

2024 Quarterly AUM Staked vs. 2024 Total Quarterly AUM

 

 

 

Note: Includes the Company’s investments in Equity investments in digital assets at FVTPL

 

19

 

CLIENT DIGITAL ASSETS

 

On October 7, 2024 the Company acquired 100% interest in Stillman Digital As at December 31, 2024, Stillman Digital’s client digital assets consisted of the below digital currencies, with a fair value of $3,356,235. Client digital assets are comprised of digital assets in custody with Stillman Digital.

 

   December 31,
2024		   December 31,
2023		 
   Quantity   $   Quantity   $ 
Binance Coin (BNB)   0.1974    201    -    - 
Bitcoin (BTC)   4.8104    801,253    -    - 
Ethereum (ETH)   25.1001    120,759    -    - 
Cardano (ADA)   2,049.2100    2,508    -    - 
Polkadot (DOT)   28.8530    275    -    - 
Solana (SOL)   1,333.3800    363,843    -    - 
USDC   237,564.9400    341,832    -    - 
USDT   26,690.3319    38,324    -    - 
DOGE   147,934.5500    67,409    -    - 
Cosmos (ATOM)   3.2564    29    -    - 
Avalanche (AVAX)   1,206.8100    61,471    -    - 
Matic (MATIC)   24.1100    13    -    - 
Ripple (XRP)   274,300.0100    830,507    -    - 
Enjin (ENJ)   100.0000    30    -    - 
Tron (TRX)   463.6000    170    -    - 
1INCH   574.1916    315    -    - 
AAVE   0.9000    402    -    - 
ALGO   999.9991    477    -    - 
ARB   1,027.5800    1,065    -    - 
BAT   60.4000    20    -    - 
BCH   0.3773    236    -    - 
CHZ   190.0000    22    -    - 
COMP   2.6530    278    -    - 
CRV   35.0000    45    -    - 
EURC   139,109.2000    220,172    -    - 
FTM   256.7697    251    -    - 
GALA   0.6200    0    -    - 
GRT   813.1900    233    -    - 
HBAR   74,568.6800    28,791    -    - 
IMX   0.0177    0    -    - 
KSM   0.6000    28    -    - 
LDO   1,557.7460    3,950    -    - 
LINK   1,265.1500    36,317    -    - 
LRC   104.0710    29    -    - 
LTC   746.4658    111,813    -    - 
MANA   36.7100    24    -    - 
MKR   0.0863    185    -    - 
NEAR   2.5000    18    -    - 
OP   8.0000    20    -    - 
POL   94.9910    35    -    - 
QNT   1,968.4087    299,096    -    - 
SAND   41.3300    32    -    - 
SUSHI   21.3100    41    -    - 
TON   1.0148    2    -    - 
XLM   47,618.2000    23,303    -    - 
XTZ   163.8638    303    -    - 
YFI   0.0091    105    -    - 
Total client digital assets        3,356,235         - 

 

20

 

EQUITY INVESTMENTS IN DIGITAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS

 

   Current   Long Term   Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   216,379.2216   $44,442,849    244,331.9458   $50,184,152    460,711.1675   $94,627,001 
Fund A - Avalance (AVAX)   223,905.1900   $8,663,344    707,540.4100   $27,376,168    931,445.6000   $36,039,512 
    440,284.4116   $53,106,193    951,872.3558   $77,560,320    1,392,156.7675   $130,666,513 
                               
Fund B - Solana (SOL)   626,365.7000   $128,651,339    540,869.9000   $111,091,072    1,167,235.6000   $239,742,411 
Total       $181,757,532        $188,651,392        $370,408,924 

 

Fund A

 

During the year ended December 31, 2024, the Company through a subsidiary, invested US$61,741,683 in three tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company (“Fund A”). The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana and 931,446 Avalanche at US$11 per Avalanche.

 

The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The Avalanche acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Avalanche is locked and will become distributable on the same unlocking schedule as the Avalanche. The Avalanche will be released in weekly increments July 10, 2025 and continuing through July 1, 2027.

 

The investment in the investment fund was valued based on the latest available net asset value, as determined by the investment fund’s administrator less DLOM. The fair values of the investments were remeasured based on monthly valuation reports provided to the Company by the investment fund administrator.

 

Fund B

 

During the year ended December 31, 2024, the Company invested through a subsidiary, $153,516,846 (US$112,072,453) in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company (“Fund B” and together with Fund A the “Equity Investments in Digital Assets”.

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period and thereafter until such Solana is sold by the fund manager or an in-kind distribution in the limited partners of the fund. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25 % of the Solana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028. The investment in the investment fund was valued based on the latest available net asset value, as determined by the investment fund’s administrator less DLOM. The fair values of the investments were remeasured based on monthly valuation reports provided to the Company by the investment fund administrator.

 

21

 

Third Party Exchanges, Custodians and Funds

 

As of December 31, 2024, the Company used the following third-party exchanges and custodians and in the ordinary course of business:

 

Exchange Location
Binance Cayman Islands
B2C2 Overseas LTD Cayman Islands
Bitcoin Suisse AG Switzerland
OKX Seychelles
Kraken United States
Wintermute United Kingdom
Deribit Panama
Laser Digital Switzerland
   
Custodian  
Anchorage Digital United States
Bitgo Trust United States
Copper Switzerland

 

Each of the Custodians and Exchanges have not appointed a sub-custodian to hold crypto assets owned by the Company. The Custodian and Exchanges hold and safeguard the digital assets deposited by the Company and its subsidiaries. The Custodians and Exchanges also offer lending and staking services. The Custodians and Exchanges are not Canadian financial institutions. None of the Custodians and Exchanges are related parties of the Company.

 

Each Custodian maintains general commercial insurance on its own behalf, but the Corporation and other clients of such Custodians are not named insured under such policies. The Company is not aware of any security breaches or similar incidents at the Custodians. The Company believes that any event of insolvency or bankruptcy of a Custodian would be treated in accordance with the insolvency or bankruptcy laws of the applicable jurisdiction of such Custodian.

 

22

 

As of December 31, 2024, the breakdown of digital assets deposited with each of the Custodians, or Exchanges as a percentage of total digital assets custodied by the Company and its subsidiaries is as follows:

 

Custodian Location % of digital assets custodied by market value (1) Regulatory Body
Binance Cayman Islands 15.3% Cayman Islands Monetary Authority (CIMA)
B2C2 Overseas LTD Cayman Islands 0.8% Cayman Islands Monetary Authority (CIMA)
Bitcoin Suisse AG Switzerland 0.0% Financial Services Standards Association (VQF). Zug. Switzerland
Kraken United States 0.1% Office of Comptroller of Currency
Anchorage Digital United States 0.0% Office of Comptroller of Currency
Laser Digital Switzerland 0.8% Financial Services Standards Association (VQF). Zug. Switzerland
Copper Switzerland 7.1% Financial Services Standards Association (VQF). Zug. Switzerland
Wintermute United Kingdom 0.0% Financial Conduct Authority (FCA)
Bitgo Trust United States 0.5% South Dakota Division of Banking and Money Services Business (MSB) with Financial Crimes Enforcement Network (FinCEN)

 

Note 1: As at December 31, 2024; Residual digital assets served as collateral for loans with Genesis Global Capital LLC (0.4%; subject to bankruptcy proceeding/filing as of 19 January 2023).

 

Note 2: The Company holds interest in funds that acquire Solana and Avalanche token from bankrupt company. The Company has included these positions in this chart to illustrate the underlying Solana and Avalanche tokens held in such funds.

 

Valour diligences and reviews counterparty risk in accordance with the following principles:

 

●Valour shall strive to spread counterparty risk between several counterparties, where relevant and practical.

 

●In relevant situations and as far as possible, counterparty (and settlement) risk shall be mitigated by conducting transactions in well-established settlement systems based on the principles of delivery versus payment or payment versus payment.

 

●The below methodology is to be applied when proposing and selecting counterparties and when granting limits on counterparty risk score.

 

●The counterparties are reviewed in regular intervals and re-evaluated.

 

●In case of significant events such as negative news or credit events, Valour can decide to close the business relationship with a counterparty irrespective of the review cycle.

 

●Valour manages a counterparty scorecard and captures, assesses and monitors the below information.

 

23

 

1.Contact information

 

The name, the website and contact person at the exchange/counterparty, as well as the responsible onboarding owner on Valour side.

 

2.Current status

 

The current status of the relationship, the connection type, as well as the services, products and currency pairs used on the respective exchange/counterparty have to be documented and kept up to date

 

3.Country of registration and regulation

 

The country in which the exchange/counterparty is registered must be documented. In addition, all countries in which the exchange/counterparty holds a regulatory licence have to be assessed and documented by stating the licence number (if applicable).

 

4.Country risk

 

The country of registration as well as the country/-ies of regulation are evaluated by using the country risk matrix. The country risk matrix considers the FATF (and equivalent) country evaluation, the Transparency.org Corruption Perception Index (CPI) as well as the VQF SRO country risk recommendations.

 

5.Adverse media search

 

An adverse media search is being conducted. For example, information about an exchange having been hacked in the past or any news about a negative reputation, regulatory breaches etc. are documented.

 

6.Public exchange scores

 

Publicly available information and risk scores from data sources such as Coinmarketcap and Coingecko are being collected and documented.

 

7.Information security certification

 

The exchange/counterparty information security certification status is assessed. Information about the possession of certifications such as AICPA SOC 1, SOC 2 Type I and SOC 2 Type II as well as ISO 27001 are documented.

 

8.Insurance coverage

 

Information about insurance protection and regulatory status in terms of investor protection are assessed and documented.

 

9.Proof of reserves

 

It is being checked if the exchange/counterparty has made the public wallet addresses of its cold and hot storage publicly available or if any other cryptographic means of verification of the reserves held in custody are either publicly available or have been audited.

 

10.Risk evaluation

 

The risk score is evaluated on a scale of 1 to 5, with 1 being the lowest risk and 5 being the highest risk. Based on the information collected in the scorecard, with a focus on regulatory licences, a risk score is calculated and documented for each exchange or counterparty. By carefully evaluating the risk score, we can ensure that we are making responsible business decisions and protecting our customers and stakeholders.

 

24

 

11.Business justification and restrictions

 

In cases where an exchange or counterparty presents increased risks, a business justification must be provided. We must carefully consider the potential exposure and take appropriate measures to limit it through restrictions, thresholds, or other means. Any decision to establish a business relationship with an exchange or counterparty with increased risks must be approved by the board.

 

12.Recurring review schedule

 

The review date and review frequency of all exchanges/counterparties are documented and tracked in the scorecard. A review once a year is set as the default standard, however, an ad-hoc review has to be considered in case of any event that may result in any of the assessment criteria being changed.

 

13.Account closure

 

If the exchange or counterparty has been identified with an increased risk, such as a risk score of 4 or 5, Valour will determine if it is necessary to close the business relationship. This decision is based on the potential exposure and the potential impact on the business and stakeholders.

 

If it is determined that the business relationship should be terminated, a plan for closing the relationship is developed in a controlled and orderly manner. This may include transferring outstanding transactions, closing accounts, and ensuring that all necessary documents and records are properly transferred or retained. The decision to close the business relationship is communicated to the exchange or counterparty and a timeline for the closure is provided. Once the business relationship has been successfully terminated, the counterparty scorecard is updated in order to reflect the closure.

 

By following this process, we can ensure that we are taking a responsible and proactive approach to closing business relationships with risky counterparties. This can help protect our customers and stakeholders and maintain the integrity of our business operations.

 

Self-Custody of Digital Assets

 

At December 31, 2024, the Company’s had self-custody of digital assets totaling $488,436,860 (December 31, 2023 - $4,463,332).

 

The Company maintains controls around the meta mask and other hot and cold wallets includes only senior management having access to the accounts, passwords and seed phases. All copies of passwords and seed phases are secured with senior management. Duplicate copies of the passwords and seeds phases are held by two members of the senior management in different locations.

 

Staking and Lending Policy

 

 

As part of Valour’s policy to hedge 100% of the market risk, subject to allowing a US$2 million maximum unhedged exposure as a trading buffer. Valour purchases and sells the digital assets which its ETPs track. Valour may lend or stake such digital assets on its balance sheet to generate revenue in accordance with the policies in the Base Prospectus and VDSL Base Prospectus. Lending or staking transactions are only conducted with institutional-grade counterparties and only up to a certain percentage for risk management purposes in accordance with Valour’s lending and staking policy (the “Lending and Staking Policy”), which is reviewed and approved by the board of Valour.

 

When deciding whether to lend or stake a particular asset, the Lending and Staking Policy provides that the decision will initially be made based on the risk profile of the potential counterparties, then the highest yield available, then prioritizing staking over lending.

 

25

 

As of the date of this MD&A, the Lending and Staking Policy provides the following limits for lending and staking of digital assets:

 

Digital Asset Lending and staking limits
Bitcoin, Ethereum, Solana, Avalanche

Up to 75% of unrestricted tokens may be lent on open terms to eligible counterparties, 50% of tokens may be lent on terms up to six months.

 

100% of tokens may be staked  

All other Digital Assets

Up to 75% of unrestricted tokens may be lent on open terms to eligible counterparties, 50% of tokens may be lent on terms up to six months.

 

If total AUM is greater than US$5 million, up to 95% may be staked, else 75% may be staked  

 

The Company’s lending arrangements policy is as follows:

 

(a) which party has legal title

 

The lender authorizes the counterparty e.g., Anchorage to draw down lent assets. Typically, the counterparty / borrower is then permitted to use Client’s Designated Assets for any lawful purpose.

 

(b) the status of the assets in the event of insolvency of the borrower

 

The lender shall have full recourse to Counterparty for any obligations hereunder in equity and at law. Upon any event of default, the lender shall be entitled to seek all remedies available at law or in equity for the full amount or any unpaid principal of any advance, accrued but unpaid fees or other amounts or property payable hereunder against Lender in addition to enforcing its security interest.

 

(c) contractual limitation on use and transfer of lent items by borrower

 

Typically, the Counterparty is then permitted to use client’s designated assets for any lawful purpose.

 

(d) borrower’s ability to initiate transactions with the borrowed assets, including but not limited to: sell, lend, pledge, and/or hypothecate

 

Typically, the Counterparty is then permitted to use Client’s Designated Assets for any lawful purpose, including selling, lending, pledging and/or hypothecating. Certain lending agreements require Counterparties to grant a security interest to the Company on any assets that are further lent out.

 

(e) borrowers’ rights regarding “co-mingling”

 

There is no specific language in the lending agreement but given the Counterparties can use for any lawful purpose, the Company’s believes that comingling can occur.

 

(f) callability terms and conditions (including “notice period”, if any).

 

Termination. Client may terminate any Advance of its Designated Assets upon three (3) business days’ prior notice (the date of such termination, the “Termination Date”), from time to time at its sole discretion through an Electronic Notice.

 

26

 

Investments, At Fair Value, Through Profit and Loss, As At December 31, 2024

 

 

At December 31, 2024, the Company’s investment portfolio consisted of one publicly traded investment and nine private investments for a total estimated fair value of $54,859,741 (December 31, 2023 – nine private investments for a total estimated fair value of 43,540,534).

 

Public Investments

 

          Estimated   % 
Private Issuer  Note   Security description  Cost   Fair Value   of FV 
Brazil Potash Corp.  (i)   404,200 common shares  $1,998,668   $1,119,587    100.0%
Total public investments     $1,998,668   $1,119,587    100.0%

 

(i)Investments in related party entities

 

Private Investments

 

At December 31, 2024, the Company’s nine private investments had a total fair value of $53,740,153.

 

          Estimated   % 
Private Issuer  Note   Security description  Cost   Fair Value   of FV 
3iQ Corp.      61,712 common shares  $86,319   $432,331    0.9%
Amina Bank AG  (i)   3,906,250 non-voting shares   34,498,750    51,020,502    94.9%
Earnity Inc.      85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation      201,633 preferred shares   630,505    719,522    1.3%
Neuronomics AG      724 common shares   128,898    128,898    0.2%
SDK:meta, LLC      1,000,000 units   3,420,000    -    0.0%
Skolem Technologies Ltd.      16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation      Rights to certain preferred shares and warrants   37,809    -    0.0%
ZKP Corporation  (i)   370,370 common shares   1,385,800    1,438,900    2.7%
Total private investments         $40,496,515   $53,740,153    100.0%

 

(i)Investments in related party entities

 

At December 31, 2023, the Company’s nine private investments had a total fair value of $43,540,534.

 

          Estimated   % 
Private Issuer  Note   Security description  Cost   Fair Value   of FV 
3iQ Corp.      187,007 common shares  $261,605   $1,216,890    2.8%
Brazil Potash Corp.  (i)   404,200 common shares   1,998,668    2,138,380    4.9%
Earnity Inc.      85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation      201,633 preferred shares   630,505    661,366    1.5%
Neuronomics AG      724 common shares   128,898    128,898    0.3%
SDK:meta, LLC      1,000,000 units   3,420,000    -    0.0%
Amina Bank AG (formerly SEBA Bank AG)  (i)   3,906,250 non-voting shares   34,498,750    39,395,000    90.5%
Skolem Technologies Ltd.      16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation      Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments         $41,284,669   $43,540,534    100.0%

 

(i)Investments in related party entities

 

27

 

Financial Results

 

The following is a discussion of the results of operations of the Company for the three and twelve months ended December 31, 2024, and 2023. They should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2024 and 2023 and related notes.

 

Three and twelve months ended December 31, 2024 and 2023:

 

   Three months ended
December 31,		   Year ended
December 31		 
   2024   2023   2024   2023 
   $   $   $   $ 
                 
Revenues                
Realized and net change in unrealized gains on digital assets   165,019,913    (11,096,160)   345,243,593    323,958,866 
Realized and net change in unrealized losses on ETP payables   (307,226,709)   16,105,048    (482,892,054)   (332,100,866)
Unrealized gain on equity investments at FVTPL   117,736,302    -    132,474,754    - 
Staking and lending income   12,847,754    746,871    35,717,997    3,554,587 
Management fees   2,880,607    243,845    8,826,934    1,461,594 
Trading commissions   2,885,180    -    2,885,180    - 
Research revenue   861,241    -    1,963,433    - 
Realized gain (loss) on investments   (479,506)   (658)   154,765    (4,150)
Unrealized gain on investments   11,186,953    -    10,833,475    13,484,504 
Interest income   1,947    552    6,215    1,480 
Total revenues   5,713,682    5,999,498    55,214,292    10,356,015 
                     
Expenses                    
Operating, general and administration   10,569,312    3,246,755    50,320,325    9,975,267 
Share based payments   9,353,742    387,329    26,368,118    2,920,219 
Depreciation - equipment   619    3,236    7,548    12,945 
Amortization - intangibles   546,030    509,575    2,114,955    2,038,300 
Finance costs   417,791    1,082,576    3,868,425    4,161,136 
Fees and commissions   3,229,079    164,900    6,798,892    1,029,443 
Foreign exchange (gain) loss   (440,142)   3,526,454    (440,142)   10,338,575 
Impairment loss   -    -    4,962,021    - 
Total expenses   23,676,431    8,920,825    94,000,142    30,475,885 
Loss before other item   (17,962,749)   (2,921,327)   (38,785,850)   (20,119,870)
Gain (loss) on settlement of debt   133,881    26,389    133,881    (172,093)
Provision on accounts receivable             (389,533)   - 
Net loss for the year   (17,828,868)   (2,894,938)   (39,041,502)   (20,291,963)
Other comprehensive income                    
Foreign currency translation gain   6,998,431    (1,829,345)   4,907,373    1,343,670 
Net loss and comprehensive loss for the year   (10,830,437)   (4,724,283)   (34,134,129)   (18,948,293)
                     
Net loss attributed to:                    
Owners of the parent   (17,828,868)   (2,891,620)   (39,041,502)   (20,067,424)
Non-controlling interests   -    (6,050)   -    (4,871)
    (17,828,868)   (2,897,670)   (39,041,502)   (20,072,295)
                     
Net income loss and comprehensive loss attributed to:                    
Owners of the parent   (10,830,437)   (4,720,965)   (34,134,129)   (18,943,422)
Non-controlling interests   -    (6,050)   -    (4,871)
    (10,830,437)   (4,727,015)   (34,134,129)   (18,948,293)
                     
Income (loss) per share                    
Basic   (0.06)   (0.01)   (0.13)   (0.09)
                     
Weighted average number of shares outstanding:                    
Basic   308,171,214    224,661,137    295,591,423    223,084,360 

 

28

 

For the three and twelve months ended December 31, 2024, the Company recorded a net loss of $17,828,868 and $39,014,502 on total revenues of $5,713,682 and $55,214,292 compared to net losses of $2,894,938 and $20,291,963 on total revenues of $5,999,498 and $10,356,015 for the three and twelve months ended December 31, 2023.

 

Our 2024 full year results have been adjusted to include an unrealized loss of $124,490,360 due to a Discount for Lack of Marketability applied to our Equity Investments in Digital Assets, at FVTPL as described at the beginning of this MD&A. The DLOM for the three months ended December 31, 2024 was $21,940,525 (December 31, 2023: $Nil).

 

The DLOM accounts for the lock up period extending to 2028 on some of the tokens owned by the funds. The Company shows how its revenues and EBITDA would present without the DLOM being applied in the non-IFRS measures section of this MD&A.

 

The Company intends to hold its equity investments in digital assets at FVTPL until the underlying digital assets become unlocked such that any eventual sale of the underlying digital assets would not be expected to occur at a discounted price resulting from their lack of marketability as at the date of the Financial Statements. In the event the Company requires additional unlocked SOL or AVAX to meet SOL and AVAX ETP redemptions, the Company believes it can borrow SOL or AVAX, or against its equity investments to meet redemptions, so as to avoid a sale of the equity investments prior to the underlying digital assets becoming unlocked. The Company also believes it can employ various other hedging strategies so as to short the underlying tokens and cover the short with tokens released from the equity investees over time. Tokens underlying the investments are expected to be released over 2025 through 2028, with approximately 25% of the locked up tokens being released on March 31, 2025. The DLOM will reverse to $nil by 2028.

 

For the three and twelve months ended December 31, 2024, realized and net change in unrealized gains and (loss) on digital assets was $165,019,913 and $345,243,593 and realized and net change in unrealized gains and (loss) on ETP payables was $(307,226,709) and $(482,892,054). DeFi Alpha trading returns and higher digital asset prices in 2024 resulted in gains on our digital assets that were offset by losses on ETP payables due to the increased share price of the ETPs. Unrealized gain on equity investments at FVTPL was $117,736,302 and $132,474,754 for the three twelve months ended December 31, 2024 compared to $nil an $nil in the three and twelve months ended December 31, 2023. This new revenue line has been added to report on gains on the equity investments in digital assets at FVTPL which the Company made during 2024. The equity investments in digital assets did not exist in the comparative period.

 

The Company wishes to bring investors to attention to the fact that for the full year 2024 the net amount of all realized/unrealized digital assets, equity investments in digital assets at FVTPL and ETPs was a net $5,173,707 loss after deducting $124,490,360 for the DLOM.

 

The Company earned staking and lending income of $12,847,754 and $35,717,997 for the three and twelve months ended December 31, 2024 compared to $746,871 and $3,554,587 for the same periods in 2023. The Company actively stakes and lends its digital assets to earn additional revenue. The staking and lending income was significantly higher for the three and twelve months ended December 31, 2024 due to the increased digital asset prices as well as the Company staking and lending more digital assets compared to 2023 thanks to higher overall AUM.

 

The Company had management fee revenue of $2,880,607 and $8,826,934 for the three and twelve months ended December 31, 2024 compared to $243,845 and $1,461,594 for the same periods in 2023. In 2024, the Company’s had higher AUM and additional ETP products resulting in higher management fees.

 

29

 

The Company had realized gain (loss) on investments of ($479,506) and $154,765 for the three and twelve months ended December 31, 2024 compared to $(658) and $(4,150) for the same periods in 2023. The Company had unrealized gain (loss) on investments of $11,186,953 and $10,833,475 compared to $nil and $13,484,504 in the prior period. The unrealized gain for the three and nine months ended December 31, 2024 consisted primarily of an unrealized gain of on Amina.

 

Operating, general and administration

 

   Three months ended
December 31		   Year ended
December 31		 
   2024   2023   2024   2023 
Compensation and consulting  $4,326,809   $1,576,590   $35,335,887   $5,569,354 
Travel and promotion   3,074,055    218,322    8,373,218    718,366 
General and administration   674,143    247,180    2,739,300    1,467,975 
Accounting and legal   2,464,487    1,177,471    3,679,312    2,000,363 
Regulatory and transfer agent   29,818    27,192    192,608    219,209 
   $10,569,312   $3,246,755   $50,320,325   $9,975,267 

 

Compensation and consulting fees were $4,326,809 and $35,335,887 during the three and twelve months ended December 31, 2024 compared to $1,576,590 and $5,569,354 during the same periods in 2023. Management and consulting fees increased due to DeFi Alpha trading bonus and the consolidation of Stillman Digital from October 7, 2024 and Reflexivity from February 6, 2024.

 

Travel and promotion was $3,074,055 and $8,373,218 during the three and twelve months ended December 31, 2024 compared to $218,322 and $718,356 during the same period in 2023. Corporate activities and business development increased in 2024 compared to 2023 with the significant growth in AUM.

 

General and administration was $674,143 and $2,739,300 during the three and twelve months ended December 31, 2024 compared to $247,180 and $1,467,975 during the same periods in 2023.

 

Accounting and legal was $2,464,487 and $3,679,312 during the three and twelve months ended December 31, 2024 compared to $1,177,471 and $2,000,363 during the same periods in 2023. The increase is due to higher audit costs due to the significantly larger company and increased legal fees associated with growth and acquisitions made during the year.

 

Total depreciation and amortization was $546,649 and $2,122,503 for the three and twelve months ended December 31, 2024 compared to $512,811 and $2,051,245 during the prior periods in 2023. This relates to the equipment, right of use assets and intangible assets acquired as part of the acquisitions of Reflexivity LLC, DeFi Capital, Stillman Digital and Valour.

 

Share based payments were $9,353,742 and $26,368,118 during the three and twelve months ended December 31, 2024 compared to $387,329 and $2,920,219 in the same periods in 2023. The Company granted 9,461,187 options and 10,914,007 DSUs to directors, officers and consultants of the Company during 2024 compared to the 4,359,286 DSUs and 8,900,000 options to directors, officers and consultants of the Company during 2023. Higher share price and volatility inputs used in the Black Scholes model in 2024 contributed to the increased value of share based payments compared to the same periods in 2023.

 

30

 

Finance costs were $417,791 and $3,868,425 for the three and twelve months ended December 31, 2024 compared to $1,082,576 and $4,161,136 during the prior periods in 2023. The decrease in financing costs is due to the Company repaying more of its loans during 2024.

 

Fees and commissions were $3,229,079 and $6,798,892 for the three and twelve months ended December 31, 2024 compared to $164,900 and $1,029,443 in the prior period. The increase in transaction costs relates to the trading of digital assets as brokerage commission and ETP issuance costs as well as transaction costs related to DeFi Alpha trading activity.

 

Foreign (gain) loss was $(440,142) and $(440,142) for the three and twelve months ended December 31, 2024 compared to $3,526,454 and $10,338,575 in the prior period. The (gains) loss reflects the currency fluctuations primarily in Company’s cash balances which are denominated in Swedish Krona, Euro and Swiss Franc.

 

Impairment loss was $Nil and $4,962,021 for the three and twelve months ended December 31, 2024 compared to $nil and $nil in the comparative periods. The Company impaired the costs related to the Solana IP acquisition in Q1 2024.

 

Cash used in operating activities was $129,958,895 for the twelve months ended December 31, 2024 compared with cash used of $92,518,510 in the comparative period. Cash used in operations before adjustments for working capital, investments and purchases and sales digital assets was $53,938,014 for the twelve months ended December 31, 2024 compared with cash used of $23,098,887 in the comparative period. The Company generally maintains its surplus working capital in digital assets and thus the operating cash flow statements will show a use of cash as long as more money is invested in cryptocurrencies than converted to Canadian or U.S. dollars or other fiat currencies.

 

During the twelve months ended December 31, 2024, $131,079,483 was provided by financing activities compared to $94,6154,329 in the prior period. The Company received proceeds of $973,681,726 from ETP holders, proceeds of $964,930 from option exercises and $15,213,215 provided from warrant exercises offset by $802,137,396 used for payments to ETP holders and $42,263,028 from loan repayments. During the twelve months ended December 31, 2023, the Company received proceeds of $308,595,496 from ETP holders and proceeds of $4,629,099 from loans offset by $223,232,891 used for payments to ETP holders. The cash provided from financing was higher in 2024 compared to 2023 due to higher net ETP sales in 2024, warrant and option exercises offset by loan repayment.

 

The Company confirms that no changes to the Company’s financial conditions or performance have occurred other than the restatement of the Affected Periods.

 

31

 

Non-IFRS Measures

 

The Company has included certain non-IFRS performance measures, namely Adjusted Revenue, Adjusted Net income, EBITDA, Adjusted EBITDA and Adjusted Net Income Per Share throughout this document. These non-IFRS measures are used by management to assess the Company’s performance and provide additional information and transparency to investors with respect to the Company’s revenue and net income performance.

 

Non-IFRS performance measures, including Adjusted Revenue, Adjusted Net Income, EBITDA and, Adjusted EBITDA and Adjusted Net Income Per Share do not have a standardized meaning. As a result, these measures may not be comparable to similar measures presented by other companies. Non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

 

“Adjusted Revenue” is a non-IFRS financial measure that is defined as revenue excluding (a) the application of the DLOM and (b) the effect of the adjustment in the value the BTC collateral held by Genesis Global Capital LLC (“Genesis”) to the fair value of the loan and interest held with Genesis (the “Genesis Adjustment”). Due to the ongoing bankruptcy related to Genesis, the Company is adjusting the BTC collateral position to the value of the loan and interest held at Genesis in accordance with the principles of IFRS. The Company continues to monitor and participate in the Genesis proceedings to determine the magnitude of the expected recovery as the proceedings progress.

 

“Adjusted Net Income” is a non-IFRS financial measure that is defined as net income excluding (a) the application of the DLOM, (b) the Genesis Adjustment and (c) the one-time effect of the impairment loss as a result of its acquisition on February 9, 2024 of intellectual property tailored to support the Solana-focused trading desk operated by the Company. At the time of acquisition, the intangible assets were in an early stage of research and development, with significant uncertainties surrounding its future market demand, sales price and production costs, and as such, the full amount was impaired (the “Solana IP Adjustment”).

 

“Adjusted EBITDA” is a non-IFRS financial measure that is defined as Adjusted Net Income and adding back interest, taxes, depreciation, amortization of property and equipment, right-of-use assets and other intangible assets.

 

“Adjusted Net Income Per Share” is a non-IFRS financial measure that is defined as Adjusted Net Income divided by the total number of common shares of the Company issued and outstanding.

 

With respect to the DLOM adjustment, the Company intends to hold its equity investments until the underlying digital assets become unlocked such that any eventual sale of the underlying digital assets would not be expected to occur at a discounted price resulting from their lack of marketability as at the date of the Financial Statements. In the event the Company requires additional unlocked SOL or AVAX to meet SOL and AVAX ETP redemptions, the Company believes it can borrow SOL or AVAX, or against its equity investments to meet redemptions, so as to avoid a sale of the equity investments prior to the underlying digital assets becoming unlocked. The Company also believes it can employ various other hedging strategies so as to short the underlying tokens and cover the short with tokens released from the equity investees over time. Tokens underlying the investments are expected to be released over 2025 through 2028, with approximately 25% of the locked up tokens being released on March 31, 2025.

 

32

 

For a reconciliation of these measures to the most directly comparable financial information presented in the Financial Statements in accordance with IFRS, see the tables below:

 

   Three months ended
December 31,		   Year ended
December 31,		 
   2024   2023   2024   2023 
   $   $   $   $ 
REVENUE RECONCILIATION                
Total Revenue (IFRS)  $5,713,682   $5,999,498   $55,214,292   $10,356,015 
add back: Discount for Lack of Marketability (DLOM)  $21,940,525   $0   $124,490,360   $0 
add back: Bitcoin collateral held by Genesis Capital LLC  $15,005,656   $0   $24,660,033   $0 
ADJUSTED REVENUE  $42,659,863   $5,999,498   $204,364,685   $10,356,015 
                     
NET LOSS (INCOME) RECONCILIATION                    
Net Loss  $(17,828,868)  $(2,894,938)  $(39,041,502)  $(20,291,963)
add back: Discount for Lack of Marketability (DLOM)  $21,940,525   $0   $124,490,360   $0 
add back: Bitcoin collateral held by Genesis Capital LLC  $15,005,656   $0   $24,660,033   $0 
add back: Impairment of Solana IP acquisition  $0   $0   $4,962,021   $0 
ADJUSTED NET INCOME (LOSS)  $19,117,313   $(2,894,938)   $115,070,912   $(20,291,963)
                     
EBITDA RECONCILIATION                    
Net Loss (IFRS)  $(17,828,868)  $(2,894,938)  $(39,041,502)  $(20,291,963)
Interest  $417,791   $1,082,576   $3,868,425   $4,161,136 
Depreciation & Amortization  $546,649   $512,811   $2,122,503   $2,051,245 
EBITDA  $(16,864,428)   $(1,299,551)   $(33,050,574)   $(14,079,582)
add back: Discount for Lack of Marketability (DLOM)  $21,940,525   $0   $124,490,360   $0 
add back: Bitcoin collateral held by Genesis Capital LLC  $15,005,656   $0   $24,660,033   $0 
add back: Impairment of Solana IP acquisition  $0   $0   $4,962,021   $0 
ADJUSTED EBITDA  $20,081,753   $(1,299,551)   $116,099,819   $(14,079,582)
                     
Net Income (loss) per share                    
Basic   (0.06)   (0.01)   (0.13)   (0.09)
Adjusted net income (loss) per share                    
Basic   0.06    (0.01)   0.39    (0.09)

 

33

 

Liquidity and Capital Resources

 

In management’s view, given the nature of the Company’s operations, the most relevant financial information relates primarily to current liquidity, solvency and planned expenditures. The Company’s financial success will be dependent upon the execution and development of its new investment strategy and business operations. Such execution and development may take years to complete and the amount of resulting income, if any, is difficult to determine.

 

To date, the Company has not had any negative impacts to the Company’s digital assets holdings with the bankruptcies of Celsius, Voyager and Blockfi, with the exception for a small exposure to FTX as it held some of its own digital assets on the exchange. The Company has pay down its loans from cash flow generated by the business.

 

The Company loaned and staked more digital assets in 2024 compared to 2023 and as a result the Company earned more revenue via staking and lending. Higher AUM in the Company’s fee earning ETPs in 2024 compared to 2023 resulted in higher management fees. Overall, the Company’s total revenues improved in 2024 as a result of improving digital asset markets and from profitable trades from DeFi Alpha.

 

DeFi relies upon various sources of funds for its ongoing operating activities. These resources include operating profits, proceeds from dispositions of investments, interest and dividend income from investments and private placement financing.

 

Loans Payable

 

As of December 31, 2024, loan principal of $8,633,400 (US$6,000,000) (December 31, 2023 - $52,242,700 (US$39,500,000)) was outstanding. The US$6,000,000 loan payable is held with Genesis. On January 20, 2023, Genesis declared bankruptcy and currently is not allowing withdrawals and not extending new loans. On March 15, 2023, the Court ruled that the Genesis debtors may not sell, buy, trade in crypto assets without prior consent by the creditors. The Court also allowed for the payment of some service providers required for upholding the operations but nothing beyond that. The Company’s loan with Genesis is an open term loan. The Genesis loan and interest payable is $10,082,451 (US$7,007,055) and secured with 365.44 BTC.

 

The Company has a C$3,865,230 (December 31, 2023: $Nil) margin loan from a crypto liquidity provider.  The loan is secured by the equity in its margin trading account.  The crypto liquidity provider charges fluctuating interest rates typically ranging between 9% and 15% annually.

 

On March 23, 2023, the Company entered into a loan agreement with an institutional investment firm that specializes in long-term asset backed financing for secured loan of $4,316,700 (US$3,000,001). The loan is secured by 158.2614 BTC. The Company paid a 1% origination fee to the lender. The principal is due eighteen months from the closing date. Interest payments of US$24,375 are due quarterly with the first payment due on June 23, 2023. As of December 31, 2024, the loan principal of $3,865,230 (US$2,686,239) (December 31, 2023 - $3,967,801 (US$3,000,001)) was outstanding.

 

34

 

Operating Segments

 

The Company operates in various business lines based on where the subsidiaries operate. Valour operates the Company’s ETPs business line which involves issuing ETPs, hedging against the underlying digital asset, lending and staking of digital assets and management fees earned on the ETPs. DeFi Bermuda operates the Company’s Venture portfolio and node business lines. DeFi Alpha is a specialized trading desk with the sole focus of identifying low-risk arbitrage opportunities within the crypto ecosystem. The Reflexivity operates the Company’s research firm and Stillman and Stillman Bermuda operate the trading platform.

 

Information about the Company’s assets by segment is detailed below.

 

December 31, 2024  DeFi   Reflexivity   Stillman Digital   Valour Inc   Total 
Cash   2,548,289    217,449    1,662,490    18,495,644    22,923,872 
Client cash deposits        -    15,346,080    -    15,346,080 
Public investments, at fair value through profit and loss   1,119,586    -    -    -    1,119,586 
Prepaid expenses   788,162    103,606    1,007,990    685,693    2,585,451 
Digital assets   763,338    228,237    8,227,158    790,577,858    799,796,591 
Equity instruments   -    -    -    370,408,924    370,408,924 
Client digital assets   -    -    3,356,235    -    3,356,235 
Property, plant and equipment   -    -    -    130    130 
Other non-current assets   51,868,922    -    -    53,316,856    105,185,778 
Total assets   57,088,297    549,292         1,233,485,105    1,320,722,647 
Accounts payable and accrued liabilities   3,363,664    279,114    830,101    538,043    5,010,922 
Loans payable   -    -    -    13,947,681    13,947,681 
Trading liabilities   -    -    25,097,116    -    25,097,116 
ETP holders payable   -    -    -    1,253,515,501    1,253,515,501 
Total liabilities   3,363,664    279,114    25,927,217    1,268,001,225    1,297,571,220 

 

December 31, 2023  DeFi   DeFi Bermuda   Valour Inc   Total 
Cash   59,069    -    6,668,412    6,727,481 
Amounts receivable   6,878    -    47,159    54,037 
Prepaid expenses   77,521    -    1,432,303    1,509,824 
Digital assets   503,669    218,131    488,500,351    489,222,151 
Property, plant and equipment   -         7,679    7,679 
Other non-current assets   -    -    94,438,937    94,438,937 
Total assets   647,137    218,131    591,094,840    591,960,108 
Accounts payable and accrued liabilities   2,976,405    29,440    6,169,001    9,174,846 
Loans payable   -    -    56,210,709    56,210,709 
Trading liabilities   -    -    -    - 
ETP holders payable   -    -    508,130,490    508,130,490 
Total liabilities   2,976,405    29,440    570,510,200    573,516,045 

 

35

 

Information about the Company’s revenues and expenses by segment is detailed below:

 

   DeFi   Reflexivity   DeFi Bermuda   Stillman Digital   Defi Alpha1   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digital assets   259,669    73,580    (35,011)   -    132,121,555    212,823,799    345,243,593 
Realized and net change in unrealized gains and (losses) on ETP payables   -    -    -    -    -    (482,892,054)   (482,892,054)
Staking and lending income   -    -    -    -    -    35,717,997    35,717,997 
Trading commissions   -    -    -    2,885,180    -    -    2,885,180 
Management fees   -    -    -    -    -    8,826,934    8,826,934 
Research revenue   -    1,963,433    -    -    -    -    1,963,433 
Realized (loss) on investments, net   -    -    -    -    -    154,765    154,765 
Unrealized (loss) on investments, net   4,827,461    -    -    -    -    6,006,014    10,833,475 
Unrealized gain on equity investments   -    -    -    -    -    132,474,754    132,474,754 
Interest income   5,385    -    -    830    -    -    6,215 
Total revenue   5,092,515    2,037,013    (35,011)   2,886,010    132,121,555    (86,887,791)   55,214,292 
Expenses                                   
Operating, general and administration   9,948,895    1,652,218    12,719    1,568,626    27,172,254    9,965,613    50,320,325 
Share based payments   17,774,171    -    -    -    -    8,593,947    26,368,118 
Depreciation - property, plant and equipment   -    -    5,073    -    -    2,475    7,548 
Amortization - intangibles   2,114,955    -    -    -    -    -    2,114,955 
Finance costs   -    -    -    1,295    -    3,867,130    3,868,425 
Transaction costs   44,498    -    -    341,445    857,048    5,555,901    6,798,892 
Foreign exchange (gain) loss   124,291    -    -    (472,863)   -    (91,570)   (440,142)
Impairment loss   4,962,021    -    -    -    -    -    4,962,021 
Total expenses   34,968,831    1,652,218    17,792    1,438,503    28,029,302    27,893,496    94,000,142 
Income (loss) before other item   (29,876,316)   384,795    (52,802)   1,447,507    104,092,253    (114,781,287)   (38,785,850)
Gain on settlement of debt   (133,881)   -    -    -    -    -    (133,881)
Provision on accounts receivable   (5,331)   -    -    394,864    -    -    389,533 
Net income (loss) for the year   (29,737,105)   384,795    (52,802)   1,052,643    104,092,253    (114,781,287)   (39,041,502)
Other comprehensive income (loss)                                   
Foreign currency translation (loss) gain   -    (29,329)   14,404    456,573    -    4,465,725    4,907,373 
Net (loss) income and comprehensive (loss) income for the period   (29,737,105)   355,466    (38,398)   1,509,216    104,092,253    (110,315,561)   (34,134,129)

 

36

 

Capital Management

 

The Company considers its capital to consist of share capital, equity reserve and deficit. The Company’s objectives when managing capital are:

 

●to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments;

 

●to give shareholders sustained growth in value by increasing shareholders’ equity; while

 

●taking a conservative approach towards financial leverage and management of financial risks.

 

The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:

 

●raising capital through equity financings; and

 

●realizing proceeds from the disposition of its investments

 

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders’ equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million. There were no changes to the Company’s capital management during the twelve months ended December 31, 2024.

 

Commitments

 

Management Contract Commitments

 

The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $2,375,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these consolidated financial statements. Minimum commitments remaining under these contracts were approximately $905,000, all due within one year.

 

Legal Commitments

 

The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

 

37

 

Summary of Quarterly Results

 

The following is a summary of the Company’s financial results for the eight most recently completed quarters:

 

   31-Dec   30-Sep   30-Jun   31-Mar   31-Dec   30-Sep   30-Jun   31-Mar 
   2024   2024   2024   2024   2023   2023   2023   2022 
Revenue  $5,713,682   $20,299,458   $34,509,314   $(4,922,567)  $8,548,779   $6,003,995   $7,147,292   $(11,344,052)
Net income (loss) and comprehensive income (loss)  $(10,830,437)  $20,085,853   $(8,179,564)  $(19,310,808)  $1,415,946   $(4,719,786)  $800,012   $(16,444,465)
Income (loss) per Share - basic   (0.06)   0.08    (0.09)   (0.06)   -    (0.01)   -    (0.08)
Income (loss) per Share - diluted   (0.05)   0.07    (0.07)   (0.06)   -    (0.01)   -    (0.08)
Total Assets  $1,320,722,647   $925,066,965   $785,194,831   $983,940,422   $591,960,107   $253,585,558   $259,787,932   $267,666,904 
Total Long Term Liabilities  $0   $0   $0   $0   $0   $0   $0   $0 

 

Selected Annual Information

 

 

The highlights of financial data for the Company for the three most recently completed financial years are as follows:

 

   31-Dec-24   31-Dec-23   31-Dec-22 
(a) Net Revenue   55,214,292    10,356,015   $(14,226,780)
(b) Net Income (Loss) and Comprehensive Income (Loss)               
(i) Total income (loss)   (34,134,129)   (20,291,963)  $(65,898,036)
(ii) Income (loss) per share – basic   (0.13)   (0.09)   (0.32)
(iii) Income (loss) per share – diluted   (0.13)   (0.09)   (0.32)
(c) Total Assets   1,320,722,647    591,960,108   $194,003,779 
(d) Total Liabilities   1,297,571,219    573,516,045   $166,094,517 

 

Off Balance Sheet Arrangements

 

 

There are no off-balance sheet arrangements to which the Company is committed.

 

38

 

Related Party Transactions

 

a)The consolidated financial statements include the financial statements of the Company and its subsidiaries and its respective ownership listed below:

 

   % equity
interest		 
DeFi Capital Inc.   100 
DeFi Holdings (Bermuda) Ltd.   100 
Electrum Streaming Inc.   100 
Reflexivity LLC   100 
Valour Inc.   100 
DeFi Europe AG   100 
DeFi Middle East DMCC   100 
Stillman Digital Inc.   100 
Stillman Bermuda Ltd.   100 
Valour Digital Securities Limited   0 

 

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. The remuneration of directors and other members of key management personnel during the years ended December 31, 2024 and 2023 were as follows:

 

b)Compensation of key management personnel of the Company (continued)

 

   Three months ended
December 31,		   Year ended
December 31,		 
   2024   2023   2024   2023 
Short-term benefits  $1,310,040   $161,664   $29,516,112   $1,475,096 
Shared-based payments   10,167,428    67,498    12,977,714    264,829 
   $11,477,468   $229,162   $42,493,826   $1,739,925 

 

As at December 31, 2024, the Company had $nil (December 31, 2023 - $147,485) owing to its current key management, and $394,274 (December 31, 2023 - $314,136) owing to its former key management and a member of key management owes the Company $143,890 (December 31, 2023 - $nil). Such amounts are unsecured, non-interest bearing, with no fixed terms of payment or “due on demand.”

 

More detailed information regarding the compensation of officers and directors of the Company is disclosed in the management information circular and such information is incorporated by reference herein. The management information circular is available under profile of the Company on SEDAR+ at www.sedarplus.ca

 

39

 

b)During the years ended December 31, 2024 and 2023, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

 

   Three months ended
December 31,		   Year ended
December 31,		 
   2024   2023   2024   2023 
2227929 Ontario Inc.  $30,000   $30,000   $120,000   $120,000 
   $30,000   $30,000   $120,000   $120,000 

 

The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at December 31, 2024, the Company had a payable balance of $327,700 (December 31, 2023 - $226,000) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former director and former officer of the Company, is also a director of 2227929 Ontario Inc.

 

For the year ended December 31, 2024, the Company incurred $59,439 (December 31, 2023 - $173,917) in legal fees to a firm in which a director of the Company is a partner. At December 31, 2024, the Company had recorded $nil in accounts payable and accrued liabilities related to these legal expenses (December 31, 2023 – $165,868) incurred in the ordinary course of business with this law firm.

 

During the year ended December 31, 2024, Valour purchased 1,320,130 USDT for EUR1,213,237 from a former director of Valour.

 

During the year ended December 31, 2024, the Company paid management US$20,000,000 and 3,998,508 DeFi shares valued at US$6,273,870 related to DeFi Alpha trading profits.

 

During the year ended December 31, 2023, Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

During the year ended December 31, 2023, the Company also issued 2,724,941 common shares of the Company to former key management at an issue price of $0.11 per share to settle existing debt of $231,620 resulting in a loss on settlement of debt in the amount of $68,124.

 

Included in accounts payable and accrued liabilities were expenses of GBP 44,228 ($79,964) (December 31, 2023 - $74,466) of expenses owed to Vik Pathak, a former director and officer of the Company.

 

The Company has a diversified base of investors. To the Company’s knowledge, no one holds more than 10% of the Company’s shares on a basic share and partially diluted share basis as at December 31, 2024.

 

40

 

c)The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of December 31, 2024 and 2023.

 

Investment  Nature of relationship to invesment  Estimated Fair value 
Brazil Potash Corp.  Officer (Ryan Ptolemy) of Investee  $1,119,587 
Aminna Bank AG *  Former Director (Olivier Roussy Newton) of investee   51,020,502 
ZKP*  Director (Olivier Roussy Newton) of investee   1,438,900 
Total investment - December 31, 2024     $53,578,989 

 

*Private companies

 

Investment  Nature of relationship to invesment  Estimated Fair value 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $2,138,380 
Aminna Bank AG (formerlt SEBA Bank AG)*  Former Director (Olivier Roussy Newton) of investee   39,395,000 
Total investment - December 31, 2023     $41,533,380 

 

*Private companies

 

Financial Instruments and Other Instruments

 

Financial assets and financial liabilities as at December 31, 2024 and 2023 are as follows:

 

   Asset / (liabilities) at amortized cost   Assets / (liabilities) at fair value through
profit/(loss)		   Total 
December 31, 2023            
Cash  $6,727,482   $-   $6,727,482 
Private investments   -    43,540,534    43,540,534 
USDC   -    1,586    1,586 
Accounts payable and accrued liabilities   9,174,346    -    (9,174,846)
Loan payable   (56,210,709)   -    (56,210,709)
ETP holders payable   -    (508,130,490)   (508,130,490)
December 31, 2024               
Cash  $22,923,872   $-   $22,923,872 
Client Cash Deposits   15,346,080    -    15,346,080 
Digital assets   -    799,796,591    799,796,591 
Equity investments   -    370,408,924    370,408,924 
Public investments   -    1,119,586    1,119,586 
Private investments   -    53,740,154    53,740,154 
Digital assets        799,796,591    799,796,591 
Accounts payable and accrued liabilities   (5,010,922)   -    (5,010,922)
Loan payable   (13,947,681)   -    (13,947,681)
Trading liabilities   -    (25,097,116)   (25,097,116)
ETP holders payable   -    (1,253,515,501)   (1,253,515,501)

 

41

 

The Company’s financial instruments are exposed to several risks, including market, liquidity, credit and currency risks. There have been no significant changes in the risks, objectives, policies and procedures from the previous year. A discussion of the Company’s use of financial instruments and their associated risks is provided below:

 

Credit risk

 

Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash carries an investment grade rating as assessed by external rating agencies. The Company maintains all or substantially all of its cash with a major financial institution domiciled in Canada, the United States and Europe. Deposits held with this institution may exceed the amount of insurance provided on such deposits.

 

Regulatory Risks

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company. Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation.

 

Custodian Risks

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line as well as for digital assets underlying Valour Cayman ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investments declines, resulting in losses upon disposition. In addition, some of the investments the Company holds are lightly traded public corporations or not publicly traded and may not be easily liquidated. The Company generates cash flow from proceeds from the disposition of its investments and digital assets. There can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. All of the Company’s assets, liabilities and obligations are due within one to three years.

 

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The Company manages liquidity risk by maintaining adequate cash balances and liquid investments and digital assets. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial and non-financial assets and liabilities. As at December 31, 2024, the Company had current assets of $1,026,403,733 (December 31, 2023 - $497,513,493) to settle current liabilities of $1,297,571,219 (December 31, 2023 - $573,516,045).

 

The following table shows the Company’s source of liquidity by assets / (liabilities) as at December 31, 2024 and 2023:

 

December 31, 2024

 

   Total   Less than
1 year		   1–3 years 
Cash  $22,923,872   $22,923,872   $- 
Client cash deposits   15,346,080    15,346,080    - 
Public Investments   1,119,586    1,119,586    - 
Prepaid expenses   2,585,451    2,585,451    - 
Digital assets   799,796,591    799,314,977    481,614 
Private investments   53,740,154         53,740,154 
Equity investments   370,408,924    181,757,532    188,651,392 
Accounts payable and accrued liabilities   (5,010,922)   (5,010,922)   - 
Loan payable   (13,947,681)   (13,947,681)   - 
Trading liabilities   (25,097,116)   (25,097,116)     
ETP holders payable   (1,253,515,501)   (1,253,515,501)   - 
Total assets / (liabilities) - December 31, 2024  $(31,650,562)  $(274,523,722)  $242,873,160 

 

December 31, 2023

 

   Total   Less than
1 year		   1–3 years 
Cash  $6,727,482   $6,727,482   $- 
Amounts receivable   -    -    - 
Prepaid expenses   1,563,860    1,563,860    - 
Digital assets   489,865,638    489,222,151    643,487 
Private investments   43,540,534    -    43,540,534 
Accounts payable and accrued liabilities   (9,174,846)   (9,174,846)   - 
Loans payable   (56,210,709)   (56,210,709)   - 
ETP holders payable   (508,130,490)   (508,130,490)   - 
Total assets / (liabilities) - December 31, 2023  $(31,818,531)  $(76,002,552)  $44,184,021 

 

Digital assets included in the table above are non-financial assets except USDC. For the purposes of liquidity risk analysis, these non-financial assets were included as they are mainly utilized to pay off any redemptions related to ETP holders payable, a financial liability. The lent and staked digital assets fall under the “less than 1 year” bucket.

 

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Market risk

 

Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate because of changes in market prices.

 

(a)Price and concentration risk

 

The Company is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favorable prices. In addition, most of the Company’s investments are in the technology and resource sector. At December 31, 2024, one investments made up approximately 3.4% (December 31, 2023 – two investments of 7.0%) of the total assets of the Company.

 

For the year ended December 31, 2024, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $5.1 million, or $0.02 per share.

 

For the year ended December 31, 2023, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $4.2 million, or $0.02 per share.

 

(b)Interest rate risk

 

The Company’s cash is subject to interest rate cash flow risk as it carries variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash balances on hand at December 31, 2024, a 1% change in interest rates could result in approximately $229,000 change in net loss.

 

(c)Currency risk

 

Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company’s operations are exposed to foreign exchange fluctuations, which could have a significant adverse effect on its results of operations from time to time. The Company’s foreign currency risk arises primarily with respect to United States dollar, Euro, Swiss Franc, Swedish Krona and British Pound. Fluctuations in the exchange rates between this currency and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. The Company reduces its currency risk by maintaining minimal cash balances held in foreign currency.

 

As at December 31, 2024 and 2023, the Company had the following financial and non-financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:

 

December 31, 2024

 

   United States   British   Swiss   Swedish Krona   Euro   Dirham 
Cash  $17,034,759   $-   $5,141,507   $9,818,189   $3,645,348   $88,135 
Client cash deposits   15,346,080    -    -    -    -    - 
Private investments   1,119,587    -    51,020,502    -    -    - 
Prepaid investment   2,585,451    -    -    -    -    - 
Digital assets   799,796,591    -    -    -    -    - 
Accounts payable and accrued liabilities   (4,204,771)   (79,738)   (356,130)   -    (22,392)   - 
Loan payable   (13,947,681)   -    -    -    -    - 
Trading liabilities   (25,097,116)   -    -    -    -    - 
ETP holders payable   (1,253,515,501)   -    -    -    -    - 
Net assets (liabilities)  $(460,882,601)  $(79,738)  $55,805,880   $9,818,189   $3,622,956   $88,135 

 

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December 31, 2023

 

   United States   British   Swiss   Euro 
Cash  $6,668,518   $-   $-   $- 
Other assets   47,159    -    -    - 
Private investments   4,016,636    -    39,395,000    - 
Prepaid investment   1,509,824    -    -    - 
Digital assets   489,865,637    -    -    - 
Accounts payable and accrued liabilities   (3,080,229)   (74,466)   (101,828)   (21,939)
Loan payable   (56,210,709)               
ETP holders payable   (508,130,490)   -    -    - 
Net assets (liabilities)  $(65,313,654)  $(74,466)  $39,293,172   $(21,939)

 

A 10% increase (decrease) in the value of the Canadian dollar against all foreign currencies in which the Company held financial instruments as of December 31, 2024 would result in an estimated increase (decrease) in net income of approximately $35,222,000, (December 31, 2023 - $2,601,500).

 

(d)Digital currency risk factors: Perception, Evolution, Validation and Valuation

 

A digital currency does not represent an intrinsic value or a form of credit. Its value is a function of the perspective of the participants within the marketplace for that digital currency. The price of the digital currency fluctuates as a result of supply and demand pressures that accumulate in the market for it.

 

Having a finite supply (in the case of many but not all digital currencies), the more people who want to own that digital currency, the more the market price increases and vice-versa.

 

The most common means of determining the value of a digital currency is through one or more cryptocurrency exchanges where that digital currency is traded. Such exchanges publicly disclose the “times and sales” of the various listed pairs. As the marketplace for digital currencies evolves, the process for assessing value will become increasingly sophisticated.

 

(e)Fair value of financial instruments

 

The Company has determined the carrying values of its financial instruments as follows:

 

i.The carrying values of cash, amounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

 

ii.Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 in the Company’s December 31, 2023 financial statements.

 

iii.Digital assets classified as financial assets relate to USDC which is measured at fair value.

 

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The following table illustrates the classification and hierarchy of the Company’s financial instruments, measured at fair value in the statements of financial position as at December 31, 2024 and 2023.

 

   Level 1   Level 2   Level 3     
Investments, fair value  (Quoted Market price)   (Valuation
technique -
observable
market Inputs)		   (Valuation technique -non-
observable
market inputs)		   Total 
Privately traded investments  $-   $-   $53,740,154   $53,740,154 
Digital assets   -    799,796,591         799,796,591 
Client digital assets   -    3,356,235    -    3,356,235 
Equity investments   -         370,408,927    370,408,927 
Publicly traded investments   1,119,587    -    -    1,119,587 
December 31, 2024  $1,119,587   $803,152,826   $424,149,081   $1,228,421,494 
Privately traded investments  $-   $-   $43,540,534   $43,540,534 
Digital assets   -    489,865,638    -    489,865,638 
December 31, 2023  $-   $489,865,638   $43,540,534   $533,406,172 

 

Level 1 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 1 during the years ended December 31, 2024 and 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   December 31,   December 31, 
Investments, fair value for the year ended  2024   2023 
Balance, beginning of year  $-   $      - 
Transferred from level 1   1,119,587    - 
Balance, end of year  $1,119,587   $- 

 

Level 2 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 2 during the years ended December 31, 2024 and 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   December 31,   December 31, 
Investments, fair value for the year ended  2024   2023 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   540,008,974    318,355,007 
Client digital assets acquired   3,356,235    - 
Digital assets disposed   (717,306,612)   (244,656,544)
Digital assets earned from staking, lending and fees   35,717,997    3,554,587 
Realized gain (loss) on digital assets   396,824,120    (1,017,247)
Net change in unrealized gains and losses on digital assets   80,894,227    324,976,115 
Foreign exchange loss   (26,207,753)   (15,548,365)
   $803,152,826   $489,865,638 

 

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Level 3 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the years ended December 31, 2024 and 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   December 31,   December 31, 
Investments, fair value for the year ended  2024   2023 
Opening balance  $43,540,534   $30,015,445 
Purchases   370,408,927    128,898 
Transferred to Level 1   (1,119,587)   - 
Realized gain (loss)   154,767    - 
Unrealized gain/(loss)   11,164,440    13,396,191 
   $424,149,081   $43,540,534 

 

Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly traded companies.As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results. The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at December 31, 2024 and 2023.

 

             Range of
          Significant  significant
       Valuation  unobservable  unobservable
Description  Fair value   technique  input(s)  input(s)
3iQ Corp.  $432,331   Recent financing  Marketability of shares  0% discount
Equity Investments in digital   370,408,927   Recent financing  Discount for lack of marketability  25% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   719,522   Recent financing  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Amina Bank   51,020,502   Market approach  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
ZKP Corporation   1,438,900   Recent financing  Marketability of shares  0% discount
September 30, 2024  $424,149,080          
3iQ Corp.  $1,216,890   Recent financing  Marketability of shares  0% discount
Brazil Potash Corp.   2,138,380   Recent financing  Marketability of shares  0% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   661,366   Recent financing  Marketability of shares  0% discount
SEBA Bank AG   39,395,000   Market approach  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
December 31, 2023  $43,540,534           

 

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3iQ Corp. (“3iQ”)

 

On March 31, 2020, the Company acquired 187,007 common shares of 3iQ as part of the Company’s acquisition of Valour. As at December 31, 2024, the valuation of 3iQ was based on the recent transaction which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of 3iQ will result in a corresponding +/- $43,233 (December 31, 2023 - $121,689) change in the carrying amount.

 

Amina Bank AG (“Amina”)

 

On January 14, 2022, the Company invested $34,498,750 to acquire 3,906,250 non-votes shares of Amina. As at December 31, 2024, the valuation of Amina was based on a market approach which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of Amina will result in a corresponding +/- $5,102,050 (December 31, 2023 +/- $3,939,500) change in the carrying amount.

 

Earnity Inc. (“Earnity”)

 

On April 13, 2021, the Company subscribed $50,076 (US$40,000) to acquire certain rights to certain future equity of Earnity. As at December 31, 2024, the valuation of Earnity was determined to be nil based on Earnity ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at December 31, 2024, a +/- 10% change in the fair value of Earnity will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Luxor Technology Corporation (“LTC”)

 

On December 29, 2020, the Company subscribed $128,060 (US$100,000) to acquire certain rights to the preferred shares of LTC. The transaction was closed on February 15, 2021. On May 11, 2021, the Company subscribed additional rights of US$62,500 ($75,787). As at December 31, 2024, the valuation of LTC was based on a previous financing which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024. a +/- 10% change in the fair value of LTC will result in a corresponding +/- $71,952 (December 31, 2023 - $66,137) change in the carrying amount.

 

SDK:Meta LLC

 

On June 3, 2021, the Company entered into a share exchange agreement with SDK exchanging 1,000,000 membership units of SDK with 3,000,000 shares of the Company valuing the investment at $3,420,000. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at December 31, 2024, the valuation of SDK:Meta LLC was $nil (December 31, 2023 - $nil). Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at December 31, 2024, a +/- 10% change in the fair value of SDK:Meta LLC will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Skolem Technologies Ltd. (“STL”)

 

On December 29, 2020, the Company invested $25,612 (US$20,000) to acquire certain rights to the preferred shares of STL. On October 29, 2021, the Company rights were converted into 16,354 series A preferred shares. As at December 31, 2024, the valuation of STL was determined to be nil based on STL ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of STL will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

48

 

VolMEX Labs Corporation (“VLC”)

 

On February 23, 2021, the Company invested $37,809 (US$30,0000 to acquire certain rights to the preferred shares of VLC. As at December 31, 2024, the valuation of VLC was nil. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of VLC will result in a corresponding +/- nil (December 31, 2023 - $nil) change in the carrying amount.

 

ZKP Corporation (“ZKP”)

 

On August 2, 2024, the Company invested $1,385,800 (US$1,000,000) to acquire shares of ZKP. As at December 31, 2024, the valuation of ZKP was based on the recent financing price. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2024. As at December 31, 2024, a +/- 10% change in the fair value of ZXP will result in a corresponding +/- $143,890 change in the carrying amount.

 

Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at December 31, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $37,040,893 change in the carrying amount.

 

Digital asset risk

 

(a)Digital currency risk factors: Risks due to the technical design of cryptocurrencies

 

The source code of many digital currencies, such as Bitcoin, is public and may be downloaded and viewed by anyone. As with all code, there may be a bug in the respective code which is yet to be found and repaired and can ultimately jeopardize the integrity and security of one or more of these networks.

 

Should miners for reasons yet unknown cease to register completed transactions within blocks which have been detached from the block chain, the confidence in the protocol and network will be reduced, which will reduce the value of the digital currency associated with that protocol, and the ETP payable balances that are valued with reference to the respective digital asset.

 

Protocols for most digital assets or cryptocurrencies are public open-source software, they could be particularly vulnerable to hacker attacks, which could be damaging for the digital currency market and may be the cause for investors to choose other currencies or assets to invest in.

 

(b)Digital currency risk factors: Ownership, Wallets

 

Rather than the actual cryptocurrency (which are “stored” on the blockchain), a cryptocurrency wallet stores the information necessary to transact the cryptocurrency. Those digital credentials are needed so one can access and spend the underlying digital assets. Some use public-key cryptography in which two cryptographic keys, one public and one private, are generated and stored in a wallet. There are several types of wallets:

 

-Hardware wallets are USB-like hardware devices with a small screen built specifically for handling private keys and public keys/addresses.

 

-Paper wallets are simply paper printouts of private and public addresses.

 

-Desktop wallets are installable software programs/apps downloaded from the internet that hold your private and public keys/addresses.

 

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-Mobile wallets are wallets installed on a mobile device and are thus always available and connected to the internet.

 

-Web wallets are hot wallets that are always connected to the internet that can be stored in a browser or can be “hosted” by third party providers such as an exchange.

 

(c)Digital currency risk factors: Political, regulatory risk and technology in the market of digital currencies The legal status of digital currencies, inter alia Bitcoin varies between different countries. The lack of consensus concerning the regulation of digital currencies and how such currencies shall be handled tax wise causes insecurity regarding their legal status. As all digital currencies remain largely unregulated assets, there is a risk that politics and future regulations may negatively impact the market of digital currencies and companies operating in such market. It is impossible to estimate how politics and future regulations may affect the market. However, future regulations and changes in the legal status of the digital currencies is a political risk which may affect the price development of the tracked digital currencies.

 

The perception (and the extent to which it is held) that there is significant usage of the digital assets in connection with criminal or other illicit purposes, could materially influence the development and regulation of digital assets (potentially by curtailing the same).

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack.

 

Outstanding Share Data

 

Authorized unlimited common shares without par value – 327,070,307 are issued and outstanding as at March 29, 2025.

 

Authorized 20,000,000 preferred shares, at 9% cumulative dividends, non-voting, non-participating, non-redeemable, non-retractable, and non-convertible – 4,500,000 are issued and outstanding as at November 14, 2024.

 

Stock options and convertible securities outstanding as at March 29, 2025 are as follows:

 

Stock Options:

 

26,906,187 with an exercise price ranging from $0.09 to $4.59 expiring between November 16, 2025 and January 6, 2030.

 

Warrants:

 

23,125,000 with an exercise price ranging from $0.20 to $0.30 expiring between November 14, 2024 and November 6, 2028.

 

Deferred shares units:

 

13,156,507 with vesting terms ranging from six months to three years.

 

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Risks and Uncertainties

 

The Company is exposed to a number of risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. The following outlines certain risk factors specific to the Company. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward–looking information relating to the Company. Please also refer to the Company’s AIF for the year ended December 31, 2024 filed on SEDAR+ for a full description of the Company’s risks in addition to those highlighted below.

 

Staking and Lending of Cryptocurrencies, DeFi Protocol Tokens or other Digital Assets

 

The Company (or entities the Company makes Equity Investments in Digital Assets in) may stake or lend digital assets to third parties or affiliates. The digital assets that are “staked” will earn rewards in the form of additional digital assets, which will accrue to the validator address, but neither the rewards nor the principal allocation of digital assets can be withdrawn for a predetermined period of time, and as a result, the liquidity of such digital assets will be limited. On termination of the staking arrangement or loan, the counterparty is required to return the digital assets to the owner; any gains or loss in the market price during the period would inure to the owner. Such limitations on liquidity could prevent the disposal of the applicable digital asset during certain periods. Liquid digital assets that are staked are maintained outside of cold storage during the staking process, locked into a smart contract and will generally not be maintained with a qualified custodian while being staked. The owner of the staked digital asset is provided with withdrawal keys that allow retrieval of the staked liquid tokens once withdrawals have been activated by the relevant protocol, and on a defined timeline with daily limits on the number of digital assets that can be withdrawn. Withdrawal keys will be held by a qualified custodian, but the additional complexities of staking liquid digital assets can increase the risk of loss. Staked liquid tokens are also subject to higher risk of loss or theft due to malicious actions, network interruptions, or a failure by third-party validators to validate transactions. Staking creates exposure to smart contracts. Smart contracts are subject to certain risks and may result in losses stemming from errors, bugs or other failures. Staking provides no guarantee of return nor are there currently efficient ways to insure against such risks. To the extent that smart contract insurance is available, it may not cover all risks related to staking of the applicable digital asset, engaging with smart contracts, or other opportunities utilized.

 

In the event of the bankruptcy of the counterparty, the Company could experience delays in recovering its digital assets. In addition, to the extent that the value of the digital assets increases during the term of the loan, the value of the digital assets may exceed the value of collateral provided to the Company, exposing the Company to credit risks with respect to the counterparty and potentially exposing the Company to a loss of the difference between the value of the digital assets and the value of the collateral. If a counterparty defaults under its obligations with respect to a loan of digital assets, including by failing to deliver additional collateral when required or by failing to return the digital assets upon the termination of the loan, the Company may expend significant resources and incur significant expenses in connection with efforts to enforce the staking or loan agreement, which may ultimately be unsuccessful.

 

Furthermore, the Company and its affiliates may also pledge and grant security over its digital assets to secure loans. In the event that the Company or its affiliates defaults under its obligations with respect to the loan, including failure to repay the principal amount of the loan or accrued interest, lenders may realize upon its security and take possession to such pledged digital assets.

 

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The digital assets that are staked, loaned or pledged to third parties by the Company include digital assets held by Valour for the purposes of hedging its ETPs. The Company is exposed to a potentially significant liquidity risk if, for example, the aggregate sale of ETPs exceed the quantum of uncommitted cryptocurrency available to the Company to satisfy such sale requests. A similar risk applies with respect to individual reserves of each type of cryptocurrency should the sale of ETPs, and correspondingly, the underlying cryptocurrency, exceed the Company’s available reserves.

 

Custody Risk

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line, its digital assets in treasury as well as for digital assets underlying Valour ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Momentum Pricing Risk

 

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Cryptocurrency and DeFi protocol token market prices are determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and DeFi Protocol tokens inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of the Company’s cryptocurrency and DeFi protocol token inventory and thereby affect the Company’s shareholders.

 

The profitability of our operations will be significantly affected by changes in prices of cryptocurrencies, DeFi protocol tokens and other digital assets. Any declines in the volume of digital asset transactions, the price of digital assets, or market liquidity for digital assets generally may adversely affect our operating results. Cryptocurrencies, DeFi protocol tokens and other digital assets prices are highly volatile, can fluctuate substantially and are affected by numerous factors beyond our control, including use of such cryptocurrencies, DeFi protocol tokens and other digital assets in the DeFi industry, demand, inflation and expectations with respect to the rate of inflation, global or regional political or economic events. If cryptocurrencies, DeFi protocol tokens and other digital assets prices should decline and remain at low market levels for a sustained period, our financial condition may be adversely affected, and we could determine that it is not economically feasible to continue activities.

 

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The price and trading volume of any digital asset is subject to significant uncertainty and volatility, depending on several factors, including, but not limited to:

 

●changes in liquidity, market-making volume, and trading activities;

 

●investment and trading activities of highly active retail and institutional users, speculators, miners, and investors;

 

●decreased user and investor confidence in digital assets and digital asset platforms;

 

●negative publicity or events and unpredictable social media coverage or “trending” of digital assets;

 

●the ability for digital assets to meet user and investor demands;

 

●the functionality and utility of digital assets and their associated ecosystems and networks;

 

●consumer preferences and perceived value of digital asset markets;

 

●regulatory or legislative changes and updates affecting the digital asset economy;

 

●the characterization of digital assets under the laws of various jurisdictions around the world;

 

●the maintenance, troubleshooting, and development of the blockchain networks;

 

●the ability for digital asset networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently;

 

●interruptions in service from or failures of major digital asset platforms;

 

●availability of an active derivatives market for various digital assets;

 

●availability of banking and payment services to support digital asset-related projects;

 

●level of interest rates and inflation;

 

●national and international economic and political conditions;

 

●global digital asset supply;

 

●changes in the software, software requirements or hardware requirements underlying a blockchain network;

 

●competition for and among various digital assets; and

 

●actual or perceived manipulation of the markets for digital assets.

 

Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Volatility Risk

 

As Valour’s ETPs track the market price of digital assets, cryptocurrencies and DeFi protocol tokens, the value of the Common Shares relates partially to the value of such digital assets, cryptocurrencies and DeFi protocol tokens, and fluctuations in the price of cryptocurrencies, DeFi protocol tokens and other digital assets could materially and adversely affect an investment in the Common Shares. Several factors may affect the price of cryptocurrencies, DeFi protocol tokens and other digital assets, including: the total number of cryptocurrencies, DeFi protocol tokens and other digital assets in existence; global cryptocurrency, DeFi protocol tokens and other digital assets demand; global cryptocurrencies, DeFi protocol tokens and other digital assets supply; investors’ expectations with respect to the rate of inflation of fiat currencies; investors’ expectations with respect to the rate of deflation of cryptocurrencies, DeFi protocol tokens and other digital assets; interest rates; currency exchange rates, including the rates at which cryptocurrencies, DeFi protocol tokens and other digital assets may be exchanged for fiat currencies; fiat currency withdrawal and deposit policies of cryptocurrency exchanges and liquidity of such cryptocurrency exchanges; interruptions in service from or failures of major cryptocurrency exchanges; Cyber theft of cryptocurrencies, DeFi protocol tokens and other digital assets from online wallet providers, or other third parties holding digital assets, or news of such theft from such providers or from individuals’ wallets; investment and trading activities of large investors; monetary policies of governments, trade restrictions, currency devaluations and revaluations; regulatory measures, if any, that restrict the use of cryptocurrencies, DeFi protocol tokens and other digital assets as a form of payment or the purchase of cryptocurrencies, DeFi protocol tokens and other digital assets; the availability and popularity of businesses that provide cryptocurrencies, DeFi protocol tokens and other digital assets and blockchain-related services; the maintenance and development of the open-source software protocol of various cryptocurrency or DeFi protocol networks; increased competition from other forms of cryptocurrency or payments services; global or regional political, economic or financial events and situations; expectations among cryptocurrencies, DeFi protocol tokens and other digital assets economy participants that the value of cryptocurrencies, DeFi protocol tokens and other digital assets will soon change; and fees associated with processing a cryptocurrency, DeFi protocol token or other digital asset transaction.

 

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Cryptocurrencies, DeFi protocol tokens and other digital assets have historically experienced significant intraday and long-term price volatility. If cryptocurrency, DeFi protocol token and other digital asset markets continue to be subject to sharp fluctuations, shareholders may experience losses if they need to sell their Common Shares at a time when the price of cryptocurrencies, DeFi protocol tokens and other digital assets is lower than it was when they purchased their Common Shares. In addition, investors should be aware that there is no assurance that cryptocurrencies, DeFi protocol tokens and other digital assets will maintain their long term value in terms of future purchasing power or that the acceptance of cryptocurrencies, DeFi protocol tokens and other digital assets payments by mainstream retail merchants and commercial businesses will continue to grow.

 

Cybersecurity Threats, Security Breaches and Hacks

 

As with any other computer code, flaws in cryptocurrency and DeFi protocol source code have been exposed by certain malicious actors. Several errors and defects have been found and corrected, including those that disabled some functionality for users and exposed users’ information. Discovery of flaws in or exploitations of the source code that allow malicious actors to take or create cryptocurrencies and / or DeFi protocol tokens can occur.

 

Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin and other cryptocurrency exchange market since the launch of the Bitcoin Network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm the Company’s business operations or result in loss of the Company’s assets. Any breach of the Company’s infrastructure could result in damage to the Company’s reputation and reduce demand for the Common Shares, resulting in a reduction in the price of the Common Shares. Furthermore, the Company believes that if its assets grow, it may become a more appealing target for security threats, such as hackers and malware.

 

Any security procedures implemented cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by the Company. The security procedures and operational infrastructure of the Company may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s crytocurrency account, private keys, data or cryptocurrencies. Additionally, outside parties may attempt to fraudulently induce employees of the Company to disclose sensitive information in order to gain access to the Company’s infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of one of the Company’s accounts occurs, the market perception of the effectiveness of the Company could be harmed.

 

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As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack

 

Cryptocurrency Exchanges and other Trading Venues are Relatively New

 

The Company and its affiliates manages its holdings of cryptocurrency, DeFi protocol tokens and other digital assets through cryptocurrency exchanges. In particular, Valour relies on cryptocurrency exchanges to be able to buy and sell the digital assets which its ETPs track. To the extent that cryptocurrency exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, this could result in a reduction in cryptocurrency prices. Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, derivatives and other currencies. For example, in the past, a number of cryptocurrency exchanges have been closed due to fraud, business failure or security breaches. In many of these instances, the customers of these exchanges were not compensated or made whole for the partial or complete losses of their account balances in such exchanges. While smaller exchanges are less likely to have the infrastructure and capitalization that provide larger exchanges with additional stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information, or gain access to private computer systems) and may be more likely to be targets of regulatory enforcement action.

 

Regulatory Risks

 

As digital assets have grown in both popularity and market size, governments around the world have reacted differently to digital assets with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company.

 

Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation.

 

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The Company has not received any exemptive relief from regulators in Canada. The Company discusses regulatory compliance with its external legal counsel on a regular basis. Investments in the ETPs in the light of their exposure to digital assets must always be assessed by every investor based on the circumstances and legal and regulatory conditions applicable to that investor. An investor governed by such conditions may be subject to limited possibilities to invest in the ETPs and/or experience unforeseeable consequences of a holding in the ETPs. The combination of the nature of Valour’s activities, the markets to which it is exposed, the institutions with which it does business and the securities which it issues makes it particularly exposed to national, international and supranational regulatory action and taxation changes. The scope and requirements of regulation and taxation applicable to the issuer continues to change and evolve and there is a risk that as a result it may prove more difficult or impossible, or more expensive, for Valour to continue to carry on their functions in the manner currently contemplated. This may require that changes are made in the future to the agreements applicable to Valour and may result in changes to the commercial terms of the ETPs and/or the inability to apply for and redeem ETPs and/or compulsory redemption of some or all of the ETPs and/or disruption to the pricing thereof.

 

Valour Cayman and VDSL are companies which are regulated by various laws and regulations of the Cayman Islands and Jersey, respectively. Valour Cayman and VDSL cannot fully anticipate all changes that in the future may be made to laws and regulations to which Valour Cayman and VDSL are subject to in the future, nor the possible impact of all such changes. Valour Cayman and VDSL’s ability to conduct its business is dependent on the ability to comply with rules and regulations.

 

If the Company was found to be in breach of regulations applicable to Valour Cayman or VDSL, it could result in fines or adverse publicity which could have a material adverse effect on the business which in turn may lead to decreased results of operations and the company’s financial condition.

 

Valour Cayman or VDSL’s involvement in such proceedings or settlements as well as potential new legislation or regulations, decisions by public authorities or changes regarding the application of or interpretation of existing legislation, regulations or decisions by public authorities applicable to Valour Cayman or VDSL’s operations, the ETPs and/or the underlying assets, may adversely affect Valour Cayman or VDSL’s business or an investment in the ETPs.

 

The impact of any detrimental developments in the underlying digital asset’s regulation on Valour Cayman and VDSL’s ETPs becomes evident by considering an ETP’s product nature: An Exchange Traded Product is a financial instrument traded – like a share - on a stock exchange whereby typically the aim is to provide the same return as a specified benchmark or asset (before fees). Although ETPs can take a number of forms (ETFs/ETCs/ETNs), they share some common characteristics. ETPs are designed to replicate the return of an underlying benchmark or asset, with the easy access and tradability of a share or digital asset (that otherwise may only be bought via a decentralized exchange wallet-setup). Investors can benefit from the broad diversification of a benchmark, gaining exposure to hundreds or thousands of individual underlying securities – or digital assets - in a single transaction. Additionally, the wide range of asset classes covered by ETPs opens up more exotic investment areas which historically could only be accessed by institutional investors (such as individual commodities, emerging markets or digital assets). ETPs generally do all this with a lower fee than actively managed funds and therefore compete with traditional index funds on cost.

 

Valour Cayman’s ETPs are non-interest-bearing debt securities that are designed to track the return of an underlying digital asset. The current Valour ETP program in place does not provide that those securities are collateralised. Although their yield references an underlying benchmark or asset, the ETPs are similar to unsecured, listed bonds. As such, Valour ETPs are entirely reliant on the creditworthiness of Valour as issuing entity. Hence, generally a change in that creditworthiness might negatively impact the value of the ETP, irrespective of the performance of the underlying benchmark or digital asset.

 

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However, the primary appeal of these types of ETPs is that they guarantee exposure to a benchmark or an asset’s return (minus fees) even when the underlying markets or sectors suffer from liquidity shortages. The return is guaranteed by the issuing entity and not reliant on the access (direct or via a directive) to the underlying assets. Unlike physical replication, a synthetic ETP does not hold the underlying assets the product is designed to track. Instead, an ETP issuer like Valour enters into hedging transactions thereby directly or indirectly trading in the underlying assets, entering swap agreements, making investment in funds dedicated to holding the underlying digital assets etc. with a range of counterparties to provide the return of the underlying assets. Consequently, a negative change of regulation (tightening/restriction/prohibition) can have a direct impact on Valour’s issuer activity or – indirectly – by affecting its contractual counterparties. Restrictive and prohibitive regulation may lead to counterparty default, known as counterparty risk. If a counterparty defaults on its obligations under the hedging transactions described above, the ETP would not provide the return of the asset it is designed to track which could also expose investors to losses.

 

Canada

 

In Canada, the Canadian Securities Administrators (the “CSA”), the umbrella group for the provincial and territorial securities regulators, have generally taken the position that securities laws apply to cryptocurrencies. The CSA, beginning in 2017, has published a series of Staff Notices outlining their position and explaining how securities laws apply to various aspects of the cryptocurrency industry. Many of those Staff Notices have dealt with cryptocurrency trading platforms and other businesses that hold cryptocurrencies on behalf of clients, which the Company does not do as part of its business.

 

The CSA has also, however, published Staff Notices focused on the analysis of when a cryptocurrency constitutes a security for securities law purposes. On August 24, 2017 and June 11, 2018, the CSA published CSA Staff Notice 46-307 – Cryptocurrency Offerings and CSA Staff Notice 46- 308 – Securities Law Implications for Offerings of Tokens, respectively, each providing guidance on whether token offerings are subject to Canadian securities laws. While the Company does not create or sell digital assets of its own issue, through its Valour Venture and Valour Infrastructure business lines it holds a number of digital assets from a variety of issuers. In the event that any of these were determined to be securities, it could negatively impact the issuers of those digital assets by making trading subject to prospectus requirements, which could reduce the market price of such assets and therefore devalue the holdings of the Company.

 

While the Company does not have operations in the United States, the Company reviews development of the cryptocurrency regulatory environment in the United States on an ongoing basis due to the proximity of United States to Canada. In comparison to traditional securities or commodities markets, U.S. law and regulation remains thinly developed with respect to financial services provided to the cryptocurrency and digital asset markets. Although recent years have seen some guidance emerge with respect to the question of whether a digital asset constitutes a security for certain purposes under U.S. law, there remains little or no clear legal authority or established practice with respect to the application to digital assets of concepts like staking and lending of cryptocurrency, fungibility, settlement, trade execution and reporting, collateralization rehypothecation, custody, repo, margin, restricted securities, short sales, bankruptcy and insolvency and many others. Some or all of these concepts may be needed for crypto-related marketplaces to continue to grow, mature and attract institutional participants; there can be no assurances that rules and practices for such concepts will develop in the United States in a manner that is timely, clear, favorable to the Company or compatible with other jurisdictions’ regimes in which the Company operates. Furthermore, to the extent the Company offers any of these financial services, emerging regulation or enforcement activity may have a material impact on the Company’s ability to continue providing such service thereby affecting the Company’s revenues and profitability as well as its reputation and resources.

 

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Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. By extension, similar actions by other governments may result in the restriction of the acquisition, ownership, holding, selling, use or trading in the common shares of the Company’s common shares. Such a restriction could result in the Company liquidating its cryptocurrency investments at unfavorable prices and may adversely affect the Company’s shareholders.

 

U.S. Classification of digital Assets and Investment Company Act of 1940

 

The SEC and its staff have taken the position that certain digital assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given digital asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular digital asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ether are securities (in their current form). Bitcoin and Ether are the only digital assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital asset. With respect to all other digital assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular digital asset could be deemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given digital asset is a security in April 2019, this framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.

 

Several foreign jurisdictions have taken a broad-based approach to classifying digital assets as “securities,” while other foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach. As a result, certain digital assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of digital assets as “securities.” The classification of a digital asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets.

 

Additionally, we do not currently intend to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). If certain digital assets that form a part of our ETPs are determined to be digital assets, we may be obligated to register as an investment company under the Investment Company Act, and we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

 

limitations on capital structure;

 

restrictions on specified investments;

 

prohibitions on transactions with affiliates; and

 

compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

 

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Further, the classification of certain digital assets as securities could draw negative publicity and a decline in the general acceptance of the digital asset, which could have a negative effect on our ETPs that contain such digital assets.

 

Venture Portfolio Exposure

 

Given the nature of the Company’s Venture activities, the results of operations and financial condition of the Company are dependent upon the market value of the securities, tokens and cryptocurrencies that comprise Venture’s portfolio assets. Market value can be reflective of the actual or anticipated operating results of companies or projects in the portfolio and/or the general market conditions that affect the technology, crypto and DeFi sectors. Various factors affecting these sectors could have a negative impact on the Company’s portfolio of investments and thereby have an adverse effect on its business. Additionally, the Company’s investments are mostly in early stage ventures that may never mature or generate adequate returns or may require a number of years to do so. Junior companies may never achieve commercial success. This may create an irregular pattern in the Company’s investment gains and revenues (if any) and an investment in the Company’s securities may only be suitable for investors who are prepared to hold their investment for a long period of time. Macro factors such as commodity prices, the growth and decline of disruptive technologies, including DeFi technologies, and global political and economic conditions could have an adverse effect on the mining, technological and Defi sectors, thereby negatively affecting the Company’s portfolio of investments. Company and project-specific risks, such as the risks associated with emerging companies and project in the technology, crypto and DeFi sectors generally, could have an adverse effect on one or more of the investments in the portfolio at any point in time. Company, project and industry-specific risks that materially adversely affect the Company’s investment portfolio may have a materially adverse impact on operating results.

 

Banks May Cut off Banking Services to Businesses that Provide Cryptocurrency-related Services

 

A number of companies that provide cryptocurrency-related services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, a number of such companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to cryptocurrency related companies or companies that accept cryptocurrencies for a number of reasons, such as perceived compliance risks or costs. The difficulty that many businesses that provide cryptocurrency-related services have and may continue to have in finding banks willing to provide them with bank accounts and other banking services may be currently decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies or could decrease its usefulness and harm its public perception in the future. Similarly, the usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks were to close the accounts of many or of a few key businesses providing cryptocurrency-related services. This could decrease the market prices of cryptocurrencies and adversely affect the value of the Company’s cryptocurrency inventory.

 

Impact of Geopolitical Events

 

Crises may motivate large-scale purchases of cryptocurrencies which could increase the price of cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of the Company’s cryptocurrency holdings. The possibility of large-scale purchases of cryptocurrencies in times of crisis may have a short-term positive impact on the prices of same. Future geopolitical crises may erode investors’ confidence in the stability of cryptocurrencies and may impair their price performance which would, in turn, adversely affect the Company’s cryptocurrency holdings.

 

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As an alternative to fiat currencies that are backed by central governments, cryptocurrencies are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally. Large-scale sales of cryptocurrencies would result in a reduction in their market prices and adversely affect the Company’s operations and profitability.

 

Further Development and Acceptance of Digital Assets and DeFi Networks

 

The further development and acceptance of digital assets and other cryptographic and algorithmic protocols governing the issuance of transactions in cryptocurrencies and DeFi Protocols, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of such networks may adversely affect the value of the corresponding cryptocurrencies and DeFi Protocol tokens, and thus may adversely affect the Company’s operations. The factors affecting the further development of the industry, include, but are not limited to the following:

 

continued worldwide growth in the adoption and use of cryptocurrencies and DeFi;

 

governmental and quasi-governmental regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency and DeFi systems;

 

changes in consumer demographics and public tastes and preferences;

 

the maintenance and development of the open-source software protocol of relevant networks;

 

the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

general economic conditions and the regulatory environment relating to digital assets and decentralized finance; and

 

negative consumer sentiment and perception of cryptocurrencies.

 

Currently, there is relatively small use of digital assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect the Company’s operations, investment strategies, and profitability.

 

As relatively new products and technologies, cryptocurrencies have not been widely adopted, for example as a means of payment for goods and services, by major retail and commercial outlets. Conversely, a significant portion of digital asset demand is generated by speculators and investors seeking to profit from the short-term or long-term holding of digital assets. The relative lack of acceptance of digital assets in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services or other direct use cases that may arise. A lack of expansion by cryptocurrencies into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in their market prices, either of which could adversely impact the Company’s operations, investment strategies, and profitability. Further, if fees increase for recording transactions in the applicable Blockchain, demand for cryptocurrencies may be reduced and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the price of cryptocurrencies.

 

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Trade Errors

 

We may make, or otherwise be subject to, trade errors. Errors may occur with respect to trades executed on our behalf. Trade errors can result from a variety of situations, including, for example, when the wrong investment is purchased or sold or when the wrong quantity is purchased or sold. Trade errors frequently result in losses, which could be material. To the extent that an error is caused by a third party, we may seek to recover any losses associated with the error, although there may be contractual limitations on any third party’s liability with respect to such error.

 

Dependence on Investment Manager.

 

The success of the Company’s Equity Investments in Digital Assets is dependent upon the ability of the investment manager to manage the investment fund and effectively implement the investment fund’s investment program. The investment fund’s governing documents do not permit the Company participate in the management and affairs of the investment fund.

 

Discretion as to Distributions and Timing of Withdrawal

 

The investment manager of the Company’s Equity Investment in Digital Assets is not obligated to distribute digital assets in-kind nor to distribute the proceeds form the sale of any digital assets. The Company is permitted to make withdrawals, however, the ability to make withdrawals may be limited while the investment manager is actively engaged in investment strategies or for other purposes. The Company is required to be provide a significant advance notice in respect of any withdrawal and accordingly its ability to withdraw in a timely manner is limited.

 

Discretion as to Form of Payment.

 

The investment manager of the Company’s Equity Investments in Digital Assets has the discretion to make distribution and pay withdrawals in unlocked digital assets, cash or a combination. There can be no assurance as to (i) the form of distribution or payment, (ii) that the investment fund will have sufficient cash or unlocked digital assets to satisfy withdrawal requests, or that it will be able to liquidate investments at favorable prices at the time such withdrawals are requested. The Company has no right to request in-kind distributions, and should not expect the investment fund to accommodate any such request.

 

Conditions on Equity Investments in Digital Assets

 

The digital assets held by the Equity Investments in Digital Assets are subject to staggered lock up periods pursuant to which the digital assets are not freely tradeable. As a result, the Company may only request to withdraw the portion of it capital account balance that corresponds to its pro-rata share of the applicable digital assets that is no longer locked-up and freely transferable by the investment fund.

 

Development and Acceptance of the Digital Asset Networks

 

The growth and use of digital assets generally is subject to a high degree of uncertainty. The future of the industry likely depends on several factors, including, but not limited to: (a) economic and regulatory conditions relating to both fiat currencies and digital assets; (b) government regulation of the use of and access to digital assets; (c) government regulation of digital asset service providers, administrators or exchanges; and (d) the domestic and global market demand for—and availability of—other forms of digital asset or payment methods. Any slowing or stopping of the development or acceptance of digital assets may adversely affect the Company.

 

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Digital Asset Audit Risk

 

Audits for entities holding digital assets are unlike audits for other types of entities. Special procedures must be taken to determine whether investments and transactions are properly accounted for and valued because independent confirmation of digital asset ownership (e.g., ownership of a balance on a digital asset exchange) differs dramatically from traditional confirmation with a securities broker or bank account. The Company requires satisfactory processes in place in order for the auditor to obtain the Company’s transaction history and properly prepare audited financials. Any breakdown in such processes may result in delays or other impediments of an audit. In addition, the complexity of digital assets generally may lead to difficulties in connection with the preparation of audited financials.

 

Risk of Total Loss of Equity Investment in Digital Assets.

 

While all investments risk the loss of capital, the equity investment in digital assets should be considered substantially more speculative and significantly more likely to result in a total loss of capital than most other investment funds. The investment manager will not attempt to mitigate the potential of loss of capital through the use of risk management techniques. Rather, the investment manager generally intends only to sell the digital assets when such sales are necessary in order to satisfy withdrawal requests. Furthermore, the investment manager does not intend to hedge potential losses and will not make investment decisions based on the price of the digital assets. Consequently, the equity investment in Digital Assets could result in the total loss of the Company’s capital.

 

Risk of Loss, Theft or Destruction of Cryptocurrencies

 

There is a risk that some or all of the Company’s cryptocurrencies could be lost, stolen or destroyed. Digital assets of Valour that are held internally via multi-signature cold storage may be prone to loss or theft as a result of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. If the Company’s cryptocurrencies are lost, stolen or destroyed under circumstances rendering a party liable to the Company, the responsible party may not have the financial resources sufficient to satisfy the Company’s claim.

 

Irrevocability of Transactions

 

Bitcoin and most other cryptocurrency and DeFi protocol token transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies or DeFi protocol tokens may be irretrievable. Such transactions are not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of cryptocurrencies or a theft of cryptocurrencies generally will not be reversible and the Company may not be capable of seeking compensation for any such transfer or theft. To the extent that the Company is unable to seek a corrective transaction with the third party or is incapable of identifying the third party that has received the Company’s cryptocurrencies through error or theft, the Company will be unable to revert or otherwise recover incorrectly transferred cryptocurrencies. The Company will also be unable to convert or recover cryptocurrencies transferred to uncontrolled accounts.

 

Potential Failure to Maintain Digital Asset Networks

 

Many digital asset networks, including the Bitcoin Network, operate based on an open-source protocol maintained by the core developers of such networks and other contributors. As such protocols are not sold and their uses do not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating such network protocols. Consequently, there is a lack of financial incentive for developers to maintain or develop such networks and the core developers may lack the resources to adequately address emerging issues with such network protocol. Although the many networks, including the Bitcoin Network, are currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. To the extent that material issues arise with such network protocol and the core developers and open source contributors are unable to address the issues adequately or in a timely manner, such networks and an investment in the Common Shares may be adversely affected.

 

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Potential Manipulation of Blockchain

 

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains control of more than 50% of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter or manipulate the Blockchain on which the Bitcoin Network and most Bitcoin transactions rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new Bitcoins or transactions using such control. The malicious actor could “double-spend” its own Bitcoins (i.e., spend the same Bitcoins in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the processing power on the Bitcoin Network or the Bitcoin community did not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible. To the extent that the Bitcoin ecosystem, including the core developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin Network will increase.

 

Miners May Cease Operations

 

If the award of Bitcoins or other cryptocurrencies for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners in relevant networks, miners may cease expending processing power to solve blocks and confirmations of transactions on the Bitcoin Blockchain or other networks could be slowed. A reduction in the processing power expended by miners on the applicable blockchain network could increase the likelihood of a malicious actor or botnet obtaining control.

 

Risks Related to Insurance

 

The Company intends to insure its operations in accordance with technology industry practice. However, given the novelty of cryptocurrency mining and associated businesses, such insurance may not be available, may be uneconomical for the Company, or the nature or level may be insufficient to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the Company.

 

Concentration of Investments

 

Other than as described herein, there are no restrictions on the proportion of the Company’s funds and no limit on the amount of funds that may be allocated to any particular investment. The Company may participate in a limited number of investments and, as a consequence, its financial results may be substantially adversely affected by the unfavorable performance of a single investment. Completion of one or more investments may result in a highly concentrated investment in a particular company, commodity or geographic area resulting in the performance of the Company depending significantly on the performance of such company, commodity or geographic area. As at December 31, 2024, the Company’s investments through its Venture business arm comprise of C$53,740,154, which represented approximately 4% of the Company’s total assets.

 

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Competition

 

The Company operates in a highly competitive industry and competes against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively.

 

The cryptoeconomy is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. The Company’s business line compete against several companies and expect that we will face even more competition in the future. These competitors could have various competitive advantages over us, including but not limited to:

 

●greater name recognition, longer operating histories, and larger market shares;

 

●larger sales and marketing budgets and organizations;

 

●more established marketing, banking, and compliance relationships;

 

●greater resources to make acquisitions;

 

●lower labor, compliance, risk mitigation, and research and development costs;

 

●operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and

 

●substantially greater financial, technical, and other resources.

 

If the Company is unable to compete successfully, or if competing successfully requires the Company to take costly actions in response to the actions of the Company’s competitors, the Company’s business, operating results, and financial condition could be adversely affected.

 

Harm to the Company’s brand and reputation could adversely affect the Company’s business. The Company’s reputation and brand may be adversely affected by complaints and negative publicity about the Company, even if factually incorrect or based on isolated incidents. Damage to the Company’s brand and reputation may be caused by:

 

●cybersecurity attacks, privacy or data security breaches, or other security incidents;

 

●complaints or negative publicity about the Company, its ETPs, its management team, its other employees or contractors or third-party service providers;

 

●actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by its management team, its other employees or contractors or third-party service providers;

 

●unfavorable media coverage;

 

●litigation involving, or regulatory actions or investigations into its business;

 

●a failure to comply with legal, tax and regulatory requirements;

 

●any perceived or actual weakness in its financial strength or liquidity;

 

●any regulatory action that results in changes to or prohibits certain lines of its business;

 

●a failure to operate our business in a way that is consistent with its values and mission;

 

●a sustained downturn in general economic conditions; and

 

●any of the foregoing with respect to its competitors, to the extent the resulting negative perception affects the public’s perception of the Company or its industry as a whole.

 

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Private Issuers and Illiquid Securities

 

Through its Ventures business line, the Company invests in securities and / or digital assets of private issuers or projects. These may be subject to trading restrictions, including hold periods, and there may not be any market for such securities or digital assets. These limitations may impair the Company’s ability to react quickly to market conditions or negotiate the most favourable terms for exiting such investments. Investments in private issuers or projects are subject to a relatively high degree of risk. There can be no assurance that a public market will develop for any of the Company’s private investments, or that the Company will otherwise be able to realize a return on such investments.

 

The value attributed to securities and / or digital assets of private issuers or projects will be the cost thereof, subject to adjustment in limited circumstances, and therefore may not reflect the amount for which they can actually be sold. Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a ready market had existed for the investments.

 

The Company may also invest in illiquid securities of public issuers. A considerable period of time may elapse between the time a decision is made to sell such securities and the time the Company is able to do so, and the value of such securities could decline during such period. Illiquid investments are subject to various risks, particularly the risk that the Company will be unable to realize its investment objectives by sale or other disposition at attractive prices or otherwise be unable to complete any exit strategy. In some cases, the Company may be prohibited by contract or by law from selling such securities for a period of time or otherwise be restricted from disposing of such securities. Furthermore, the types of investments made may require a substantial length of time to liquidate.

 

The Company may also make direct investments in publicly traded securities that have low trading volumes. Accordingly, it may be difficult to make trades in these securities without adversely affecting the price of such securities.

 

Cash Flow, Revenue and Liquidity

 

The Company’s revenue and cash flow is generated primarily from financing activities, proceeds from the disposition of investments, management fees of ETPs and staking and lending activities of cryptocurrencies and DeFi protocol tokens. The availability of these sources of income and the amounts generated from these sources depend upon various factors, many of which are outside of the Company’s direct control. The Company’s liquidity and operating results may be adversely affected if its access to the capital markets is hindered, whether as a result of a downturn in the market conditions generally or to matters specific to us, if the value of our investments decline, resulting in losses upon disposition, if there is low demand for our ETPs, resulting in lack of management fees received, and if rates provided by counterparties for staking and lending decrease.

 

Risk Management

 

The Company seeks to mitigate risk and have established policies for the types of risk to which the Company is subject, including operational risk, credit risk, market risk, counterparty risk, exchange risk and liquidity risk. However, there are inherent limitations to our current and future risk management strategies, including risks that management has not appropriately anticipated or identified. Accurate and timely enterprise-wide risk information is necessary to enhance management’s decision- making in times of crisis. If the Company’s risk management framework proves ineffective or if our enterprise-wide management information is incomplete or inaccurate, we could suffer unexpected losses, which could materially adversely affect our business, results of operations and financial condition. The Company continually assesses its risk profile and risk management processes across the firm to identify opportunities for improvement and to consider whether it needs to address new technologies and innovations in its risk management processes and policies. While the Company has not identified any material gaps with respect to recent digital asset market events, the Company cannot guarantee that our risk management processes will continue to be effective in preventing or mitigating losses from future market events.

 

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Dependence on Management Personnel

 

The Company is dependent upon the efforts, skill and business contacts of key members of management, the Board and the Advisory Board, for among other things, the information and deal flow they generate during the normal course of their activities and the synergies that exist amongst their various fields of expertise and knowledge. Accordingly, the Company’s success may depend upon the continued service of these individuals who are not obligated to remain consultants to the Company. The loss of the services of any of these individuals could have a material adverse effect on the Company’s revenues, net income and cash flows and could harm its ability to maintain or grow existing assets and raise additional funds in the future.

 

Sensitivity to Macro-Economic Conditions

 

Due to the Company’s focus on decentralized finance industry, the success of the Company’s investments is interconnected to the growth of disruptive technologies. The Company may be adversely affected by the falling share prices of the securities of investee companies, cryptocurrencies, DeFi Protocol tokens and other digital assets, as the trading price for the Common Shares may reflect the estimated aggregate value of the Company’s portfolio of investments and assets under management. The factors affecting current macro-economic conditions are beyond the control of the Company.

 

Available Opportunities and Competition for Investments

 

The success of the Company’s Ventures line of business will depend upon: (i) the availability of appropriate investment opportunities; (ii) the Company’s ability to identify, select, acquire, grow and exit those investments; and (iii) the Company’s ability to generate funds for future investments. The Company can expect to encounter competition from other entities having similar investment objectives, including institutional investors and strategic investors. These groups may compete for the same investments as the Company, may be better capitalized, have more personnel, have a longer operating history and have different return targets. As a result, the Company may not be able to compete successfully for investments. In addition, competition for investments may lead to the price of such investments increasing which may further limit the Company’s ability to generate desired returns. There can be no assurance that there will be a sufficient number of suitable investment opportunities available to invest in or that such investments can be made within a reasonable period of time. There can be no assurance that the Company will be able to identify suitable investment opportunities, acquire them at a reasonable cost or achieve an appropriate rate of return. Identifying attractive opportunities is difficult, highly competitive and involves a high degree of uncertainty. Potential returns from investments will be diminished to the extent that the Company is unable to find and make a sufficient number of attractive investments.

 

Share Prices of Investments

 

Investments in securities of public companies are subject to volatility in the share prices of the companies. There can be no assurance that an active trading market for any of the subject shares is sustainable. The trading prices of the subject shares could be subject to wide fluctuations in response to various factors beyond the Company’s control, including quarterly variations in the subject companies’ results of operations, changes in earnings, results of exploration and development activities, estimates by analysts, conditions in the mining, technological and cryptocurrency industries and general market or economic conditions. In recent years equity markets have experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on market prices, often unrelated to the operating performance of the specific companies. Such market fluctuations could adversely affect the market price of the Company’s investments.

 

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Additional Financing Requirements

 

The Company anticipates ongoing requirements for funds to support its growth and may seek to obtain additional funds for these purposes through public or private equity, or debt financing. There are no assurances that additional funding will be available on acceptable terms, at an acceptable level or at all. Any additional equity financing may cause shareholders to experience dilution, and any debt financing would result in interest expense and possible restrictions on the Company’s operations or ability to incur additional debt. Any limitations on the Company’s ability to access the capital markets for additional funds could have a material adverse effect on its ability to grow its investment portfolio.

 

No Guaranteed Return

 

There is no guarantee that an investment in the Company’s securities will earn any positive return in the short term or long term. The task of identifying investment opportunities, monitoring such investments and realizing a significant return is difficult. Many organizations operated by persons of competence and integrity have been unable to make, manage and realize a return on such investments. In addition, past performance provides no assurance of future success.

 

Failure to Develop and Execute Successful Investment or Trading Strategies

 

The success of the Company’s investment and trading activities, including though DeFi Alpha, will depend on the ability of the investment team to identify overvalued and undervalued investment opportunities and to exploit price discrepancies. This process involves a high degree of uncertainty. No assurance can be given that the Company will be able to identify suitable or profitable investment opportunities in which to deploy our capital. The success of the trading activities also depends on the Company’s ability to remain competitive with other DeFi providers. Competition in trading is based on price, offerings, level of service, technology, relationships and market intelligence. The success of investment activities depends on the Company’s ability to source deals and obtain favorable terms. The barrier to entry in each of these businesses is very low and competitors can easily and will likely provide similar services in the near future. The success of the Company’s Venture investments and trading business could suffer if the Company is not able to remain competitive.

 

Management of the Company’s Growth

 

Significant growth in the business, as a result of acquisitions or otherwise, could place a strain on the Company’s managerial, operational and financial resources and information systems. Future operating results will depend on the ability of senior management to manage rapidly changing business conditions, and to implement and improve the Company’s technical, administrative and financial controls and reporting systems. No assurance can be given that the Company will succeed in these efforts. The failure to effectively manage and improve these systems could increase costs, which could have a materially adverse effect on the Company’s operating results and overall performance.

 

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Social, Political, Environmental and Economic Risks in the Countries in which the Company’s Investments are Located

 

The Company’s investments are affected in varying degrees by the political and social stability, environmental and economic conditions in the countries in which its investments are located. Such investments may also be affected in varying degrees by terrorism, military conflict or repression, crime, populism, activism, labour unrest, renegotiation, nullification or failure to renew or grant existing concessions, licences permits and contracts, unstable or unreliable legal systems, changes in fiscal regimes including taxation, and other risks arising out of sovereignty issues.

 

Due Diligence

 

The due diligence process undertaken by the Company in connection with investment opportunities may not reveal all facts that may be relevant in connection with the investments. Before making investments, the Company conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, the Company may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, the Company relies on resources available including information provided by the target of the investment and, in some circumstances, third-party investigations. The due diligence process that is carried out with respect to investment opportunities may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful.

 

Exchange Rate Fluctuations

 

A significant portion of the Company’s cryptocurrency, DeFi protocol tokens and digital asset holdings could be invested in United States dollar denominated investments or other foreign currencies. Changes in the value of the foreign currencies in which the Company’s investments are denominated could have a negative impact on the ultimate return on its investments and overall financial performance.

 

Non-controlling Interests

 

The Company’s investments include debt instruments and equity securities of companies that it does not control. Such instruments and securities may be acquired through trading activities or through purchases of securities directly from the issuer. These investments are subject to the risk that the company in which the investment is made may make business, financial or management decisions with which the Company does not agree or that the majority stakeholders or the management of the investee company may take risks or otherwise act in a manner that does not serve the Company’s interests. If any of the foregoing was to occur, the value of the Company’s investments could decrease and its financial condition, results of operations and cash flow could suffer as a result.

 

Changes in Legislation and Regulatory Risk

 

There can be no assurance that laws applicable to the Company or the businesses in which the Company invests, including securities legislation, will not be changed in a manner which adversely affects the Company. If such laws change, such changes could have a negative effect upon the value of the Company and upon investment opportunities available to the Company.

 

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Risks Relating to the Business and Financial Condition of the Company

 

Limited Operating History as a DeFi Company

 

The Company announced its focus in the DeFi industry on January 19, 2021. The Company’s limited operating history and the lack of meaningful historical financial data makes it difficult to fully evaluate the Company’s prospects. To the extent that the Company is able to execute its business plan, its business will be subject to all of the problems that typically affect a business with a limited operating history, such as unanticipated expenses, capital shortfalls, delays in program development and possible cost overruns. Investment in the securities of the Company is highly speculative given the nature of the Company’s business.

 

The Company’s success will depend on many factors, including some which may be beyond its control or which cannot be accounted for at this time, such as the market’s acceptance of the products of its investee companies, the emergence of potential competitors, and changes in economic conditions. For the reasons discussed in this section and elsewhere in this MD&A, it is possible that the Company may not generate revenues or profits in the foreseeable future or at all.

 

No History of Operating Revenue and Cash Flow

 

The Company is dependent on financings and future cash flows to meet its obligations. The future performance of the business and the ability of the Company’s subsidiaries to provide the Company with payments may be constrained by factors such as, among others: success of the Company’s corporate strategy, economic downturns; technological and regulatory changes; the cash flows generated by operations, investment activities and financing activities; and the level of taxation, particularly corporate profits and withholding taxes. If the Company is unable to generate sufficient cash from operations, the Company may be required to incur indebtedness, raise funds in a public or private equity or debt offering, or sell some or all of its assets. There can be no assurance that any such financing will be available on satisfactory terms or that it will be sufficient.

 

The Company may be subject to limitations on the repatriation of earnings in each of the countries where the Company, including its investee companies, do business. In particular, there may be significant withholding taxes applicable to the repatriation of funds from foreign countries to Canada. There can be no assurance that changes in regulations, including tax treaties, in and among the relevant countries where the Company or its investee companies do business will not take place, and if such changes occur, they may adversely impact the Company’s ability to receive sufficient cash payments from its subsidiaries.

 

Insufficient Cash Flow and Funds in Reserve

 

The Company’s cash flow and funds in reserve may not be sufficient to fund its ongoing activities at all times and from time to time and it may require additional financing in order to carry out its activities. In addition, the Company may incur major unanticipated liabilities or expenses. Although the Company has been successful in the past in financing its activities, there can be no assurance that the Company will be able to obtain additional financing on commercially acceptable terms. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of Company. There is risk that if the economy and banking industry experienced unexpected and/or prolonged deterioration, the Company’s access to additional financing may be affected. This may be further complicated by the limited market liquidity for shares of smaller companies such as the Company, restricting access to some institutional investors. Due to uncertainty in the capital markets, the Company may from time to time have restricted access to capital and increased borrowing costs. To the extent that external sources of capital become limited, unavailable, or available on onerous terms, the Company’s ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition, results of operations and prospects may be affected materially and adversely as a result.

 

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The Company, along with all other companies, may face reduced cash flow and restricted access to capital if the global economic situation deteriorates. A prolonged period of adverse market conditions may impede the Company’s ability to grow and complete additional acquisitions, if desired. In addition, a prolonged period of adverse market conditions may impede the Company’s ability to service any of its loans or arrange alternative financing when the existing loans become due. In each case, the Company’s business, financial condition, results of operations and prospects would be adversely affected.

 

Material Weakness in the Company’s Financial Statements

 

We identified a material weakness in our internal control over financial reporting and restated our financial statements for the three-month periods ended June 30, 2023, and September 30, 2023 as a result of factors related to that weakness. This may adversely affect the accuracy and reliability of our financial statements and, if we fail to maintain effective internal financial control reporting (“ICFR”) it could impact our reputation, business and the price of the Common Shares, as well as lead to a loss of investor confidence in us.

 

There can be no assurance that we will be able to successfully remediate the identified material weakness, or that we will not identify additional control deficiencies or material weaknesses in the future. If we are unable to successfully remediate our existing or any future material weaknesses in our ICFR, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities laws and CBOE listing requirements regarding the timely filing of periodic reports, investors may lose confidence in our financial reporting and the price of our stock may decline.

 

We continue to execute our plan to remediate the material weakness identified. The remediation measures are ongoing, and although not all inclusive, include implementing additional policies, procedures, and controls. We are working to remediate our material weakness as efficiently and effectively as possible. At this time, we cannot provide an estimate of the timing for achieving full remediation or the costs expected to be incurred in connection with implementing this remediation plan; however, these remediation measures will be time consuming, could result in us incurring significant costs, and could place significant demands on our financial and operational resources. We cannot assure you that the measures undertaken to remediate the material weakness will be sufficient or that they will prevent future material weaknesses. Additional material weaknesses or failure to maintain effective internal control over financial reporting could cause us to fail to meet our reporting obligations as a public company and may result in a restatement of our financial statements for prior periods.

 

The preparation of financial statements and related disclosures in conformity with IFRS requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory or auditor views differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our needing to revise or restate prior period financial statements, cause damage to our reputation and the price of our common shares, and adversely affect our business, financial condition and results of operations.

 

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Risks related to the Expense and Impact of Restatement of the Company’s Historical Financial Statements

 

The Company will need to restate certain historical financial statements to reflect a correction to its accounting for its digital assets. Specifically, the Company had previously valued its position in Equity Investments in Digital Assets subject to an extended lock-up period based on market price; however, in connection with the preparation of its financial statements for the year ended December 31, 2024, the Company’s auditors concluded that the valuation of the position should use a discounted valuation reflecting the lock-up. For more information, see “Restatement of Previously Issued Condense Interim Consolidated Financial Statements” in the Company’s Annual Management’s Discussion and Analysis for the year ended December 31, 2024.

 

It is difficult to predict all of the ramifications to the Company from the restatement. The restatement process is time and resource-intensive and involved substantial attention from management and significant costs and expenses, including for professional advisors assisting with the restatement. It is possible that the Company will receive inquiries from the Canadian securities regulators, and/or Cboe Canada regarding the restated financial statements or related matters, which could consume a significant amount of resources. Moreover, many companies that have been required to restate their historical financial statements have experienced volatility in stock prices and declines in stock prices and shareholder lawsuits, which can be expensive to defend and divert Management attention and resources. The Company may suffer similar consequences as a result of the restatement.

 

Lack of Comprehensive Accounting Guidance for Digital Assets under IFRS Accounting Standards

 

The holding of digital assets in Canada is an emerging industry with unique technological aspects, a number of novel auditing challenges have arisen. Audit firms, standard setters, and regulatory bodies continue to explore these challenges and potential solutions. Because there has been limited precedent set and a lack of specific accounting guidance for cryptocurrencies under certain applicable accounting standards, including, among other things, revenue recognition, it is unclear if DeFi companies (in particular, companies like the Company that utilize IFRS Accounting Standards) may be required to account for cryptocurrency operations, transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards, or interpretations thereof by the Canadian Securities Administrators, particularly as they relate to the Company and the financial accounting of its DeFi-related operations, could result in changes in the Company’s accounting policies. Further, unlike in the case of U.S. generally accepted accounting principles where the Financial Accounting Standards Board has recently issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain crypto assets, no similar guidance has yet been issued in respect of IFRS Accounting Standards. In addition, the accounting policies of many Bitcoin mining companies are being subjected to heightened scrutiny by regulators and the public.

 

It is possible that, as a result of the determinations by applicable securities regulators as to the application of the relevant IFRS Accounting Standards, the Company could be obligated in the future to restate historical financial statements. In connection with any such restatement the market price of the Common Shares could be adversely affected, and the Company could become subject to private litigation or to investigations or enforcement actions by the Ontario Securities Commission or other regulatory authorities, all of which could require the Company’s expenditure of additional financial and management resources. Furthermore, continued uncertainty with regard to financial accounting matters, particularly as they relate to the Company, the financial accounting of its DeFi-related operations, could negatively impact the Company’s business, prospects, financial condition and results of operations and its ability to raise capital on terms acceptable to the Company or at all.

 

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Conflicts of Interest may Arise

 

Certain current or future directors and officers of the Company and its subsidiaries may be shareholders, directors and officers of other companies that may operate in the same sectors as the Company. Such associations may give rise to conflicts of interest from time to time. The directors and officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in such conflict is required under the applicable corporate laws to disclose his or her interest and to abstain from voting on such matter.

 

Hedging Risk

 

Except as described in the Base Prospectus and the VDSL Base Prospectus We are not obligated to, and often times may not, hedge our exposures. However, from time to time, we may use a variety of financial instruments and derivatives, such as options, swaps, and forward contracts, for risk management purposes, including to: protect against possible changes in the market value of our investment or trading assets resulting from fluctuations in cryptocurrency markets or securities markets and changes in interest rates; protect our unrealized gains in the value of our investments or trading assets; facilitate the sale of any such assets; enhance or preserve returns, spreads or gains on any trade or investment; hedge the interest-rate or currency-exchange risk on any of our liabilities or assets; protect against any increase in the price of any assets that we anticipate purchasing at a later date; or to any other end that we deem appropriate. The success of any hedging activities by us will depend, in part, on our ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the assets being hedged. Since the characteristics of many assets change as markets change or time passes, the success of our hedging strategy will also be subject to our ability to continually recalculate, readjust and execute hedges in an efficient and timely manner. In addition, while we may enter into hedging transactions to seek to reduce risk, such transactions may actually increase risk or result in a poorer overall performance for us than if we had not engaged in such hedging transactions.

 

With respect to Valour, Valour’s hedging programs will not fully eliminate the market and other risks related to its ETPs, and the hedging programs themselves expose Vaour to additional risks. Valour’s hedging programs are not designed to completely offset all risks associated with the various exposures embedded in the ETPs. The profit (loss) on the hedge instruments employed may not completely offset the underlying losses (gains) related to its ETPs for many potential reasons including

 

a portion of the yield on any ETP may not hedged;

 

hedging instruments may have differing liquidity attributes as compared to the liquidity requirements of the ETPs;

 

hedging instruments introduce additional risks to Valour, including counterparty risk;

 

performance of the underlying funds hedged may differ from the performance of the corresponding hedge instruments; and

 

not all other risks are hedged.

 

Valour’s hedging programs may employ various types of instruments including, but not long and short direct and indirect positions on underlying assets, swaps, options, forwards and futures. Improper use of these instruments could have an adverse impact on earnings.

 

72

 

Risks Relating to the Common Shares

 

Market Price of Common Shares may Experience Volatility

 

The market price of the Common Shares has been volatile in the past and may continue to be volatile. The market price is, and could be, subject to wide fluctuations due to a number of factors, including actual or anticipated fluctuations in the Company’s results of operations, changes in estimates of its future results of operations by management or securities analysts, market rumours, investments or divestments by the Company or its competitors and general industry changes.

 

Many of the factors that could affect the market price of the Common Shares are outside of the Company’s control. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of the Common Shares. The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of the Common Shares.

 

Shareholders’ Interest in the Company may be Diluted in the Future

 

If the Company raises additional funding by issuing additional equity securities, or securities convertible into equity, such financing may substantially dilute the interests of shareholders.

 

The Company has Never Paid Dividends and may not do so in the Foreseeable Future

 

The Company has never paid cash dividends on its Common Shares. Currently, the Company intends to retain its future earnings, if any, to fund the development and growth of its business, and does not anticipate paying any cash dividends on its Common Shares in the near future. As a result, shareholders will have to rely on capital appreciation, if any, to earn a return on investment in any Common Shares in the foreseeable future. See “Dividends”.

 

73

 

Multilateral Instrument 52-109 Disclosure

 

In accordance with National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, management is responsible for the establishment and maintenance of DC&P and ICFR. The Company’s management, including the CEO and CFO, has designed the DC&P and ICFR based on the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO 2013 Framework”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.

 

Regardless of how well the DC&P and ICFR are designed, internal controls have inherent limitations and can only provide reasonable assurance that the controls are meeting the Corporation’s objectives in providing reliable financial reporting information in accordance with IFRS. These inherent limitations include, but are not limited to, human error and circumvention of controls and as such, there can be no assurance that the controls will prevent or detect all misstatements due to errors or fraud, if any.

 

The CEO and the CFO have concluded that the Corporation’s ICFR were not effective as of December 31, 2024 because of the material weakness identified above under the headings “Restatement of Previously Issued Condensed Interim Consolidated Financial Statements” and Change in Valuation and Classification of Equity Investments in Digital Assets, at FVTPL.

 

Remediation of Material Weakness in ICFR

 

We continue to work to fully remediate the material weakness and are taking steps to strengthen our internal control over financial reporting. We are taking appropriate and reasonable steps to remediate this material weakness through the planned implementation of a new ERP system and hiring of additional staff for our finance department.

 

Management expects to continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of our internal control over financial reporting. We believe these measures, and others that may be implemented, will remediate the material weakness in ICFR described above.

 

The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Material Accounting Policies

 

The Company’s material accounting policies can be found in Note 2 of its annual audited financial statements for the years ended December 31, 2024 and 2023.

 

74

 

Critical Accounting Estimates and Assumptions

 

The preparation of the Company’s Consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods.

 

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the Consolidated financial statements are as follows:

 

Accounting for digital assets

 

The IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2 - Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss. Digital currencies consist of cryptocurrency denominated assets (see Note 7) and are included in current and long-term assets. Digital currencies are carried at their fair value determined by the spot rate less costs to sell. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase other exchanges consistent with the final terms for each ETP. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Vomex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

Equity investments in digital assets at fair value through profit and loss

 

Investments in equity instruments at fair value through profit or loss - Included in investments in equity instruments at fair value through profit or loss are investments in a US private company (LLC), and a U.S. Limited Liability Partnership via a Cayman Island domiciled feeder Limited Liability Partnership.

 

Management accounted for such investments at fair value to profit or loss under IFRS 9, because the Company does not exercise significant influence over the investee. The Company does not have any contractual right to appoint any representative to the investee’s board of directors. In addition, the Company does not have any participation in policymaking processes and does not have any material transactions with the investee. The fair value of investments in investment funds which are not quoted in an active market is determined by using net asset value as determined by the investment fund’s administrator and include a discount for lack of marketability (“DLOM”). Management deems the net asset value to be the fair value after considering key factors such as the liquidity of the investment fund or its underlying investments, any restrictions on redemptions and basis of accounting.

 

75

 

Fair value of financial derivatives

 

Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. Valuation technique such as Black Scholes model is used to value these instruments.

 

Fair value of investment in securities not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values.

 

Share-based payments

 

The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk-free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense.

 

Business combinations and goodwill

 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Goodwill is assessed for impairment annually.

 

Estimated useful lives and impairment considerations

 

Amortization of intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

 

76

 

Impairment of non-financial assets

 

The Company’s non-financial assets include prepaid expenses, digital assets excluding USDC, equipment and right of use assets, intangibles and goodwill. Impairment of these non-financial assets exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. See Note 8 for the discussion regarding impairment of the Company’s non-financial assets.

 

Functional currency

 

The functional currency of the Company has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and the currencies in which expenses are settled, by each entity, as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency.

 

Assessment of transaction as an asset purchase or business combination

 

Significant acquisitions require judgements and estimates to be made at the date of acquisition in relation to determining the relative fair value of the allocation of the purchase consideration over the fair value of the assets. The information necessary to measure the fair values as at the acquisition date of assets acquired requires management to make certain judgements and estimates about future performance of these assets.

 

Control

 

Significant judgment is involved in the determination whether the Company controls under IFRS 10. The Company is deemed to control an investee when it demonstrates: power over the investee, exposure, or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. There is judgement required to determine whether these criterions are met. The Company determined it controlled Valour Digital Securities Limited through its role as arranger.

 

77

Exhibit 99.126

 

 

 

 

 

 

 

DEFI TECHNOLOGIES INC.

 

ANNUAL INFORMATION FORM

 

FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2024

 


Dated: March 30, 2025

 

 

 

 

TABLE OF CONTENTS

 

EXPLANATORY NOTES AND CAUTIONARY STATEMENTS 1
   
CORPORATE STRUCTURE 3
   
GENERAL DEVELOPMENT OF THE BUSINESS 4
   
DESCRIPTION OF THE BUSINESS 15
   
Risk Factors 25
   
DIVIDENDS 52
   
DESCRIPTION OF SHARE CAPITAL 52
   
MARKET FOR SECURITIES 53
   
Escrowed securities 53
   
DIRECTORS AND OFFICERS 54
   
AUDIT COMMITTEE DISCLOSURE 56
   
PROMOTER 57
   
LEGAL PROCEEDINGS AND REGULATORY ACTIONS 57
   
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 58
   
TRANSFER AGENT AND REGISTRAR 58
   
MATERIAL CONTRACTS 58
   
INTERESTS OF EXPERTS 58
   
ADDITIONAL INFORMATION 58

 

i

 

 

EXPLANATORY NOTES AND CAUTIONARY STATEMENTS

 

Explanatory Notes

 

In this Annual Information Form (the “AIF”), the term “Company” or “DeFi Technologies” refers to DeFi Technologies Inc. and its subsidiaries as a whole, unless otherwise specified or the context otherwise requires.

 

Information contained in this AIF is given as of December 31, 2024, the financial year end of the Company, unless otherwise specifically stated.

 

Unless otherwise indicated, all currency amounts in this AIF and references to “$” are stated in Canadian dollars.

 

Market and industry data used throughout this AIF was obtained from various publicly available sources. Although the Company believes that these independent sources are generally reliable, the accuracy and completeness of such information are not guaranteed and have not been verified due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and the limitations and uncertainty inherent in any statistical survey of market size, conditions and prospects.

 

This AIF should be read in conjunction with the Company’s audited consolidated financial statements and management’s discussion and analysis for the financial year ended December 31, 2024. The financial statements and management’s discussion and analysis are available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR+”) website at www.sedarplus.ca. The Company’s financial statements are prepared in accordance with International Financial Reporting Standards.

 

Caution Regarding Forward-Looking Information

 

This AIF contains “forward-looking information” within the meaning of that term under Canadian securities laws. This information relates to future events or future performance and reflects the Company’s expectations and assumptions regarding such future events and performance. Forward-looking information can be identified by the use of words such as, but not limited to, “plans”, “expects”, “project”, “predict”, “potential”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved.

 

In particular, all statements, other than statements of historical facts, included in this AIF that address activities, events or developments that management of the Company expects or anticipates will or may occur in the future contain forward-looking information, including but not limited to, statements with respect to:

 

●financial, operational and other projections and outlooks as well as statements or information concerning future operation plans, objectives, performance, revenues, growth, acquisition strategies, profits or operating expenses of the Company and its subsidiaries;

 

●details and expectations regarding the Company’s investments in the decentralized finance (“DeFi”) industry and the Company’s Equity Investments in Digital Assets (as defined herein);

 

●expectations regarding revenue growth due to changes in the Company’s business strategy;

 

●expansion and growth of the Company’s Asset Management, Ventures and Infrastructure business lines;

 

●development of ETPs and partnerships and joint ventures with other companies;

 

●growth of assets under management (“AUM”);

 

●listing of ETPS;

 

●identifying and capitalizing on low-risk arbitrage opportunities within the digital asset market;

 

●digital asset staking, lending or trading transactions;

 

●listing of the Common Shares on Nasdaq;

 

●the AsiaNext MOU;

 

●the NSE MOU;

 

1

 

 

●SolFi Technologies;

 

●CoreFi Technologies;

 

●anticipated lending and staking income and management fees charged on ETPs;

 

●hedging activities;

 

●investment performance of ETPs, DeFi protocols and digital assets underlying ETPs and portfolio companies that the Company has invested in;

 

●future development of laws and regulations governing the DeFi industry;

 

●requirements for additional capital and future financing options;

 

●publishing and marketing plans;

 

●the availability of attractive investments that align with the Company’s investment strategy;

 

●future outbreaks of infectious diseases;

 

●the impact of climate change; and

 

●other expectations of the Company.

 

Forward-looking information involves various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Important factors that could cause actual results to differ materially from the Company’s expectations are described in the Company’s documents filed from time to time with the applicable regulatory authorities and such factors include, but are not limited to, risks related to the staking and lending of cryptocurrencies, DeFi protocol tokens, or other digital assets; risks relating to momentum prising and volatility of cryptocurrencies, DeFi protocol tokens, and other digital assets; cybersecurity threats, security breaches and hacks; the relative novelty of cryptocurrency exchanges and other trading venues; regulatory risks; hedging risk; the U.S. classification of crypto assets and the Investment Company Act of 1940; the issuance of crypto ETPs in the EU and non-EU countries; risk related the Company’s Ventures portfolio exposure; risks associated with banks cutting off services to businesses that provide cryptocurrency related services; the impact of geopolitical events; the further development and acceptance of digital and DeFi networks; risks and uncertainties associated with custodians of digital assets; risk of loss, theft or destruction of cryptocurrencies; risks associated with the irrevocability of transactions; risks associated with the potential failure to maintain the cryptocurrency networks; risks associated with the potential manipulation of blockchain; risks that miners may cease operations; risks related to insurance; risks related to the concentration of investments; risks related to competition; risk related to investments in private issuers and illiquid securities; risks related to cash flow, revenue and liquidity; risks related to the Company’s dependence on management personnel; risks related to macro-economic conditions; risks related to the availability or opportunities and competition for investments; risks related the share prices of investments; risks related to additional financing requirements; risks related to the return on investments; risks related to the management of the Company’s growth; social , political, environmental, and economic risks in the countries in which the Company’s investment interests are located; risks related to the due diligence process undertaken by the Company in connection with investment opportunities; risks related to exchange-rate fluctuations; risks related to non-controlling interests; risks related to changes in legislation and regulations; risks associated with the Company’s limited operating history and no history of operating revenue and cash flow; risks associated with the Company having limited cash flow and funds in reserve which may not be sufficient to fund its ongoing activities at all times; risks associated with conflicts of interest; risks associated with the volatility of the Common Shares market price; risks associated the future dilution of shareholders interest in the Company; and risks associated with the Company’s history of never paying dividends; and other risks described herein including under the heading “Risk Factors – Risks Relating to the Business and Industry of the Company”.

 

When relying on forward-looking information to make decisions, readers should ensure that the preceding information, the risks and uncertainties described in “Risk Factors” and the other contents of this AIF are all carefully considered. The forward-looking information contained herein is current as of the date of this AIF, and, except as may be required by applicable law, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking information contained herein to reflect any change in expectations, estimates and projections with regard thereto or any changes in events, conditions or circumstances on which any information is based. Readers should not place undue importance on such forward-looking information and should not rely upon this information as of any other date. In addition to the disclosure contained herein, for more information concerning the Company’s various risks and uncertainties, please refer to the Company’s public filings available under its profile on SEDAR+ at www.sedarplus.ca and at www.cboe.ca.

 

With regard to all information included herein relating to companies in the Company’s Venture portfolio, the Company has relied on information provided by the investee companies and on publicly available information disclosed by the respective companies.

 

2

 

 

CORPORATE STRUCTURE

 

Name, Address and Incorporation

 

The Company was incorporated in British Columbia pursuant to the Company Act (British Columbia) (the “BCCA”) under the name “Western Premium Resource Corp.” on April 14, 1986. On August 29, 1997, the Company filed a certificate of change of name under the BCCA and changed its name to “Zodiac Exploration Corp.” On December 18, 1998, the Company filed a certificate of change of name under the BCCA and changed its name to “Donnybrook Resources Inc.” On August 13, 2003, the Company filed a certificate of change of name under the BCCA and changed its name to “Rodinia Minerals Inc.” On November 3, 2009, the Company was continued under the Business Corporations Act (Ontario) (the “OBCA”), and on June 15, 2010, the Company filed articles of amendment under the OBCA and changed its name to “Rodinia Lithium Inc.” On August 16, 2016 the Company filed articles of amendment under the OBCA and changed its name to “Routemaster Capital Inc.” The common shares of the Company (the “Common Shares”) began trading on the TSX Venture Exchange (the “TSXV”) on June 30, 2010. The Company sold its sole subsidiary on December 29, 2015 and completed a change of business (“COB”) to a tier 2 investment issuer under the rules of the TSXV on September 16, 2016. On January 19, 2021, the Common Shares were uplisted to trade on the Cboe Canada Exchange (formerly NEO Exchange Inc.) (“Cboe Canada”), and on February 26, 2021, the Company filed articles of amendment under the OBCA and changed its name to “DeFi Technologies Inc.” On April 19, 2022, the Common Shares were listed for trading on the OTCQB Venture Market. On June 1, 2022, the Company filed articles of amendment under the OBCA and changed its name to “Valour Inc.” On July 10, 2023, the Company filed articles of amendment under the OBCA and changed its name to “DeFi Technologies Inc.” The Company’s head office and registered office is located at Suite 2400, 333 Bay Street, Toronto, Ontario, M5H 2T6.

 

As of the date of this AIF, the Company holds 100% of DeFi Holdings (Bermuda) Ltd., 100% of Reflexivity Research, LLC (“Reflexivity Research”), 100% of Valour Inc. (“Valour Cayman”), 100% of Stillman Digital Inc. (“SDI”), 100% of Stillman Digital Bermuda Ltd. (“SDB” and together with SDI “Stillman Digital”) and 52.47% of Neuronomics AG. The following is an organizational chart illustrating the inter-corporate relationships between the Company and its subsidiaries and the jurisdiction of organization of each such entity, as at the date hereof:

 

 

Note: Valour Digital Securities Limited (“VDSL”), is owned by the charitable trust VLR Charitable Trust in Jersey. VDSL and Valour Cayman are together referred to as “Valour”. Defi Capital Inc. and Electrum Streaming Inc., wholly-owned subsidiaries of the Company, are in the process of being dissolved.

 

3

 

 

GENERAL DEVELOPMENT OF THE BUSINESS

 

The Company is a publicly listed company on Cboe Canada trading under the symbol “DEFI”. The Company operates five lines of business: Asset Management, Ventures, DeFi Alpha, Reflexivity Research and Stillman Digital, each of which is explained further below under their respective headings in “Description of Business”.

 

Three Year History

 

The following is a summary of the general development of the Company’s business over the three most recently completed financial years.

 

Subsequent to Fiscal 2024

 

On March 3, 2025, the Company announced that Valour launched four new ETPs on the Frankfurt Exchange: Valour Dogecoin (DOGE) EUR, Valour Aptos (APT) EUR, Valour Sui (SUI) EUR, and Valour Render (RENDER) EUR.

 

On March 3, 2025, the Company announced that it had appointed Chase Ergen to the board of directors of the Company (the “Board”). Mr. Ergen is a visionary entrepreneur and a leading figure in the decentralized finance space. As the son of Charlie Ergen, founder of Dish Network, a subsidiary of Echostar (NASDAQ: SATS), Chase has leveraged his firsthand experience, entrepreneurial roots, and forward-thinking mindset to drive innovation across satellite technology, information and communications technology (ICT), and cross-sector enterprises. Mr. Egegn’s appointment follows the resignation of Krisztian Toth from the Board who will transition into an advisory role.

 

Fiscal 2024

 

Asset Management

 

In the year ending December 31, 2024 (“Fiscal 2024”) Valour announced the launch of the following ETPs:

 

Date   ETP   Exchange
February 20, 2024   1Valour Internet Computer Physical Staking   Deutsche Börse Xetra and Gettex
February 22, 2024   Valour Ripple (XRP) SEK   Spotlight Exchange
February 22, 2024   Valour Binance (BNB) SEK   Spotlight Exchange
March 18, 2024   1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip   Deutsche Börse Xetra, Gettex and Frankfurt Exchange
April 18, 2024   Valour Short Bitcoin (SBTC) SEK   Spotlight Exchange
May 13, 2024   Valour Internet Computer (ICP) SEK   Spotlight Exchange
May 13, 2024   Valour Toncoin (TON) SEK   Spotlight Exchange
May 13, 2024   Valour Chainlink (LINK) SEK   Spotlight Exchange
May 15, 2024   Valour Bitcoin Staking (BTC) SEK   Spotlight Exchange
June 4, 2024   1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip   Deutsche Börse Xetra and Frankfurt Exchange
June 18, 2024   Valour Bitcoin Staking (BTC) EUR   Frankfurt Exchange
June 19, 2024   Valour Hedera (HBAR)   Frankfurt Exchange
June 28, 2024   Valour Hedera (HBAR) SEK   Spotlight Exchange
June 28, 2024   Valour Core SEK   Spotlight Exchange
July 17, 2024   Valour Near SEK   Spotlight Exchange

 

4

 

 

September 30, 2024   Valour Ethereum Physical Staking   London Stock Exchange, Deutsche Börse Xetra, Gettex and Frankfurt Exchange
October 10, 2024   Valour Sui (SUI) SEK   Spotlight Exchange
October 30, 2024   Valour Bittensor (TAO) SEK   Spotlight Exchange
November 5, 2024   1Valour Bitcoin Physical Staking   Deutsche Börse Xetra
November 26, 2024   Valour Dogecoin (DOGE) SEK   Spotlight Exchange
December 12, 2024   Valour Sei (SEI)   Spotlight Exchange
December 12, 2024   Valour Worldcoin (WLD)   Spotlight Exchange
December 12, 2024   Valour Aptos (APT)   Spotlight Exchange
December 12, 2024   Valour ASI (FET)   Spotlight Exchange
December 12, 2024   Valour Render (RENDER)   Spotlight Exchange
December 12, 2024   Valour Aerodrome Finance (AERO)   Spotlight Exchange
December 12, 2024   Valour Arweave (AR)   Spotlight Exchange
December 12, 2024   Valour Injective (INJ)   Spotlight Exchange
December 12, 2024   Valour Aave (AAVE)   Spotlight Exchange
December 12, 2024   Valour Pendle (PENDLE)   Spotlight Exchange
December 12, 2024   Valour Fantom (FTM)   Spotlight Exchange
December 12, 2024   Valour Kaspa (KAS)   Spotlight Exchange
December 12, 2024   Valour Pyth Network (PYTH)   Spotlight Exchange
December 12, 2024   Valour Jupiter (JUP)   Spotlight Exchange
December 12, 2024   Valour Lido DAO (LDO)   Spotlight Exchange
December 12, 2024   Valour Wormhole (W)   Spotlight Exchange
December 12, 2024   Valour THORChain (RUNE)   Spotlight Exchange
December 12, 2024   Valour Akash Network (AKT)   Spotlight Exchange
December 12, 2024   Valour Starknet (STRK)   Spotlight Exchange
December 12, 2024   Valour Metis (METIS)   Spotlight Exchange
December 18, 2024   1Valour Hedera Physical Staking   Euronext Amsterdam

 

On November 22, 2024, the Company announced that Valour had entered into a memorandum of understanding with Asia Digital Exchange Ptd. Ltd. (“AsiaNext”) and SovFi inc. (“SovFi”) (the “Asia Next MOU”). AsiaNext, a global digital asset exchange regulated by the Monetary Authority of Singapore, bridges Asia and Europe by providing institutional investors with secure access to digital assets. It is backed by Japan’s SBI Digital Asset Holdings and SIX Group in Switzerland. The Asia Next MOU with Valour will evaluate and facilitate the listing and trading of Valour’s ETPs on AsiaNext’s securities exchange, enhancing AsiaNext’s position as a leading marketplace for institutional investors.

 

On August 6, 2024, the Company announced that Valour had entered into a memorandum of understanding with the Nairobi Securities Exchange (“NSE”) and SovFi (the “NSE MOU”). The key objectives of the NSE MOU include facilitating the creation, issuance, and trading of digital asset ETPs on the NSE by leveraging Valour’s extensive expertise in digital assets and ETPs. The NSE MOU aims to deploy financial products developed by Valour and SovFi, develop market infrastructure and enhance market access to global capital through tokenized finance primitives and real-world assets.

 

On June 11, 2024, the Company announced that it has deployed a Core Chain validator node to act as an independent validator for the network. The Company also staked 1,498 BTC on the Core Chain.

 

On April 8, 2024, the Company announced that Valour has launched a trading desk in the United Arab Emirates.

 

In Fiscal 2024, Valour invested US$61,741,683 in three tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company (“Fund A”). The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana and 931,446 Avalanche at US$11 per Avalanche.

 

The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The Avalanche acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Avalanche is locked and will become distributable on the same unlocking schedule as the Avalanche. The Avalanche will be released in weekly increments July 10, 2025 and continuing through July 1, 2027.

 

5

 

 

The investment in the investment fund was valued based on the latest available net asset value, as determined by the investment fund’s administrator less DLOM. The fair values of the investments were remeasured based on monthly valuation reports provided to the Company by the investment fund administrator.

 

In Fiscal 2024, Valour invested $153,516,846 (US$112,072,453) in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company (“Fund B” and together with Fund A the “Equity Investments in Digital Assets”).

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period and thereafter until such Solana is sold by the fund manager or an in-kind distribution in the limited partners of the fund. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25 % of the Solana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028. The investment in the investment fund was valued based on the latest available net asset value, as determined by the investment fund’s administrator less DLOM. The fair values of the investments were remeasured based on monthly valuation reports provided to the Company by the investment fund administrator.

 

DeFi Alpha

 

On July 16, 2024, the Company announced that DeFi Alpha generated an additional approximately C$4.0 million (US$2.9 million) in USDT and C$15.3 million (US$11.2 million) in digital asset inventory through low-risk arbitrage trades in Q3 2024.

 

On June 3, 2024, the Company announced that its new business line, DeFi Alpha generated an additional C$59.2 million (US$43.4 million) from low-risk arbitrage trades. In its first few months since formation, DeFi Alpha generated approximately C$113.8 million (US$83.4 million). Of the US$83.4 million generated, US$19.5 million was used to pay down debt.

 

Reflexivity Research

 

On September 13, 2024, the Company announced that Reflexivity Research was holding its inaugural Crypto Investor Day in New York City on October 25, 2025.

 

On June 24, 2024, the Company announced that Reflexivity Research has partnered with CoinMarketCap, the world’s largest crypto pricing and data aggregator, to educate users on various digital assets with in-depth fundamental research. Through this partnership, CoinMarketCap users will now have access to Reflexivity Research’s high-quality, actionable research on individual digital assets, including fundamental analysis, market structure updates, and technical breakdowns.

 

On March 7, 2024, the Company announced that Reflexivity Research was holding its inaugural Bitcoin Investor Day on March 22, 2024 in New York City. The Bitcoin Investor Day, orchestrated by Reflexivity Research, aims to assemble hundreds of institutional investors, capital allocators, and forward-thinking entrepreneurs.

 

On January 9, 2024, the Company announced that it had entered into a binding letter of intent to acquire Reflexivity Research (the “Reflexivity Acquisition”). Reflexivity Research, co-founded by Anthony Pompliano and Will Clemente, offers high-quality crypto-native research designed for traditional finance investors. The firm is known for unique bitcoin analysis, along with counting some of the most well-known cryptocurrency organisations as clients, including eToro, Solana, Avalanche, NEAR, Fantom, Sei Network, and many more. Reflexivity Research’s research is distributed via their homepage, a premium membership portal, and an email list of over 55,000 investors. On February 7, 2024, the Company announced that it had completed the Reflexivity Acquisition.

 

6

 

 

Partnerships and Acquisitions

 

On December 10, 2024, the Company announced that it has signed a letter of intent to increase its holdings of Neuronomics AG (“Neuronomics”), a Swiss asset management firm specializing in quantitative trading strategies powered by artificial intelligence, computational neuroscience, and quantitative finance, to 10%. On March 7, 2025, the Company announced that it had further increased its stake in Neuronomics to 52.5%.

 

On November 14, 2024, the Company announced the launch of CoreFi Strategy Corp (“CoreFi Strategy”). Modeled after MicroStrategy and MetaPlanet’s successful approaches, CoreFi Strategy offers a regulated, leveraged pathway to Bitcoin yield and CORE—the native asset of the Core blockchain, designed to unlock sustainable Bitcoin yield and other key functions. On February 4, 2025, DeFi entered a binding letter agreement with CoreFi Strategy and Orinswift Ventures (the “CoreFi LOI”) to facilitate a reverse takeover (the “RTO”). The RTO will be completed through a definitive agreement that is to be negotiated by the parties, which will contain customary representations and warranties for similar transactions, and is expected to be structured as a three-corned amalgamation whereby a newly incorporated subsidiary of Orinswift will amalgamate with CoreFi, resulting in Orinswift acquiring all securities of CoreFi, and CoreFi securityholders becoming securityholders of Orinswift, as the resulting issuer following closing of the Transaction (the “Resulting Issuer”). The final structure for the Transaction is subject to satisfactory tax, corporate and securities law advice for each of Orinswift, CoreFi, and DeFi. Pursuant to the LOI the Core Foundation will contribute US$20 million in CORE Tokens to strengthen CoreFi’s treasury in exchange for 30% of the Resulting Issuer. Additionally, CoreFi plans to raise US$20 million in concurrent financing to accelerate its growth in Bitcoin Finance (BTCfi) technologies. DeFi will provide advisory services, intellectual property development and intellectual property licenses in exchange for 30% of the Resulting Isser.

 

On November 12, 2024, the Company announced the launch of SolFi Technologies, new pure-play investment vehicle dedicated to providing traditional investors with specific access to the expanding Solana (“SOL”) ecosystem. SolFi Technologies aims to generate consistent cash flow at higher yields than third-party staking providers, with these yields reinvested or distributed to its shareholders as dividends, enhancing returns and compounding growth. As a cornerstone shareholder and partner, the Company will benefit from increased exposure to Solana’s performance, unlocking new growth potential and revenue streams that complement its existing portfolio. SolFi Technologies is designed to act as a “MicroStrategy for Solana,” providing leveraged access to Solana’s high-yield staking and capital appreciation potential. Through innovative capital structures unavailable to ETFs, SolFi offers investors both token upside and cash flow opportunities, capitalizing on Solana’s rapid adoption and enabling investors to potentially outperform the underlying asset.

 

On July 30, 2024, the Company announced that it has entered into a strategic partnership with Zero Computing, a pioneer in verifiable computation on Ethereum and Solana. This partnership aims to build critical infrastructure to enhance the arbitrage discovery and execution capabilities of DeFi Alpha, and advance capabilities for capturing zero-knowledge enabled Maximal Extractable Value.

 

On July 9, 2024, the Company announced that it has signed a letter of intent to acquire Stillman Digital (the “Stillman Acquisition”). Stillman is a leading global liquidity provider offering industry-leading trade execution, settlement, and technology services. On October 7, 2024, the Company announced that it had completed the Stillman Acquisition.

 

Financial Statements and Auditor Matters

 

On September 6, 2024, the Company announced that it has refiled its 2023 annual consolidated financial statements (the “Refiled 2023 FS”) to include an amended auditor’s report delivered by HDCPA Professional Corporation (the “Auditors”). The date of the 2023 FS remains unchanged and the Refiled 2023 FS have not been restated in any respect. In connection with a continuous disclosure review by the Ontario Securities Commission, the Company determined to refile the Auditors’ report on the Company’s previously filed 2023 annual consolidated financial statements (the “Original 2023 FS”) to correctly identify the period over which the Auditors are providing assurance. The Refiled 2023 FS include an amended Auditors report which (a) identifies that the Auditors did not audit or express an opinion on the Company’s 2022 financial statements, (b) corrects a typographical error in the “Other Matters” section to refer to “December 31, 2023”, and (c) adds certain note references under “Description of the Key Audit Matter”.

 

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On April 1, 2024, the Company announced that it has filed its financial statements of the Company for fiscal-year 2023 with restated comparative information for fiscal 2022 and the corresponding management’s discussion and analysis. The Company became aware of an enforcement report issued by the Canadian Public Accountability Board (“CPAB”) on December 7, 2023 against BF Borgers CPA PC (“Former Auditor”) (the “Enforcement Report”) resulting from an engagement findings report dated October 12, 2023 (the “CPAB Report”). As a result of the Enforcement Report, the Auditor provided a consultation with respect to the CPAB Report, remediation plan requested by CPAB and the impact on the scope of the audit for fiscal 2023 (the “Consultation”), As a result of the Consultation, the Company reassessed the application of IFRS on the accounting the valuation of the Company’s holdings in 3iQ and AMINA Bank AG (formerly SEBA Bank AG) as well as the valuation of Valour’s Genesis loan and collateral posted to secure such loan. Compared with the previously filed fiscal 2022 financial statement of the Company, the Amended and Restated Financial Statements reflected a (i) reduction in digital assets by $2,433,348 to $104,148,728 as at December 31, 2022; and (ii) reduction in private investments, at fair value through profit and loss, by $13,489,824 to $30,015,445 as at December 31, 2022, with an opening retained earnings impact at January 1, 2023 of $15,923,172.

 

On January 8, 2024, the Company announced that it has changed its auditor from Former Auditor to the Auditor effective December 20, 2023. On December 7, 2023, CPAB issued an enforcement report (the “Enforcement Report”) against the Former Auditor resulting from the CPAB Report with respect to the audit of the Company’s financial statements for the fiscal year ended December 31, 2022 (“2022 Statements”).

 

The Enforcement Report identified multiple significant inspection findings, each of which constitute a separate Violation Event (as defined in the Rules of CPAB) with respect to the Former Auditor. As a result of the CPAB Report, a remediation plan is required for the audit of the 2022 Statements. The Company has received information requests from the Former Auditor on its remediation plan, including third party confirmations from all of the Company’s digital asset custodians to confirm existence of the digital assets and fair market value, confirmations for all the private investments confirming the existence of the Company’s holdings and their latest financing details, management forecast files and schedules including all assumptions used in the goodwill impairment analysis, confirmation of exchange traded products, working papers on the calculation of staking and lending revenue, management fees and node revenue.

 

Director Appointments, NCIB, US Listing and Treasury Management

 

On October 29, 2024, the Company announced that Valour has successfully eliminated its outstanding debt following a final C$5.5 million (US$4 million) repayment completed on October 16, 2024.

 

On September 16, 2024, the Company announced that it filed a Form 40-F Registration Statement (“Form 40-F”) with the United States Securities and Exchange Commission (the “SEC”), in connection with its application to list the Common Shares on The Nasdaq Stock Market LLC (the “Nasdaq”). The listing of the Company’s common shares on the Nasdaq remains subject to the approval of the Nasdaq and the satisfaction of all applicable listing and regulatory requirements, including the Form 40-F being declared effective by the SEC.

 

On July 31, 2024, the Company announced the appointment of Andrew Forson to its board of directors. Andrew Forson is an experienced financial and risk engineer, software architect, and trust and estate practitioner. He serves as the Head of Ventures and Investments for the Hashgraph Group, the commercialization and enablement arm of Hedera, where he has been instrumental in driving strategic investments and fostering innovation in the digital asset sector.

 

On July 18, 2024, the Company announced that as part of its digital asset treasury strategy, it purchased an additional 94.34 BTC, bringing its total BTC holdings to 204.34 BTC. Additionally, the Company has acquired 12,775 SOL tokens and 1,484,148 CORE tokens, with plans to actively participate in CORE DAO’s staking facility.

 

On June 10, 2024, the Company announced that it has adopted Bitcoin as its primary treasury reserve asset and has purchased 110 Bitcoins to initiate this strategy.

 

8

 

 

On June 6, 2024, the Company announced a Normal Course Issuer Bid (“NCIB”) to buy back Common Shares through the facilities of Cboe Canada.

 

On May 7, 2024, the Company announced that it had fully repaid balances of US$6 million and US$13.5 million, which were secured by BTC and ETH collateral, respectively.

 

Fiscal 2023

 

Asset Management

 

On August 29, 2023, the Company announced that Valour launched three new products on the Nordic Growth Market Exchange (“NGM”). Valour Ethereum Zero EUR precisely tracks the price of ETH without charging management fees, making an investment in the world’s second largest digital asset easy, secure and cost-effective. Valour Solana EUR precisely tracks the price of SOL, the native cryptocurrency fuelling the Solana network. Marketed as one the fastest blockchains, Solana has more than 400 live projects spanning its DeFi, NFT, and Web3 ecosystem. Valour’s Solana ETP makes an investment in this leading decentralised platform cost-effective, simple and secure. Valour Digital Asset Basket 10 (VDAB10) tracks the performance of the top 10 largest digital assets based on market capitalisation with a maximum cap of 30% for any constituent. Valour’s VDAB10 ETP provides investors with a diversified and dynamic exposure to the ever-evolving crypto landscape in a trusted and secure manner.

 

On August 22, 2023, the Company announced that VDSL launched 1Valour Ethereum Physical Staking ETP. The 1Valour Ethereum Physical Staking ETP simplifies network participation for investors. With a fixed yield, undefined expiry and a 1.49% management fee, investors have the potential to earn passive returns, sidestepping the technical challenges involved with staking, and actively contributing towards the evolving decentralized finance landscape. Enhanced security measures including slashing insurance and full collateralization mean investors benefit from additional transparency and security measures.

 

On July 12, 2023, the Company announced that Valour launched its digital asset basket ETP - Valour Digital Asset Basket 10 (VDAB10) SEK. The Valour Digital Asset Basket 10 (VDAB10) ETP provides retail and institutional investors with trusted, secure, and diversified exposure to 10 of the largest cryptocurrencies by market capitalization. With a quarterly rebalancing, the multi-digital asset ETP enables investors to gain access to certain of the largest disruptive digital assets, offering an expanded entry into the rapidly developing digital asset ecosystem, without the need to set up a dedicated trading account.

 

On June 15, 2023, the Company announced that VDSL launched its first physically backed digital asset product, the 1Valour Bitcoin Physical Carbon Neutral ETP. The 1Valour Bitcoin Physical Carbon Neutral ETP provides investors with sustainable and climate-friendly exposure to Bitcoin with the low management fee of 1.49%. The ETP presents a trusted investment method that benefits the environment and aligns with environmental, social and governance (“ESG”) goals by funding certified carbon removal and offset initiatives in order to neutralise the associated Bitcoin carbon footprint.

 

On April 12, 2023, the Company announced the launch of VDSL, a Jersey-based securities issuer of ETPs for physically stored digital assets. VDSL obtained all regulatory approvals by the Swedish and Jersey regulators for an EU-wide offering to investors domiciled in Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Malta, Poland, Portugal, Romania, Slovakia and Spain, and its products will be listed on regulated stock exchanges such as Deutsche Börse/Xetra in Frankfurt, Euronext in Paris and Amsterdam and SIX Swiss Exchange in Switzerland.

 

9

 

 

On March 21, 2023, the Company announced the listing of certain ETPs on Euronext Paris, providing availability to French investors.

 

On January 23, 2023, the Company announced that on January 19, 2023, Genesis Global Capital LLC (“Genesis”) and its group companies filed for bankruptcy protection in the US and listed Valour as a creditor. Valour clarified that Valour Cayman, its wholly-owned subsidiary, is a borrower of funds under a master loan agreement with Genesis dated January 22, 2022. The loan amount borrowed by Valour Cayman under the loan agreement is US$6 million which is collateralised.

 

On January 10, 2023, the Company announced the approval of its renewed EU-base prospectus covering digital assets ETP-products by the Swedish Financial Supervisory Authority (“SFSA”).

 

Partnerships and Acquisitions

 

On December 18, 2023, the Company announced that it has entered into a definitive purchase agreement (the “Solana IP Agreement”) to acquire intellectual property (“Solana IP”) from prominent Solana developer Stefan Jørgensen (the “Solana IP Acquisition”). Pursuant to the Solana IP Agreement, the Company issued a total of 7,297,090 Common Shares at a deemed price of $0.55 per Common Share to Mr. Jørgensen in exchange for all of the Solana IP. The Payment Shares will be issued in five tranches over a period of two years, and be subject to the continued involvement of Mr. Jørgensen with the Company and its subsidiaries at the time of issuance. The Solana IP acquired by the Company encompasses a suite of sophisticated features including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management, and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by both the Company and Valour. The Solana IP Acquisition positions the Company to significantly elevate its capabilities, offering cutting-edge trading solutions and unique strategies specifically designed for Solana, a blockchain platform rapidly gaining recognition for its outstanding performance capabilities. The Solana IP Acquisition closed on February 9, 2024.

 

On October 24, 2023, the Company announced that it has entered into a joint venture agreement with Neuronomics AG (“Neuronomics”) to collaborate on the development of AI based exchange traded products, actively managed certificates, and asset backed tokens for global distribution. To further align the interests of the Company and Neuronomics, the Company entered into share exchange agreements with Olivier Roussy Newton, Chief Executive Officer of the Company and Johan Wattenstrom, Director of Valour, pursuant to which DeFi acquired from each of Mr. Newton and Mr. Wattenstrom 362 shares of Neuronomics with nominal value of CHF 1.- for a total of 724 shares of Neuronomics.

 

Management, Board, Auditor Changes and Name Change

 

On January 8, 2024, the Company announced the change of its auditors from BF Borgers CPA PC to HDCPA Professional Corporation effective December 20, 2023.

 

On July 7, 2023, the Company announced that it had changed its name from “Valour Inc.” to “DeFi Technologies Inc.”

 

On February 13, 2023, the Company announced that Russell Starr has elected to step down from his role as Executive Chairman but will remain as Head of Capital Markets. Olivier Francois Roussy Newton, CEO of Valour, assumed the role of Executive Chairman replacing Russell Starr.

 

On February 3, 2023, the Company announced the change of its auditors from RSM Canada LLP to BF Borgers CPA PC.

 

10

 

 

Financings

 

On November 13, 2023, the Company announced a non-brokered private placement financing of up to 6,250,000 units (a “Unit”) at a price of $0.16 per Unit (the “Unit Price”) for gross proceeds of up to $1,000,000 (the “Nov 2023 Offering”). Each Unit consisted of one common share of the Company (a “Unit Share”) and one common share purchase warrant (a “Warrant”), entitling the holder to acquire one additional common share of the Company (a “Warrant Share”) at an exercise price of $0.23 for a period of 24 months from issuance. The Nov 2023 Offering closed on an oversubscribed basis for 11,812,500 Units, representing aggregate gross proceeds of $1,890,000.

 

On November 1, 2023, the Company announced that Valour completed a non-brokered private placement financing of unsecured convertible notes (the “Notes”) for gross proceeds of C$3,000,000 (the “Convertible Offering”). The Notes issued in connection with the Convertible Offering accrue interest at a rate of 8% per annum and will mature on October 31, 2025 (“Maturity Date”). Upon the occurrence of certain trigger events, the principal amount of Notes and all accrued interest may be convertible (a “Conversion”), at the option of the holder, into (a) Common Shares (“Conversion Shares”) at a price of C$0.10 (“Conversion Price”) per Conversion Share and (b) an equal number of common share purchase warrants of the Company (“Conversion Warrants”) entitling the holder to acquire Common Shares at a price of C$0.20 for a period of five years from the date of issuance. Upon the Conversion, the Company will subscribe for such additional equity of Valour equal to the principal amount of Notes and accrued interest converted pursuant to the Conversion. As of the date hereof, all of the Notes were converted into Conversion Shares and Conversion Warrants.

 

On August 23, 2023, the Company announced that it has entered into shares for debt settlement agreements with a lender, an officer and consultants of the Company to settle an aggregate amount of approximately C$604,543.34 of accrued debt obligations and accrued fees owing to such lender, officer and consultants of the Company by issuing Common Shares at a price of C$0.105 per Common Share for a total of 5,757,827 Common Shares.

 

On June 30, 2023, the Company announced that it filed a preliminary short form base shelf prospectus (the “Preliminary Base Shelf Prospectus”) with the securities regulators in each province and territory of Canada. The filing of the Preliminary Base Shelf Prospectus was subsequently withdrawn.

 

On June 12, 2023, the Company announced that it entered into shares for debt settlement agreements with various officers and consultants of the Company to settle an aggregate amount of approximately C$674,837.78 of accrued fees owing to such officers and consultants of the Company by issuing Common Shares at a price of C$0.085 per Common Share for a total of 7,939,268 Common Shares.

 

Fiscal 2022

 

Management, Board and Advisory Board Changes

 

On November 14, 2022, the Company announced the resignation of Bernard Wilson as director of the Company.

 

On October 6, 2022, the Company announced the appointment of Olivier Roussy Newton as Chief Executive Officer of the Company following the resignation of Russell Starr. In addition, the Company announced Russell Starr will re-assume the role of Head of Capital Markets and maintain his role as Executive Chairman of the Company.

 

On July 5, 2022, the Company announced Diana Biggs stepped down from her role as Chief Strategy Officer of the Company.

 

Financings

 

On November 29, 2022, the Company announced the closing of the second tranche of the October 2022 Unit (as defined below) offering for gross proceeds of $132,400 through the sale of 662,000 October 2022 Units. No finders fees were paid in connection with the closing of the second tranche. The securities underlying the second tranche closing were subject to a statutory hold period of four months and one day following the closing date, which expired on March 30, 2023.

 

11

 

 

On November 14, 2022, the Company announced the closing of the first tranche of the October 2022 Unit offering, for gross proceeds of $1,414,973 through the sale of 7,074,865 October 2022 Units. A director of the Company purchased 2,500,000 October 2022 Units under the first tranche closing. In connection with the November 14, 2022 first tranche closing of the October 2022 Unit offering, the Company paid aggregate finder’s fees of C$ 7,499.73 in cash to certain finders and 187,493 broker warrants, each broker warrant entitling the holder to acquire one Share at a price of $0.30 for a period of two years from issuance. The securities underlying the first tranche closing were subject to a statutory hold period of four months and one day following the closing date, which expired on March 15, 2023.

 

On October 11, 2022, the Company announced its non-brokered private placement financing of 25,000,000 units (the “October 2022 Units”), at an offering price of $0.20 per October 2022 Unit, for aggregate gross proceeds of $5,000,000. Each October 2022 Unit was comprised of one Common Share and one-half Common Share purchase warrant, entitling the holder of a whole warrant to acquire one Common Share, at an exercise price of $0.30, for a period of 24 months from issuance.

 

SEBA Bank Partnership and Investment

 

On January 25, 2022, the Company announced that it closed its investment of CHF 25 million in SEBA, acting as the co-lead in the oversubscribed CHF 110 million Series C funding round of SEBA. SEBA is a fully integrated, Swiss Financial Market Supervisory Authority (“FINMA”) licensed, digital assets banking platform providing a seamless, secure, and easy-to-use bridge between digital and traditional assets.

 

On January 5, 2022, the Company announced that it has entered into a commercial agreement (the “Preferred Partnership Agreement”) to establish a preferred partnership relationship with SEBA. The Preferred Partnership Agreement outlines a framework for the Company to become a preferred provider of staking services, client referrals, market making and liquidity to SEBA, and SEBA to become a preferred provider of custody services to the Company. The Preferred Partnership Agreement also outlines further cooperation between SEBA and the Company with respect to asset and investment management, mining services, tokenization, digital capital markets and institutional research.

 

Additions to Indices

 

On January 26, 2022, the Company announced that it will be added to the CoinShares Blockchain Global Equity Index, administered by Solactive AG, on February 8, 2022. The index aims to offer exposure to listed companies that participate or have the potential to participate in the blockchain or cryptocurrency ecosystem. It also aims to capture the potential investment upside generated by earnings related to the adoption of blockchain technologies or cryptocurrencies.

 

On January 24, 2022, the Company announced that it has been added to the Melanion Bitcoin Exposure Index. This unique index, sponsored by Melanion Capital and administered by Bita GmbH, marks the first milestone in the development of an innovative Digital Asset business for Melanion Capital.

 

ESG Initiatives

 

On January 18, 2022, the Company announced that it joined the Crypto Climate Accord, an industry initiative whose objective is to decarbonise the global crypto industry by prioritizing climate stewardship and supporting the entire crypto industry’s transition to net zero greenhouse gas emissions by 2040, as a supporter.

 

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Asset Management

 

On December 23, 2022, the Company announced its products were listed on the independent comparison platform MoneyMoon, a major European ETP comparison platform.

 

On December 1, 2022, the Company announced its partnership with Autostock, a Swedish trading platform, to launch an automated trading strategy designed to capture weekly effects of Bitcoin.

 

On October 28, 2022, the Company announced it had filed a new EU-base prospectus covering digital assets ETP-products with the SFSA.

 

On October 18, 2022, the Company announced the consolidation of its full pro-rated ETHW allocation received as a result of the Ethereum proof-of-work to proof-of-stake forking event. Net proceeds from the consolidation were reinvested into the underlying asset of the Company’s Ethereum Zero certificate products. The change was reflected through an adjustment to the net asset value of both Valour Cayman Ethereum Zero certificates (SEK and EUR denominated).

 

On October 12, 2022, the Company announced its partnership with Swedish index provider Vinter to launch the Company’s first multi-asset crypto ETP, the Valour Digital Asset Basket 10 ETP (VDAB10). The Valour Digital Asset Basket 10 ETP tracks the 10 largest digital assets weighted by their market capitalisation, with a maximum portfolio allocation of 30% per asset.

 

On September 23, 2022, the Company announced the debut and trading of its Carbon Neutral Bitcoin ETP on the Boerse Frankfurt Zertifikate AG (the “Frankfurt Exchange”).

 

On August 24, 2022, the Company announced the debut and trading of its new Binance Coin Exchange traded product, Valour (BNB) EUR ETP, on the Frankfurt Exchange. The Valour (BNB) EUR ETP tracks the price of BNB, the native token behind the BNB Chain, a decentralized open-source, multi-chain platform being used to build parallel virtual ecosystem infrastructure.

 

On August 18, 2022, the Company announced an agreement with German banks, Comdirect and Onvista, that will enable banking clients to integrate Valour Cayman ETPs into their investment portfolios.

 

On August 16, 2022, the Company announced its partnership with German online brokerage firm justTrade, whereby the Company was retained to provide physically-backed crypto ETPs to justTrade’s savings plan program (Sparplan) by the end of the year.

 

On July 26, 2022, the Company announced trading of its ETP products on the Lang and Schwarz Exchange, based in Germany. Trading of Bitcoin Zero, Etherium Zero, Valour Uniswap ETP, Valour Polkadot ETP, Valour Cardano ETP, Valour Solana ETP, Valour Avalanche ETP, and Valour Cosmos ETP began July 25, 2022.

 

On May 26, 2022, the Company announced Valour Cayman received approval to begin trading of the Valour Enjin (ENJ) EUR ETP and Valour Cosmos (ATOM) EUR ETP on the Frankfurt Exchange. Trading began on May 26, 2022.

 

On May 2, 2022, the Company announced that Valour Cayman received approval from the SFSA to extend its distribution from the Top 75 single digital assets by market capitalization to the Top 125.

 

On April 6, 2022, the Company announced that Valour Cayman began trading of its Polkadot (DOT) EUR ETP, Cardano (ADA) EUR ETP, and Solana (SOL) EUR ETP on the Euronet Exchange in Paris and Amsterdam. Trading began on April 6, 2022.

 

On February 17, 2022, the Company announced a strategic partnership with RockX, a Singapore-based institutional gateway to crypto finance and blockchains, to enhance the staking components of the Company’s current respective ETP infrastructures, co-develop ETP products, provide institutional staking services, custodian services and real time data yield oracle.

 

13

 

 

On February 16, 2022, the Company announced that Valour Cayman received approval to begin trading of its Terra (LUNA) SEK ETP and Avalanche (AVAX) SEK ETP on the Nordic Growth Market Exchange (“NGM”). Trading on the NGM began on February 28, 2022 and trading on the Frankfurt Exchange began on March 25, 2022.

 

On February 14, 2022, the Company announced that Valour Cayman received approval to begin trading of the Polkadot (DOT) EUR ETP and Cardano (ADA) EUR ETP on Frankfurt Stock Exchange. Trading began on February 21, 2022.

 

On February 2, 2022, the Company announced that Valour Cayman applied for a Swiss Verein zur Qualitätssicherung von Finanzdienstleistungen (“VQF”) membership through its Swiss subsidiary Valour Europe AG (formerly known as DeFI Europe AG). The VQF membership is awarded by the Verein zur Qualitätssicherung von Finanzdienstleistungen (Financial Services Standards Association), a self-regulatory association for the financial industry in Switzerland. Approval for the VQF membership was granted on April 11, 2022.

 

On February 1, 2022, the Company announced that Valour Cayman received approval to begin trading its Solana ETP on the Frankfurt Exchange, with trading to begin February 2, 2022.

 

Ventures

 

On April 5, 2022, the Company announced it had participated in the $45 million Series A raise for Boba Network, a blockchain Layer-2 scaling solution and Hybrid Compute platform that integrates smart contracts with Web2 API.

 

On January 19, 2022, the Company announced that it has made a block purchase of $WILD tokens, the native token of Wilder World, an immersive 5D Metaverse built on Ethereum, Unreal Engine 5 and open protocol ZERO.

 

Normal Course Issuer Bid

 

On April 8, 2022, the Company announced the extension of its Normal Course Issuer Bid (“NCIB”), previously launched on April 13, 2021, to buy back Common Shares through the facilities NEO Exchange and/or other Canadian alternative trading platforms. The actual number of Common Shares that may be purchased under the NCIB and the exact timing of such purchases will be determined by the Company. Under the terms of the NCIB, the Company may, if considered advisable, purchase its Common Shares in open market transactions through the facilities of the NEO Exchange and/or other Canadian alternative trading platforms not to exceed up to 10% of the public float for the Common Shares as of April 8, 2022, or 20,359,513 Common Shares, purchased in aggregate. The price that the Company will pay for the Common Shares shall be the prevailing market price at the time of purchase and all purchased Common Shares will be cancelled by the Company. In accordance with NEO Exchange rules, daily purchases (other than pursuant to a block purchase exception) on the NEO Exchange under the NCIB cannot exceed 25% of the average daily trading volume on the NEO Exchange as measured from November 8, 2021 to April 8, 2022.

 

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DESCRIPTION OF THE BUSINESS

 

General

 

The Company is a publicly listed issuer on Cboe Canada trading under the symbol “DEFI”. The Company is a technology company bridging the gap between traditional capital markets and decentralized finance through five primary business lines:

 

●Asset Management – Valour develops and lists ETPs traditional exchanges in Europe that provide indirect exposure to underlying digital assets, digital asset indexes, or other decentralized finance instruments;

 

●Ventures – The Company make early-stage investments in companies, banks and foundations in the digital asset space;

 

●DeFi Alpha – The Company operates a specialized arbitrage trading desk based in Switzerland that focuses on identifying and capitalizing on low-risk arbitrage opportunities within the digital asset market;

 

●Reflexivity Research – Reflexivity is a private research firm that specializes in producing research reports on digital assets.

 

●Stillman Digital – Sillman is an OTC desk and digital asset liquidity provider, in October 2024.

 

“Decentralized finance” or “DeFi” refers to a financial system that seeks to operate as an alternative to the traditional financial system. DeFi seeks to allow people and companies to effect transactions on a “peer to peer” basis, typically employing blockchain or other distributed ledger technology to allow participants to interact with one another directly between each other. Because transactions are effected peer to peer, DeFi does not rely on traditional intermediaries such as banks, brokerages, and stock exchange, so transactions can be completed on a more timely basis and without the fees typically charged by intermediaries.

 

Asset Management

 

Valour ETPs

 

The Company’s wholly owned subsidiary Valour Cayman develops and lists ETPs on regulated stock exchanges and multilateral trading facilities in Europe that synthetically track the value of digital assets, or an index or basket thereof. ETPs simplify the ability for retail and institutional investors to gain exposure to cryptocurrencies and decentralized finance as they remove the need to manage wallets, various logins, custody and other intricacies that are linked to managing a digital asset portfolio. Rather, retail and institutional investors can simply purchase the associated ETP with the digital asset they wish to gain exposure to through a bank or brokerage account with access to the relevant stock exchanges and multilateral trading facilities.

 

As of the date hereof, Valour Cayman has listed 55 ETPs. Valour Cayman currently lists its ETPs, on the following European stock exchanges: Spotlight Exchange, Deutsche Börse Xetra, Gettex, Frankfurt Exchange, Euronext Amsterdam, Euronext Paris and Lang and Schwarz Exchange. The listing of ETPs are subject to exchange approval by the relevant exchange. A full list of ETPs listed by Valour Cayman can be found here: https://valour.com/en/products.

 

Products and Services

 

Valour Cayman ETPs are issued under a base prospectus dated March 16, 2021 (as amended and updated to the date hereof, the “Base Prospectus”), as supplemented by supplements or final terms from time to time (“Final Terms”), which together govern the ETP program (the “Program”). The Base Prospectus has been approved by the SFSA, the Swedish financial authority, and is passport eligible in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway and Spain and/or, subject to completion of relevant notification measures, any other member state within the European Economic Area (“EEA”). For further details on the terms and conditions of the ETPs, a copy of the Base Prospectus may be obtained at https://www.fi.se/en/our-registers/prospektregistret/details/?id=24-34625.

 

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Valour Cayman’s current ETP range are all open-ended certificates that provide exposure to a single digital asset, or an index or a basket thereof, as specified in the relevant Final Terms. The Final Terms and for each of Valour Cayman’s ETPs are available on the company website on the respective ETP pages: https://valour.com/products. Valour Cayman is the issuer of the ETPs offered under the Program and also acts as calculation agent.

 

Valour Cayman’s policy is always to hedge substantially 100% of the market risk in the underlying asset. Hedging is primarily done continuously through an in-housed developed auto-hedger and in direct correspondence to the issuance of ETPs to investors, but Valour Cayman may elect to utilize other hedging methods it deems appropriate. In order to hedge its exposure to each digital asset, Valour Cayman relies on cryptocurrency exchanges and counterparties to be able to buy and sell the digital assets, or interests in funds that hold digital assets, which the ETPs track.

 

For its Bitcoin Zero and Ethereum Zero products, Valour Cayman charges zero management fees and for all other products, a management fee of 1.9% to 2.5% applies.

 

Valour Digital Securities Limited ETPs

 

VDSL is a special purpose vehicle incorporated as a public limited liability company under the laws of Jersey. VDSL is owned by the charitable trust VLR Charitable Trust in Jersey. In April 2023, VDSL obtained all regulatory approvals by the Swedish and Jersey regulators for an EU-wide offering of physically backed ETPs to investors domiciled in Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Malta, Poland, Portugal, Romania, Slovakia and Spain. Valour Cayman acts as arranger for all ETPs issued by VDSL.

 

As of the date hereof, Valour Cayman has listed 6 ETPs. VDSL ETPs are currently listed on the Deutsche Börse Xetra and Euronext Amsterdam. The listing of ETPs are subject to exchange approval by the relevant exchange.

 

Products and Services

 

VDSL ETPs are issued under a base prospectus dated April 24, 2024 (the “VDSL Base Prospectus”), as supplemented by supplements or final terms from time to time (“VDSL Final Terms”), which together govern the VDSL ETP program (the “VDSL Program”). The VDSL Base Prospectus has been approved by the SFSA, the Swedish financial authority, and is passport eligible in Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Malta, Poland, Portugal, Romania, Slovakia and Spain. VDSL may also request the SFSA to publicize the approval of the VDSL Base Prospectus to other EEA states in accordance with Regulation (EU) 2017/1129. In addition, VDSL may decide to register this VDSL Base Prospectus in Switzerland with the reviewing body SIX Exchange Regulation AG or another FINMA approved reviewing body, as a foreign prospectus that is also deemed to be approved in Switzerland pursuant to Article 54 paragraph 2 FinSA, for the purposes of making a public offer of VDSL ETPs in Switzerland or admission to trading of all or a series of VDSL ETPs on a regulated stock exchange in Switzerland. For further details on the terms and conditions of the ETPs, a copy of the VDSL Base Prospectus may be obtained at https://www.fi.se/en/our-registers/prospektregistret/details/?id=24-5713.

 

The VDSL Program permits VDSL to issue VDSL ETPs related to any one of 124 underlying digital currencies (“Digital Currencies”) (or more subject to supplements to the VDSL Base Prospectus), to a “basket” comprising two or more of such Digital Currencies or to an index linked to Digital Currencies, as specified in the relevant VDSL Final Terms. The VDSL Final Terms and for each of VDSL’s ETPs are available on the company website on the respective ETP pages: https://valour.com/products. The VDSL ETPs are designed to offer investors a means of investing in Digital Currencies without having to acquire digital assets themselves and to enable investors to buy and sell that interest through the trading of a security on a stock exchange.

 

Each VDSL ETP is an undated secured limited recourse debt obligation of VDSL, which ranks equally with all other VDSL ETPs of the same class. VDSL ETP holders only have recourse to the assets of the class of VDSL ETP of which they are a holder. If the net proceeds are insufficient for VDSL to make all payments due, neither the trustee nor any person acting on behalf of the trustee will be entitled to take any further steps against the VDSL, and no debt shall be owed by the VDSL in respect of such further sum.

 

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The underlying assets for the VDSL ETP of each class, by which they are backed and on which they are secured, comprise private keys evidencing ownership of Digital Currencies. These private keys are held in the name of VDSL in secure vaults at the premises of the relevant custodian of VDSL (“VDSL Custodian”) and are not fungible with other digital assets held by the relevant VDSL Custodian.

 

The VDSL ETPs are constituted under the trust instrument dated April 5, 2023 between VDSL and The Law Debenture Trust Corporation p.l.c. as trustee (the “Trustee”) for the holders of VDSL ETPs (“VDSL ETP Holders”) (the “Trust Instrument”). The Trustee holds all rights and entitlements under the Trust Instrument on trust for VDSL ETP Holders. In addition, VDSL and the Trustee have entered into a single security deed (the “Security Deed”) in respect of all pools of VDSP ETPs (“Pools”). The rights and entitlements held by the Trustee under the Security Deed, to the extent attributable to a Pool, are held by the Trustee on trust for the VDSL ETP Holders of that particular class of VDSL ETP. Under the terms of the Security Deed, VDSL has charged to the Trustee for the benefit of the Trustee and the relevant VDSL ETP Holders by way of first fixed charge the Digital Currencies held in custody attributable to the relevant class of VDSL ETP and all rights of VDSP in respect of the respective custody accounts to the extent attributable to the relevant Pool. VDSL has also, under the terms of the Security Deed, assigned to the Trustee by way of security the contractual rights of the issuer relating to such class under the custody agreements entered into by VDSL and has granted a first-ranking floating charge in favour of the Trustee over all of VDSL’s rights in relation to the secured property attributable to the applicable Pool, including but not limited to its rights under the custody agreements and the custody accounts attributable to that Pool.

 

VDSL charges management fees ranging from 1.9% to 2.5% on the VDSL ETPs.

 

Staking of Cryptocurrency and Defi Protocol Tokens

 

As part of Valour’s policy to hedge substantially 100% of the market risk, Valour purchases and sells the digital assets, and investments exposed to digital assets, which its ETPs track. Valour may trade, lend or stake such digital assets on its balance sheet to generate revenue in accordance with the policies in the Base Prospectus of Valour Cayman and as Staking Agent for VDSL in accordance to VDSL’s base prospectus. Lending or staking transactions are only conducted with institutional-grade counterparties and only up to a certain percentage for risk management purposes in accordance with Valour’s Lending and Staking Policy.

 

Pursuant to the Lending and Staking Policy, lending and staking activities are overseen by the Head of Asset Management and Trading (“CIO”), Head of Finance (“CFO”) and the director of Valour. Prior to entering into any lending or staking transaction, due diligence will be conducted on all potential counterparties, and in particular counterparties in the following situations:

 

●Custody of assets of Valour by third parties, without legal separation from assets of such third party

 

●Deposits of cash with banks and investment firms

 

●Bilateral FX transactions (settlement risk)

 

●Bilateral transactions in digital assets (settlement risk)

 

●Lending and borrowing transactions relating to digital assets (settlement risk)

 

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In order to evaluate a counterparty the following information is collected and documented in the counterparty scorecard:

 

Contact information

 

The name, the website and contact person at the exchange/counterparty, as well as the responsible onboarding owner on Valour side.

 

Current status

 

The current status of the relationship, the connection type, as well as the services, products and currency pairs used on the respective exchange/counterparty have to be documented and kept up to date.

 

Country of registration and regulation

 

The country in which the exchange/counterparty is registered must be documented. In addition all countries in which the exchange/counterparty holds a regulatory licence have to be assessed and documented by stating the licence number (if applicable).

 

Country risk

 

The country of registration as well as the country/-ies of regulation are evaluated by using the country risk matrix. The country risk matrix considers the FATF (and equivalent) country evaluation, the Transparency.org Corruption Perception Index (CPI) as well as the VQF SRO country risk recommendations.

 

Adverse media search

 

An adverse media search is being conducted. For example, information about an exchange having been hacked in the past or any news about a negative reputation, regulatory breaches etc are documented.

 

Public exchange scores

 

Publicly available information and risk scores from data sources such as Coinmarketcap and Coingecko are being collected and documented.

 

Information security certification

 

The exchange/counterparty information security certification status is assessed. Information about the possession of certifications such as AICPA SOC 1, SOC 2 Type I and SOC 2 Type II as well as ISO 27001 are documented.

 

Insurance coverage

 

Information about insurance protection and regulatory status in terms of investor protection are assessed and documented.

 

Proof of reserves

 

It is being checked if the exchange/counterparty has made the public wallet addresses of its cold and hot storage publicly available or if any other cryptographic means of verification of the reserves held in custody are either publicly available or have been audited.

 

Risk evaluation

 

The risk score is evaluated on a scale of 1 to 5, with 1 being the lowest risk and 5 being the highest risk. Based on the information collected in the scorecard, with a focus on regulatory licences, a risk score is calculated and documented for each exchange or counterparty.

 

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Business justification and restrictions

 

In cases where an exchange or counterparty presents increased risks, a business justification must be provided. Any decision to establish a business relationship with an exchange or counterparty with increased risks must be approved by the board.

 

Recurring review schedule

 

The review date and review frequency of all exchanges/counterparties are documented and tracked in the scorecard. A review once a year is set as the default standard, however, an ad-hoc review has to be considered in case of any event that may result in any of the assessment criteria being changed.

 

Account closure

 

If the exchange or counterparty has been identified with an increased risk, such as a risk score of 4 or 5, Valour will determine if it is necessary to close the business relationship. This decision is based on the potential exposure and the potential impact on the business and stakeholders. If it is determined that the business relationship should be terminated, a plan for closing the relationship is developed in a controlled and orderly manner. This may include transferring outstanding transactions, closing accounts, and ensuring that all necessary documents and records are properly transferred or retained. The decision to close the business relationship is communicated to the exchange or counterparty and a timeline for the closure is provided. Once the business relationship has been successfully terminated, the counterparty scorecard is updated in order to reflect the closure.

 

When deciding whether to lend or stake a particular asset, the Lending and Staking Policy provides that the decision will initially be made based on the risk profile of the potential counterparties, then the highest yield available, then prioritizing staking over lending.

 

The Lending and Staking Policy also sets limits on how much of a particular digital asset can be lent or staked of 55% in the case of assets under management of less than US$10 million, and 80% for over US$10 million. Allocations by counterparty will be limited to 33% of Valour Cayman’s aggregate assets. Exceptions to these rules can be made with Valour Board approval.

 

“Staking” refers to the process of dedicating digital assets to a particular blockchain for a set period of time so as to verify transactions on that blockchain. The act of staking typically results in the staking person or company receiving newly-created digital assets of the same type as a reward verifying the transactions. In addition, having digital assets staked improves the integrity and security of the applicable blockchain ledger.

 

Custody of Digital Assets

 

The policies of Valour require the application of internal multi-signature cold-storage and external custody. External custody solutions include specialized third-party custody providers within the United States and Europe. Valour currently utilizes the following third-party custody providers to hold and safeguard Valour’s digital assets:

 

Custodian   Location   % of digital assets custodied by market value(1)   Regulatory Body
Binance   Cayman Islands   15.3%   Cayman Islands Monetary Authority (CIMA)
B2C2 Overseas LTD   Cayman Islands   0.8%   Cayman Islands Monetary Authority (CIMA)
Bitcoin Suisse AG   Switzerland   0.0%   Financial Services Standards Association (VQF). Zug. Switzerland
Kraken   United States   0.1%   Office of Comptroller of Currency
Anchorage Digital   United States   0.0%   Office of Comptroller of Currency
Laser Digital   Switzerland   0.8%   Financial Services Standards Association (VQF). Zug. Switzerland

 

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Copper   Switzerland   7.1%   Financial Services Standards Association (VQF). Zug. Switzerland
Fund A(2)   United States   20.4%   Office of Comptroller of Currency
Fund B(2)   United States   11.1%   Office of Comptroller of Currency
Wintermute   United Kingdom   0.0%   Financial Conduct Authority (FCA)
Bitgo Trust   United States   0.5%   South Dakota Division of Banking and Money Services Business (MSB) with Financial Crimes Enforcement Network (FinCEN)

 

Note 1: As at December 31, 2024; Residual digital assets served as collateral for loans with Genesis Global Capital LLC (0.04%; subject to bankruptcy proceeding/filing as of January 19, 2023).

 

Note 2: The Company’s hold interest in funds that acquired Solana and Avalanche tokens from a bankrupt company. The Company has included these positions in this chart to illustrate the underlying Solana and Avalanche tokens held in such funds.

 

VDSL

 

Custodian   Location   % of digital assets custodied by market value(1)   Regulatory Body
Copper Markets (Switzerland) AG   Switzerland   100%   Financial Services Standards Association (VQF), Zug, Switzerland
Komainu (Jersey) Limited   Jersey   0%   Jersey Financial Services Commission

 

Note 1: As at December 31, 2024;

 

Prior to engaging any prospective third-party to perform custody services, Valour conducts diligence and counterparty risk analysis of such third-party. Such measures include:

 

●verifying contact information of the third-party and the responsible onboarding owner on the Valour Cayman side.

 

●reviewing current status of the relationship with the third-party, the connection type, as well as the services, products and currency pairs used by the third-party.

 

●documenting the prospective third-party’s regulatory regime and licenses.

 

●assessing the third-party’s jurisdiction of incorporation and regulatory regime for compliance to international anti-terrorism and money laundering guidelines such as the Financial Action Task Force country evaluation, Transparency.org Corruption Perception Index as well as the VQF SRO country risk recommendations.

 

●collecting and documenting public exchange scores, such as Coinmarketcap and Coingecko, of the third-party

 

●assessment of the third-party’s information security certification, such as AICPA SOC 1, SOC 2 Type I and SOC 2 Type II as well as ISO 27001.

 

●assessment and documentation of the third-party’s insurance coverage with respect to investor protection.

 

●verifying if the third-party has made the public wallet addresses of its cold and hot storage publicly available or if any other cryptographic means of verification of the reserves held in custody are either publicly available or have been audited.

 

●searching for any adverse public media results regarding the third-party

 

●analyzing risk exposure and business restrictions through engaging the third-party.

 

●recurring review of third-party custody providers.

 

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Valour’s current third-party custody providers do not engage sub-custodians to provide custody services. None of Valour ’s current third-party custody providers are Canadian financial institutions or related parties of the Company. Each of Valour’s third-party custody providers maintain general commercial insurance on its own behalf and would be subject to their respective jurisdiction’s bankruptcy laws in the event of such an event. The Company and Valour are not aware of any aspect of the above custody providers that would adversely affect the Company from obtaining an unqualified audit opinion on its audited financial statements. The Company and Valour are not aware of any security breaches or similar incidents with respect to its third-party custody providers.

 

In addition, Valour utilizes custody solutions offered by institutional quality exchanges. The exchanges typically store between 95% and 100% of the assets in multi-signature cold storage. Different exchanges store different proportions of their assets in online wallets, and the proportion of assets in cold storage is one of the factors determining their risk weight in our model for capital adequacy. Cold storage means storage facilities where the private keys of a wallet are held off-line protected physically as well as by the multi-signature features of the wallet. By comparison, hot storage means storage facilities or platforms that are connected to the internet, which provide greater accessibility to digital assets for users, but are subject to greater cybersecurity risks.

 

The Company does self custody some of the Company’s portfolio using meta mask and other hot wallets. The total value of the Company’s digital assets under self custody was approximately $488.4 M on December 31, 2024 (December 31, 2023 – approximately $4.5M). Some digital assets related to the Valour Cayman ETPs are self-custodied.

 

The controls around the meta mask and other hot wallets includes only senior management having access to the accounts, passwords, seed phases, etc. All copies of passwords and seed phases are secured with senior management. Duplicate copies of the passwords and seeds phases are held by two members of the senior management in different locations.

 

The following principles are applied with regards to Valour’s internal safe keeping of digital assets:

 

a.The quantities that are kept by means of hot storage shall be limited to what is reasonably estimated as required for hedging of potential transactions in the near future;

 

b.The quantities that are kept by means of hot storage shall be distributed between a reasonable number of the approved counterparties for such storage, taking practical aspects into consideration; and

 

c.The allocation of assets between Valour’s counterparties shall be optimized with respect to security and quality of Valour’s products within the limits set forth by the model for capital adequacy.

 

Specialized Skill and Knowledge

 

Valour has assembled a team of employees, officers, directors and consultants with specialized skill and knowledge of regulated exchanges in Europe, investment banking, cryptocurrencies, digital assets and decentralized finance. In particular, Valour Cayman has retained Johan Wattenstrom, Co-Founder & Director at Nortide Capital and previously the Founder of XBT Provider (now known as Coinshares), which created the world’s first ever Bitcoin ETP in 2015, and has served on the management committees of several Nordic investment banks. Olivier Roussy Newton, CEO of the Company, also serves as director of Valour.

 

Valour also retains external legal counsel with respect to regulatory compliance of its ETP programs. Additional information can be found in the Base Prospectus and the VDSL Base Prospectus.

 

Competitive Conditions

 

There are several other issuers that have listed similar tracker-products in various forms and markets. Valour holds a strong competitive position, particularly in the Nordics, due to its competitive and transparent pricing model. Valour’s Bitcoin and Ethereum Zero ETPs are the first and only of their kind to track the two largest digital assets by market capitalisation and charge zero management fees. For its other products, Valour charges 1.9% management fees, whereas competitor products in the same markets charge up to 2.5% management fees.

 

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Valour innovative product range is also a competitive advantage. As of the date of this AIF, Valour is the most comprehensive provider of crypto ETPs listed in the Nordics.

 

Cycles

 

As Valour’s products are financial markets products tracking digital assets of finite supply, the demand for ETPs may experience cycles resulting from fluctuating supply and demand, and as an alternative asset class, although the correlation between traditional markets and digital assets has been seen to be increasing.

 

Employees

 

Valour’s wholly owned service company, Valour Europe AG, employs 4 full-time employees. Valour has 5 consultants in specialized roles in marketing, finance, IT Development. DeFi Middle East (DMCC) employs 4 employees.

 

Foreign Operations

 

Valour operates primarily out of the Cayman Islands and Switzerland, with a trading desk in the United Arab Emirates.

 

Ventures

 

The Company, whether by itself or through its subsidiaries, invests in various companies and leading protocols across the DeFi ecosystem to build a diversified portfolio of digital asset and venture investments, predominantly at Seed or Series A stage. As of December 31, 2024 the Company has participated in equity or token raises from the following ventures:

 

●3iQ Corp. is a Bitcoin and digital asset fund manager that offers digital asset investment products

 

●AMINA Bank is one of the first FINMA-regulated institutions to provide crypto banking services. The broad, vertically integrated spectrum of services, combined with the highest security standards, make AMINA’s value proposition unique. AMINA operates globally from its regulated hubs of Switzerland, Abu Dhabi and Hong Kong to offer fiat and crypto services to progressive investors, traditional and crypto-native alike, whether individuals, corporates or institutions.

 

●Luxor Technologies provides a range of solutions for scaling blockchain infrastructure including a globally distributed mining pool, a hashrate network-switching engine, and a wide variety of blockchain related software.

 

●Neuronomics AG a Swiss asset management firm specializing in quantitative trading strategies powered by artificial intelligence, computational neuroscience, and quantitative finance.

 

●ZKP Corporation a cloud platform dedicated to efficient zero-knowledge proof generation

 

●Blocto is a UX-focused interoperable ecosystem that enables users to easily access dApps, crypto and NFTs cross-chain.

 

●Clover is a substrate-based smart contracts platform with Ethereum Virtual Machine (EVM) compatibility, providing cross-chain infrastructure for scaling decentralised applications (dApps).

 

●Sovyrn provides DeFi infrastructure for Bitcoin via a non-custodial and permissionless smart contract based system that enables lending, borrowing and margin trading.

 

●Saffron Finance is a peer-to-peer (P2P) risk exchange and decentralised marketplace for risk arbitrage, built on Ethereum.

 

●Oxygen Protocol is a Solana based DeFi prime brokerage service that democratises borrowing, lending, and leverage trading.

 

●Wilder World is the first full-scale, immersive 5D Metaverse being built out on Ethereum with full augmented reality (AR) and virtual reality (VR) integration.

 

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Each of these ventures were selected for their innovative potential, high quality teams, growing and / or potential user bases and unique position in the market or market share, cutting edge technology, and/or leading investors. The ventures respective use cases include borrowing and lending, decentralized exchanges, derivatives and asset management, amongst others.

 

Specialized Skill and Knowledge

 

The Company believes that the success of its Ventures line of business is dependent on the performance of its management team and the ability of the Company to leverage the network of its management, directors and advisory board. Management of the Company and its subsidiaries have extensive knowledge and understanding of evolving digital asset industry and have a strong track record of identifying sound investment opportunities and making prudent business decisions. In addition, the members of the advisory board have also been selected due to their wealth of experience in the digital asset industry. The Company has adequate personnel with the specialized skills required to successfully carry out its operations.

 

Competitive Conditions

 

As the DeFi industry is an emerging industry, competition in the space is constantly evolving. With respect to investment in DeFi projects, protocols and other ventures, the Company’s competitors range from established DeFi protocol trading companies to crypto and / or traditional VCs to individual angel investors. The Company may also compete with other emerging companies in the DeFi industry and established mutual funds, investment funds, hedge funds, investment companies, management companies and other investment vehicles for investment opportunities. Many of these competitors have greater financial, technical and other resources than the Company. To compete, the Company depends on the knowledge, experience and network of business contacts of the management, directors and the employees of the Company.

 

Reflexivity Research

 

Reflexivity Research is a digital asset research firm seeking to bridge traditional finance into the ever-evolving world of crypto. Reflexivity Research distributes newsletters for free to the general public, with portions of the content sponsored by corporate clients. Furthermore, Reflexivity Research produces commissioned reports and organizes thematic conferences. Furthermore, Reflexivity Research produces commissioned reports. Reflexivity Research does not produce research reports on any equity securities. Additionally, Reflexivity Research holds conferences in the cryptocurrency sector, such as Bitcoin Investor Day held in New York on March 22, 2024 and Crypto Investor Day held on October 25, 2024, bringing together institutional investors, capital allocators, and entrepreneurs.

 

Specialized Skill and Knowledge

 

Anthony Pompliano has been operating in the cryptocurrency market for numerous years, have built large digital audiences, and is sought out by mainstream media outlets for his knowledge and opinions.

 

Competitive Conditions

 

The digital asset research space is new and there are low barriers to entry. Furthermore, there are no geographic restrictions on where digital asset research firms can be located. As a result, there are numerous competitors to Reflexivity Research, some of which include Messari, Blockworks Research, Delphi Digital, and The Block PRO.

 

Employees

 

Reflexivity Research employs 2 employees and 4 consultants.

 

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DeFi Alpha


 

In Q2 2024, the Company formed DeFi Alpha, a specialized arbitrage trading desk under DeFi Technologies designed to identify and capitalize on low-risk arbitrage opportunities within the cryptocurrency market. Utilizing sophisticated algorithmic strategies and comprehensive market analysis, DeFi Alpha targets inefficiencies and discrepancies in digital asset pricing. Since its inception, DeFi Alpha has generated over C$133.1 million (US$97.5 million) in cash and digital asset equivalents in 2024.

 

Specialized Skill and Knowledge

 

DeFi Alpha draws from the specialized skill and knowledge of its employees and consultants at Valour, Stillman Digital and Reflexivity Research to identify and execute low-risk arbitrage opportunities. Such individuals are at the forefront of the digital asset industry, and are often able to be one of the first to identify and capitalize on such opportunities given their day-to-day exposure to arbitrage opportunities within the digital asset space.

 

Competitive Conditions

 

The trading of digital assets is not restricted to geography, time or markets, and as such, it is a highly competitive industry. There are many firms operating in the same industry with much larger financial resources, including those that are publicly-traded. DeFi Alpha’s maintains its competitive position by primarily being the first-mover for such opportunities and by being part of the consolidated Company.

 

Employees

 

DeFi Alpha does not have any full-time employees and consultants, but rather draws from the employees and consultants at Valour, Stillman Digital, Reflexivity Research and the Company.

 

Stillman Digital

 

Stillman Digital is a non-custodial, spot digital asset OTC desk and digital asset liquidity provider. With over US$15 billion in trade volume since 2021, Stillman Digital has built a strong reputation for OTC on/off ramp tradeflow, and block trading and market-making services.

 

Stillman Digital’s core products and services are:

 

●Electronic Trade Execution: Stillman Digital generates over US$500 million in monthly volume with 24/7 streaming prices, providing deep liquidity across available assets. Clients can execute trades via the Web Portal or API, with price feeds aggregated from over 30 global exchanges and trading firms.

 

●OTC Block Trading: Stillman Digital processes an average trade size of $2 million+, offering a high-touch concierge service for large block trades. Trades are conducted via voice or chat, with manual trade confirmations handled by the back office. Acting as a global on/off ramp into the crypto markets, Stillman on-ramps US$40-80 million daily and processes over US$1 billion+ in monthly trade volumes.

 

●Market-Making: Stillman Digital provides liquidity to central limit order book products through strategic partnerships and exchanges, currently handling US$400 million in monthly volume and experiencing rapid growth.

 

Specialized Skill and Knowledge

 

Stillman Digital require its employees to be knowledgeable in digital asset trade execution, regulatory compliance in their respective place of operations, trading platform software engineering and financial reporting. Stillman Digital has employed a diverse group of employees with specialization in such skills and knowledge required to operate Stillman Digital.

 

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Competitive Conditions

 

The trading of digital assets is not restricted to geography, time or markets, and as such, it is a highly competitive industry. There are many firms operating in the same industry, some with much larger financial resources and operations.

 

Employees

 

Stillman Digital employs 16 employees and 9 consultants.

 

Foreign Operations

 

SDI is registered in Wyoming, United States of America and SDB is registered in Bermuda. Both hold relevant operating licenses or registrations in their respective jurisdictions and require the maintenance of such licenses or registrations to operate.

 

Employees

 

In addition to the 8 employees and 5 consultant at Valour, 2 employees and 4 consultants at Reflexivity Research, and 16 employees and 9 consultants at Stillman Digital, the Company has 11 consultants.

 

Risk Factors

 

The Company’s business, operations, financial results and prospects are subject to the normal risks of its industry and are subject to various factors which are beyond the control of the Company. Certain of these risk factors are described below. The risks described below are not the only ones facing the Company. Additional risks not currently known to the Company, or that it currently considers immaterial, may also adversely impact the Company’s business, operations, financial results or prospects, should any such other events occur.

 

Risks Relating to the Business and Industry of the Company

 

Staking and Lending of Cryptocurrencies, DeFi Protocol Tokens or other Digital Assets

 

The Company (or entities the Company makes Equity Investments in Digital Assets in) may stake or lend digital assets to third parties or affiliates. The digital assets that are “staked” will earn rewards in the form of additional digital assets, which will accrue to the validator address, but neither the rewards nor the principal allocation of digital assets can be withdrawn for a predetermined period of time, and as a result, the liquidity of such digital assets will be limited. On termination of the staking arrangement or loan, the counterparty is required to return the digital assets to the owner; any gains or loss in the market price during the period would inure to the owner. Such limitations on liquidity could prevent the disposal of the applicable digital asset during certain periods. Liquid digital assets that are staked are maintained outside of cold storage during the staking process, locked into a smart contract and will generally not be maintained with a qualified custodian while being staked. The owner of the staked digital asset is provided with withdrawal keys that allow retrieval of the staked liquid tokens once withdrawals have been activated by the relevant protocol, and on a defined timeline with daily limits on the number of digital assets that can be withdrawn. Withdrawal keys will be held by a qualified custodian, but the additional complexities of staking liquid digital assets can increase the risk of loss. Staked liquid tokens are also subject to higher risk of loss or theft due to malicious actions, network interruptions, or a failure by third-party validators to validate transactions. Staking creates exposure to smart contracts. Smart contracts are subject to certain risks and may result in losses stemming from errors, bugs or other failures. Staking provides no guarantee of return nor are there currently efficient ways to insure against such risks. To the extent that smart contract insurance is available, it may not cover all risks related to staking of the applicable digital asset, engaging with smart contracts, or other opportunities utilized.

 

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In the event of the bankruptcy of the counterparty, the Company could experience delays in recovering its digital assets. In addition, to the extent that the value of the digital assets increases during the term of the loan, the value of the digital assets may exceed the value of collateral provided to the Company, exposing the Company to credit risks with respect to the counterparty and potentially exposing the Company to a loss of the difference between the value of the digital assets and the value of the collateral. If a counterparty defaults under its obligations with respect to a loan of digital assets, including by failing to deliver additional collateral when required or by failing to return the digital assets upon the termination of the loan, the Company may expend significant resources and incur significant expenses in connection with efforts to enforce the staking or loan agreement, which may ultimately be unsuccessful.

 

Furthermore, the Company and its affiliates may also pledge and grant security over its digital assets to secure loans. In the event that the Company or its affiliates defaults under its obligations with respect to the loan, including failure to repay the principal amount of the loan or accrued interest, lenders may realize upon its security and take possession to such pledged digital assets.

 

The digital assets that are staked, loaned or pledged to third parties by the Company include digital assets held by Valour for the purposes of hedging its ETPs. The Company is exposed to a potentially significant liquidity risk if, for example, the aggregate sale of ETPs exceed the quantum of uncommitted cryptocurrency available to the Company to satisfy such sale requests. A similar risk applies with respect to individual reserves of each type of cryptocurrency should the sale of ETPs, and correspondingly, the underlying cryptocurrency, exceed the Company’s available reserves.

 

Custody Risk

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line, its digital assets in treasury as well as for digital assets underlying Valour ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Momentum Pricing Risk

 

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Cryptocurrency and DeFi protocol token market prices are determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and DeFi Protocol tokens inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of the Company’s cryptocurrency and DeFi protocol token inventory and thereby affect the Company’s shareholders.

 

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The profitability of our operations will be significantly affected by changes in prices of cryptocurrencies, DeFi protocol tokens and other digital assets. Any declines in the volume of digital asset transactions, the price of digital assets, or market liquidity for digital assets generally may adversely affect our operating results. Cryptocurrencies, DeFi protocol tokens and other digital assets prices are highly volatile, can fluctuate substantially and are affected by numerous factors beyond our control, including use of such cryptocurrencies, DeFi protocol tokens and other digital assets in the DeFi industry, demand, inflation and expectations with respect to the rate of inflation, global or regional political or economic events. If cryptocurrencies, DeFi protocol tokens and other digital assets prices should decline and remain at low market levels for a sustained period, our financial condition may be adversely affected, and we could determine that it is not economically feasible to continue activities.

 

The price and trading volume of any digital asset is subject to significant uncertainty and volatility, depending on several factors, including, but not limited to:

 

●changes in liquidity, market-making volume, and trading activities;

 

●investment and trading activities of highly active retail and institutional users, speculators, miners, and investors;

 

●decreased user and investor confidence in digital assets and digital asset platforms;

 

●negative publicity or events and unpredictable social media coverage or “trending” of digital assets;

 

●the ability for digital assets to meet user and investor demands;

 

●the functionality and utility of digital assets and their associated ecosystems and networks;

 

●consumer preferences and perceived value of digital asset markets;

 

●regulatory or legislative changes and updates affecting the digital asset economy;

 

●the characterization of digital assets under the laws of various jurisdictions around the world;

 

●the maintenance, troubleshooting, and development of the blockchain networks;

 

●the ability for digital asset networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently;

 

●interruptions in service from or failures of major digital asset platforms;

 

●availability of an active derivatives market for various digital assets;

 

●availability of banking and payment services to support digital asset-related projects;

 

●level of interest rates and inflation;

 

●national and international economic and political conditions;

 

●global digital asset supply;

 

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●changes in the software, software requirements or hardware requirements underlying a blockchain network;

 

●competition for and among various digital assets; and

 

●actual or perceived manipulation of the markets for digital assets.

 

Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Volatility Risk

 

As Valour’s ETPs track the market price of digital assets, cryptocurrencies and DeFi protocol tokens, the value of the Common Shares relates partially to the value of such digital assets, cryptocurrencies and DeFi protocol tokens, and fluctuations in the price of cryptocurrencies, DeFi protocol tokens and other digital assets could materially and adversely affect an investment in the Common Shares. Several factors may affect the price of cryptocurrencies, DeFi protocol tokens and other digital assets, including: the total number of cryptocurrencies, DeFi protocol tokens and other digital assets in existence; global cryptocurrency, DeFi protocol tokens and other digital assets demand; global cryptocurrencies, DeFi protocol tokens and other digital assets supply; investors’ expectations with respect to the rate of inflation of fiat currencies; investors’ expectations with respect to the rate of deflation of cryptocurrencies, DeFi protocol tokens and other digital assets; interest rates; currency exchange rates, including the rates at which cryptocurrencies, DeFi protocol tokens and other digital assets may be exchanged for fiat currencies; fiat currency withdrawal and deposit policies of cryptocurrency exchanges and liquidity of such cryptocurrency exchanges; interruptions in service from or failures of major cryptocurrency exchanges; Cyber theft of cryptocurrencies, DeFi protocol tokens and other digital assets from online wallet providers, or other third parties holding digital assets, or news of such theft from such providers or from individuals’ wallets; investment and trading activities of large investors; monetary policies of governments, trade restrictions, currency devaluations and revaluations; regulatory measures, if any, that restrict the use of cryptocurrencies, DeFi protocol tokens and other digital assets as a form of payment or the purchase of cryptocurrencies, DeFi protocol tokens and other digital assets; the availability and popularity of businesses that provide cryptocurrencies, DeFi protocol tokens and other digital assets and blockchain-related services; the maintenance and development of the open-source software protocol of various cryptocurrency or DeFi protocol networks; increased competition from other forms of cryptocurrency or payments services; global or regional political, economic or financial events and situations; expectations among cryptocurrencies, DeFi protocol tokens and other digital assets economy participants that the value of cryptocurrencies, DeFi protocol tokens and other digital assets will soon change; and fees associated with processing a cryptocurrency, DeFi protocol token or other digital asset transaction.

 

Cryptocurrencies, DeFi protocol tokens and other digital assets have historically experienced significant intraday and long-term price volatility. If cryptocurrency, DeFi protocol token and other digital asset markets continue to be subject to sharp fluctuations, shareholders may experience losses if they need to sell their Common Shares at a time when the price of cryptocurrencies, DeFi protocol tokens and other digital assets is lower than it was when they purchased their Common Shares. In addition, investors should be aware that there is no assurance that cryptocurrencies, DeFi protocol tokens and other digital assets will maintain their long term value in terms of future purchasing power or that the acceptance of cryptocurrencies, DeFi protocol tokens and other digital assets payments by mainstream retail merchants and commercial businesses will continue to grow.

 

Cybersecurity Threats, Security Breaches and Hacks

 

As with any other computer code, flaws in cryptocurrency and DeFi protocol source code have been exposed by certain malicious actors. Several errors and defects have been found and corrected, including those that disabled some functionality for users and exposed users’ information. Discovery of flaws in or exploitations of the source code that allow malicious actors to take or create cryptocurrencies and / or DeFi protocol tokens can occur.

 

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Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin and other cryptocurrency exchange market since the launch of the Bitcoin Network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm the Company’s business operations or result in loss of the Company’s assets. Any breach of the Company’s infrastructure could result in damage to the Company’s reputation and reduce demand for the Common Shares, resulting in a reduction in the price of the Common Shares. Furthermore, the Company believes that if its assets grow, it may become a more appealing target for security threats, such as hackers and malware.

 

Any security procedures implemented cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by the Company. The security procedures and operational infrastructure of the Company may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s crytocurrency account, private keys, data or cryptocurrencies. Additionally, outside parties may attempt to fraudulently induce employees of the Company to disclose sensitive information in order to gain access to the Company’s infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of one of the Company’s accounts occurs, the market perception of the effectiveness of the Company could be harmed.

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack

 

Cryptocurrency Exchanges and other Trading Venues are Relatively New

 

The Company and its affiliates manages its holdings of cryptocurrency, DeFi protocol tokens and other digital assets through cryptocurrency exchanges. In particular, Valour relies on cryptocurrency exchanges to be able to buy and sell the digital assets which its ETPs track. To the extent that cryptocurrency exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, this could result in a reduction in cryptocurrency prices. Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, derivatives and other currencies. For example, in the past, a number of cryptocurrency exchanges have been closed due to fraud, business failure or security breaches. In many of these instances, the customers of these exchanges were not compensated or made whole for the partial or complete losses of their account balances in such exchanges. While smaller exchanges are less likely to have the infrastructure and capitalization that provide larger exchanges with additional stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information, or gain access to private computer systems) and may be more likely to be targets of regulatory enforcement action.

 

Regulatory Risks

 

As digital assets have grown in both popularity and market size, governments around the world have reacted differently to digital assets with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company.

 

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Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation.

 

The Company has not received any exemptive relief from regulators in Canada. The Company discusses regulatory compliance with its external legal counsel on a regular basis. Investments in the ETPs in the light of their exposure to digital assets must always be assessed by every investor based on the circumstances and legal and regulatory conditions applicable to that investor. An investor governed by such conditions may be subject to limited possibilities to invest in the ETPs and/or experience unforeseeable consequences of a holding in the ETPs. The combination of the nature of Valour’s activities, the markets to which it is exposed, the institutions with which it does business and the securities which it issues makes it particularly exposed to national, international and supranational regulatory action and taxation changes. The scope and requirements of regulation and taxation applicable to the issuer continues to change and evolve and there is a risk that as a result it may prove more difficult or impossible, or more expensive, for Valour to continue to carry on their functions in the manner currently contemplated. This may require that changes are made in the future to the agreements applicable to Valour and may result in changes to the commercial terms of the ETPs and/or the inability to apply for and redeem ETPs and/or compulsory redemption of some or all of the ETPs and/or disruption to the pricing thereof.

 

Valour Cayman and VDSL are companies which are regulated by various laws and regulations of the Cayman Islands and Jersey, respectively. Valour Cayman and VDSL cannot fully anticipate all changes that in the future may be made to laws and regulations to which Valour Cayman and VDSL are subject to in the future, nor the possible impact of all such changes. Valour Cayman and VDSL’s ability to conduct its business is dependent on the ability to comply with rules and regulations.

 

If the Company was found to be in breach of regulations applicable to Valour Cayman or VDSL, it could result in fines or adverse publicity which could have a material adverse effect on the business which in turn may lead to decreased results of operations and the company’s financial condition.

 

Valour Cayman or VDSL’s involvement in such proceedings or settlements as well as potential new legislation or regulations, decisions by public authorities or changes regarding the application of or interpretation of existing legislation, regulations or decisions by public authorities applicable to Valour Cayman or VDSL’s operations, the ETPs and/or the underlying assets, may adversely affect Valour Cayman or VDSL’s business or an investment in the ETPs.

 

The impact of any detrimental developments in the underlying digital asset’s regulation on Valour Cayman and VDSL’s ETPs becomes evident by considering an ETP’s product nature: An Exchange Traded Product is a financial instrument traded – like a share - on a stock exchange whereby typically the aim is to provide the same return as a specified benchmark or asset (before fees). Although ETPs can take a number of forms (ETFs/ETCs/ETNs), they share some common characteristics. ETPs are designed to replicate the return of an underlying benchmark or asset, with the easy access and tradability of a share or digital asset (that otherwise may only be bought via a decentralized exchange wallet-setup). Investors can benefit from the broad diversification of a benchmark, gaining exposure to hundreds or thousands of individual underlying securities – or digital assets - in a single transaction. Additionally, the wide range of asset classes covered by ETPs opens up more exotic investment areas which historically could only be accessed by institutional investors (such as individual commodities, emerging markets or digital assets). ETPs generally do all this with a lower fee than actively managed funds and therefore compete with traditional index funds on cost.

 

Valour Cayman’s ETPs are non-interest-bearing debt securities that are designed to track the return of an underlying digital asset. The current Valour ETP program in place does not provide that those securities are collateralised. Although their yield references an underlying benchmark or asset, the ETPs are similar to unsecured, listed bonds. As such, Valour ETPs are entirely reliant on the creditworthiness of Valour as issuing entity. Hence, generally a change in that creditworthiness might negatively impact the value of the ETP, irrespective of the performance of the underlying benchmark or digital asset.

 

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However, the primary appeal of these types of ETPs is that they guarantee exposure to a benchmark or an asset’s return (minus fees) even when the underlying markets or sectors suffer from liquidity shortages. The return is guaranteed by the issuing entity and not reliant on the access (direct or via a directive) to the underlying assets. Unlike physical replication, a synthetic ETP does not hold the underlying assets the product is designed to track. Instead, an ETP issuer like Valour enters into hedging transactions thereby directly or indirectly trading in the underlying assets, entering swap agreements, making investment in funds dedicated to holding the underlying digital assets etc. with a range of counterparties to provide the return of the underlying assets. Consequently, a negative change of regulation (tightening/restriction/prohibition) can have a direct impact on Valour’s issuer activity or – indirectly – by affecting its contractual counterparties. Restrictive and prohibitive regulation may lead to counterparty default, known as counterparty risk. If a counterparty defaults on its obligations under the hedging transactions described above, the ETP would not provide the return of the asset it is designed to track which could also expose investors to losses.

 

Canada

 

In Canada, the Canadian Securities Administrators (the “CSA”), the umbrella group for the provincial and territorial securities regulators, have generally taken the position that securities laws apply to cryptocurrencies. The CSA, beginning in 2017, has published a series of Staff Notices outlining their position and explaining how securities laws apply to various aspects of the cryptocurrency industry. Many of those Staff Notices have dealt with cryptocurrency trading platforms and other businesses that hold cryptocurrencies on behalf of clients, which the Company does not do as part of its business.

 

The CSA has also, however, published Staff Notices focused on the analysis of when a cryptocurrency constitutes a security for securities law purposes. On August 24, 2017 and June 11, 2018, the CSA published CSA Staff Notice 46-307 – Cryptocurrency Offerings and CSA Staff Notice 46- 308 – Securities Law Implications for Offerings of Tokens, respectively, each providing guidance on whether token offerings are subject to Canadian securities laws. While the Company does not create or sell digital assets of its own issue, through its Valour Venture and Valour Infrastructure business lines it holds a number of digital assets from a variety of issuers. In the event that any of these were determined to be securities, it could negatively impact the issuers of those digital assets by making trading subject to prospectus requirements, which could reduce the market price of such assets and therefore devalue the holdings of the Company.

 

While the Company does not have operations in the United States, the Company reviews development of the cryptocurrency regulatory environment in the United States on an ongoing basis due to the proximity of United States to Canada. In comparison to traditional securities or commodities markets, U.S. law and regulation remains thinly developed with respect to financial services provided to the cryptocurrency and digital asset markets. Although recent years have seen some guidance emerge with respect to the question of whether a digital asset constitutes a security for certain purposes under U.S. law, there remains little or no clear legal authority or established practice with respect to the application to digital assets of concepts like staking and lending of cryptocurrency, fungibility, settlement, trade execution and reporting, collateralization rehypothecation, custody, repo, margin, restricted securities, short sales, bankruptcy and insolvency and many others. Some or all of these concepts may be needed for crypto-related marketplaces to continue to grow, mature and attract institutional participants; there can be no assurances that rules and practices for such concepts will develop in the United States in a manner that is timely, clear, favorable to the Company or compatible with other jurisdictions’ regimes in which the Company operates. Furthermore, to the extent the Company offers any of these financial services, emerging regulation or enforcement activity may have a material impact on the Company’s ability to continue providing such service thereby affecting the Company’s revenues and profitability as well as its reputation and resources.

 

Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. By extension, similar actions by other governments may result in the restriction of the acquisition, ownership, holding, selling, use or trading in the common shares of the Company’s common shares. Such a restriction could result in the Company liquidating its cryptocurrency investments at unfavorable prices and may adversely affect the Company’s shareholders.

 

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U.S. Classification of digital Assets and Investment Company Act of 1940

 

The SEC and its staff have taken the position that certain digital assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given digital asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular digital asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ether are securities (in their current form). Bitcoin and Ether are the only digital assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital asset. With respect to all other digital assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular digital asset could be deemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given digital asset is a security in April 2019, this framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.

 

Several foreign jurisdictions have taken a broad-based approach to classifying digital assets as “securities,” while other foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach. As a result, certain digital assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of digital assets as “securities.” The classification of a digital asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets.

 

Additionally, we do not currently intend to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). If certain digital assets that form a part of our ETPs are determined to be digital assets, we may be obligated to register as an investment company under the Investment Company Act, and we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

 

●limitations on capital structure;

 

●restrictions on specified investments;

 

●prohibitions on transactions with affiliates; and

 

●compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

 

Further, the classification of certain digital assets as securities could draw negative publicity and a decline in the general acceptance of the digital asset, which could have a negative effect on our ETPs that contain such digital assets.

 

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Issuance of Crypto ETPs in the EU

 

As mentioned above, the Valour Base Prospectus and VDSL Base Prospectus covering the public offering of the ETPs in the EU has been approved by the SFSA, the Swedish financial authority, and is passported to Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Malta, Poland, Portugal, Romania, Slovakia and Spain where the ETPs can be offered and sold via the respective stock exchange listings.

 

The following provides an overview on the digital assets regulatory landscape on supra-national EU level, the various EU countries in which Valour issued ETPs are available or the primary EU countries where Valour may issue ETPs in the future.

 

EU

 

The EU is the first major jurisdiction worldwide to provide a comprehensive, dedicated regulatory framework for crypto-assets, the EU Markets in Crypto-Asset Regulation (“MiCA”). MiCA has four specific objectives. The first is to provide a legal framework for crypto-assets not covered by existing EU legislation on financial services. Secondly, by setting up a sound and transparent legal framework, it would support innovation, promote crypto-assets and the wider use of distributed ledger technology (“DLT”). Thirdly, the proposal would secure an appropriate level of consumer and investor protection and market integrity. Finally, it would enhance financial stability, as some of the crypto-assets may ‘become widely accepted and potentially systemic’.

 

MiCA is set to regulate crypto-assets, including so-called stablecoins that do not already fall under existing EU rules, by setting regulatory requirements for the public offer and marketing of crypto-assets and the provision of services related to them. In addition, MiCA includes provisions to prevent market abuse involving crypto-assets. More specifically, with regard to stablecoins and with a view to mitigate risks to investors and financial stability, MiCA provides that issuers of stablecoins will need to be authorised (either as a credit institution or an e-money institution for e-money tokens, or under MiCA for asset-referenced tokens) and have in place a robust and segregated reserve of assets to support the peg, and in the case of e-money tokens enable holders to redeem at par. For issuers of significant so-called stablecoins, supplemental requirements and EU-level (instead of national) supervision apply. Yet, while MiCA is intended to create a comprehensive regulatory framework for cryptoassets, continuous monitoring will remain necessary. As the system continues to evolve quickly, with novel business models and emerging risks, further regulatory actions may be required through time. A wider crypto adoption among European citizens and institutions may also expand intersystem exposures. While the broader ecosystem (asset service providers) may be subject to regulation under MiFID II or MiCA, it does not directly impact Valour as an issuer of Exchange Traded Products (ETPs).

 

MiCA and Crypto-Assets

 

MiCA represents a landmark regulatory framework for the crypto industry in the EU, aiming to provide legal certainty, enhance consumer protection, and support innovation while maintaining financial stability. MiCA applies to crypto-assets not covered by existing financial services legislation, including e-money tokens, asset-referenced tokens, and other tokens.

 

Especially, Crypto issuers must publish detailed white papers outlining specifics of crypto-assets, potential risks, and environmental impacts. White papers must be transparent, fair, and non-misleading and contain detailed information that mimick what is required in a prospectus. This is set to create a significant change in the writing of white paper and include requirements that are not seen in other parts of the world, enhancing consumer protection while posing a significant regulatory burden for companies targeting EU clients.

 

Crypto Asset Service Providers (“CASPs”) will need to obtain authorization to provide digital asset services relating to digital assets within the EU, such as custody, digital asset trading platforms, exchange of digital assets for other ones or funds, advice, portfolio management, etc. As usual, the “target test” will apply and non-EU companies targeting EU clients must comply with MiCA standards and may need to establish an EU presence.

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Providers must act in clients’ best interests, offering transparent information about pricing, fees, and risks. Especially, Client assets must be kept separate from providers’ own assets. Prompt and effective handling of client complaints is required.

 

By mid-2025, the European Commission will report on the need for additional laws to address NFTs and decentralized finance. Other EU laws impacting the crypto sector, such as those addressing money laundering, tax avoidance, and cybersecurity, will complement MiCA.

 

MiCA creates a regulatory framework for crypto-assets that are not covered by existing financial services legislation. This regulation focuses on the issuance, trading, and custody of crypto-assets, as well as the provision of crypto-asset services. Conversely, MiCA does not apply to crypto-assets that qualify as financial instruments under MiFID II.

 

MiFID II

 

Under MiFID II, transferable securities are defined as classes of securities negotiable on the capital market, excluding instruments of payment. These include:

 

1. Shares in companies and equivalent securities

2. Bonds and other forms of securitized debt

3. Any other securities giving the right to acquire or sell transferable securities or leading to cash settlement

 

While the provision of investment services related to these securities is regulated, the issuance of transferable securities itself is not a regulated activity under MiFID II.

 

Valour

 

The issuance of transferable securities linked to underlying assets is not inherently a regulated activity under MiFID II or MiCA.

 

This remains true regardless of how the relevant underlying assets are classified or treated under these regulatory frameworks. Furthermore, the regulatory status of parties providing services related to these securities does not affect the issuer’s position. In essence, the issuer’s regulatory status remains unchanged under MiFID II or MiCA, irrespective of the nature of the underlying assets or the regulatory obligations of associated service providers.

 

The act of issuing transferable securities linked to underlying assets does not, by itself, subject the issuer to regulation under MiFID II or MiCA. The regulatory treatment of the underlying assets (whether they are traditional financial instruments or crypto-assets) does not directly impact the issuer’s regulatory position. Similarly, Even if parties providing services related to these securities are regulated under MiFID II or MiCA, this does not alter the regulatory status of the issuer.

 

Valour’s regulatory position therefore remains consistent, regardless of the complex interplay between the securities, their underlying assets, and the broader regulatory environment.

 

While the issuance itself may not be a regulated activity, Valour comply will continue to comply with other regulatory obligations, such as disclosure requirements or compliance with securities laws, depending on the nature of their offerings and the jurisdictions in which they operate.

 

Valour will continue to monitor the evolving regulatory landscape, as interpretations and applications of these regulations may change over time.

 

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Sweden

 

The Financial Supervisory Authority (FSA) and the central bank have publicly declared that bitcoin is legal but not an official form of payment or legal tender. From a tax perspective they are viewed as an asset, not a currency or cash. The FSA has warned of the risks associated with cryptos and investment products with cryptos as underlying assets such as exchange-traded products (ETPs). Sweden has imposed registration requirements that mean custodians, wallet providers and exchanges must comply with the Swedish Currency Exchange Act. The act requires certain types of financial institutions (which are otherwise largely unregulated and unsupervised) to comply with AML provisions. The scope of the Currency Exchange Act now includes custodian wallet providers and providers of virtual currency exchange services in accordance with the implementation of the Fifth Anti-Money Laundering Directive (AMLD5). Mining activities are not regulated under Swedish law. There are no licensing or registration requirements specifically applicable to virtual currency mining activities. Sweden’s Central Bank, the Riksbanken, has been a leader in developing a CBDC, the e-krona.

 

France

 

In April 2019, the French National Assembly adopted the Plan d’Action pour la Croissance et la Transformation de Enterprises (PACTE – Action Plan for Business Growth and Transformation) that will establish a framework for digital asset services providers. France’s Financial Market Authority (AMF) has adopted new rules and regulations for cryptocurrency service providers and ICOs, related to the (PACTE). Ordinance № 2020-154452, was issued on December 9, 2020, to compliment France’s cryptocurrency regulations. In June 2021, the regulations were finalized and went into effect. Firms are now subject to mandatory registration and subject to stricter KYC regulations. The rules established new AML/CFT rules related to digital assets. They imposed new requirements on crypto exchanges and prohibit anonymous accounts, expand AML/CFT and KYC obligations to better harmonize the French AML framework with Financial Action Task Force (FATF) principles and respond to new risks associated with digital assets. France has been actively involved in shaping EU-wide crypto regulations, such as the Markets in Crypto-Assets Regulation (MiCA), which will impact its domestic regulatory landscape, as other EU Member States.

 

Germany

 

The German government was one of the first countries to provide legal certainty to financial institutions, allowing them to hold crypto-assets. Regulations stipulate that citizens and legal entities can buy or trade crypto-assets as long as it is done through licensed exchanges and custodians. Pursuant to those regulations crypto-assets qualify as financial instruments under the German Banking Act and firms providing services in regard to crypto-assets must be licensed by the German Federal Financial Supervisory Authority (BaFin). With the applicability of MiCA, the German supervisory framework for the provision of digital asset services has been changed by the German Financial Market Digitalization Act, with changes to the German Banking Act (KWG) set to come into effect on December 30, 2024. The German Banking Act is still applicable for crypto-assets which fall under the MiFID II regime. Crypto-assets falling within the scope of MiCA are exclusively subject to the requirements of MiCA. Germany has signed up to requirements under AMLD5.

 

Italy

 

In February 2022, Italy published new AML rules for crypto firms which outline registration and reporting requirements for VASPs that align with the EU AMLD5 and the Financial Action Task Force (FATF) guidelines for crypto firms. The new rules also require virtual asset service providers to register in a special roster for crypto firms. Registration is required if firms offer any digital asset-related services in the country. Italy joined the European Blockchain Partnership (EBP) along with 22 other countries in April 2018. The EBP was established to enable member states to work together with the European Commission on blockchain technology. Cryptocurrencies and blockchain are regulated at the legislative level in Italy under Legislative Act no. 90. The decree in 2017 grouped cryptocurrency exchanges with foreign currency exchanges. Although the decree states that cryptocurrencies are not issued by the central bank and are not correlated with other currencies, it is a virtual currency used as a medium of exchange for goods and services.

 

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Austria

 

The Financial Market Authority (“FMA”) has warned investors that cryptocurrencies are risky and that the FMA does not supervise or regulate virtual currencies, including bitcoin, or cryptocurrency trading platforms. The FMA’s regulations follow Austria’s implementation of the Fifth Money Laundering Directive (“AMLD5”), defining crypto-assets as “financial instruments.” The FMA regulations provide registration requirements with respect to the issuance and selling of virtual currencies as well as transferring them, trading and exchange platforms for them as well as providers of custodian wallets. Cryptocurrencies are legal but are not considered as legal tender. The Austrian Ministry of Finance classes cryptocurrencies as “other (intangible) commodities.”

 

Belgium

 

The Belgian Financial Services and Markets Authority and the National Bank of Belgium are the primary regulatory bodies for financial services in Belgium. The regulators have published guidance and warnings to the public that cryptocurrencies are not legal tender and have also issued statements regarding scams and investor protection. Belgium has, however, fostered a strong fintech community involved in digital assets and blockchain. The minister of justice has announced plans to establish a legal framework related to cryptos. In February 2022 Belgium announced new rules for certain virtual asset service providers. The rules, which took effect in May 2022, require service providers “to meet a series of conditions, including ones relating to their professional integrity and compliance with the anti-money laundering legislation.”

 

Denmark

 

The Danish Financial Supervisory Authority is the main regulator in Denmark. Cryptocurrency regulation is, however, influenced by EU law. An amendment in January 2020 to the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism defines a virtual currency as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.” There is no regulation of mining for virtual currencies in Denmark. Denmark amended the AML Act in 2020 to implement AMLD5, which is designed to bring virtual currencies within the scope of the existing AML-laws. The Danish central bank, the Nationalbanken, is researching the development of a digital currency, the “e-krone.”

 

Finland

 

In May 2019, Finland’s Financial Supervisory Authority (FSA) began regulating virtual currency exchange providers, wallets and issuers of virtual currencies. Registration is required to ensure compliance with statutory requirements surrounding reliability of the provider, protection of client money, segregation of assets, marketing and compliance with AML/CFT regulations. The FSA has warned consumers of the risky, volatile and speculative nature of the investments. The Finnish FSA has published stricter rulings regarding crypto marketing saying “Only registered virtual currency providers can market virtual currencies and related services in Finland. The marketing of virtual currencies in Finnish and in Finland is only allowed for entities registered as virtual currency providers in Finland.” The list of supervised entities operating in the cryptocurrency and digital currency sector is small; although, the FSA does not advise on or restrict Finnish customers visiting foreign websites. Finland has joined the European Blockchain Partnership and agreed to AMLD5.

 

Luxembourg

 

In the Luxembourg, there is not yet a formal regulatory stance on crypto-assets, but the “Virtual Assets – FAQ” document published in November 2021 and updated in January 2022 by the Commission de Surveillance du Secteur Financier (CSSF) has shed a light on some aspects.

 

For instance, it clarified that Undertaking for Collective Investment in Transferable Securities (UCITS) funds and Undertakings for Collective Investment (UCIs) addressing non-professional customers and pension funds are forbidden to invest directly or indirectly in Virtual Assets. The document also outlines the conditions under which Alternative Investment Funds (AIFs) may invest in crypto-assets, as well as the requirements for the Alternative Investment Fund Manager (AIFM) and the specific Anti-Money Laundering (AML) considerations.

 

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Lastly, in a FAQ document on virtual assets for credit institutions issued in January 2022 by the CSSF, the regulator states that credit institutions may directly invest in virtual assets and open accounts that allow customers to invest in virtual assets. On the other hand, credit institutions cannot open bank accounts in virtual assets, must submit a business case as well as an application file to the CSSF to provide virtual assets services and must set up an effective investor protection framework.

 

The Netherlands

 

The Dutch Central National Bank De Nederlandsche N.V. (DNB) requires crypto firms to register with it. Dutch regulations require VASPs to provide identifying information on themselves and their customers. The DNB also supervises crypto service providers’ compliance with the Sanctions Act 1977. The DNB defines cryptos as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.” In May 2020 the Dutch Implementation Act amended Dutch AML rules and implemented AMLD5.

 

Norway

 

Cryptocurrencies are legal. They are defined as an asset and not any type of money. Norway has been an attractive location for blockchain start-ups. The Financial Supervisory Authority of Norway “Finanstilsynet” and the country’s Ministry of Finance has established money laundering regulations which apply to “Norwegian providers of virtual currency exchange and storage services.” The legislation requires firms such as storage services and exchanges that convert cryptos to fiat currency to comply with AML rules, but it does not impose regulatory obligations on other crypto services. “Finanstilsynet will ensure that virtual currency exchange and storage providers comply with the money laundering rules. However, FSA does not have any tasks monitoring other areas of these providers, such as investor protection,” the regulator said. In June 2021, Finanstilsynet published a warning which said, “Most cryptocurrencies are subject to extreme price fluctuations. The risk of loss is high… Price formation is in many cases not transparent.” It also warned of significant criminal activity. “Scammers use spam, computer viruses, fake drawings and a variety of other techniques to deceive consumers,” the warning stated.

 

Spain

 

Like its neighbor Portugal, Spain was a notable early hot spot for cryptocurrencies among EU members, with merchants accepting payments and bitcoin kiosks in the streets. Despite having no formal legal status, virtual currencies in Spain are taxable as income and under VAT. In 2021 the Spanish Securities and Exchange Commission, the Comision Nacional del Mercado de Valores (CNMV) and the Bank of Spain issued a joint statement warning of the risks and volatility associated with cryptos. The joint statement also highlighted that, from a legal standpoint, cryptocurrencies are not a means of payment and are not backed by a central bank or other customer protection mechanisms or authority. Spain issued the Royal Decree Law 5/202176 which included a provision giving the CNMV power to regulate advertising related to cryptocurrencies. In January 2022, the CNMV published a circular saying it would begin to regulate rampant advertising of digital assets, including by social media influencers, to make sure investors are aware of risks.

 

ETP issuance into non-EU countries

 

Although some of its operational staff is located in Switzerland, Valour does not yet offer any ETPs in Switzerland. Valour offers ETPs in the United Kingdom.

 

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Switzerland

 

Switzerland is known as one of the most cryptocurrency-friendly nations in the world. Switzerland’s financial markets regulator, the Swiss Financial Market Supervisory Authority (FINMA) has defined licensing requirements for cryptocurrency businesses of all types including bitcoin kiosk operations, and has created requirements for blockchain companies. Cryptocurrency businesses are subject to AML regulations and licensing requirements under FINMA. FINMA’s regulatory environment complies with the FATF’s digital asset regulation issued in June 2019. Switzerland further improved its regulations surrounding tokens with the August 2021 implementation of the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (the “DLT Act”).

 

The United Kingdom

 

The cryptoasset legal and regulatory landscape in the UK is rapidly evolving. Since January 10, 2020, certain types of cryptoasset business operating in the UK (i.e. those offering exchange services and custody services) have been regulated by the Financial Conduct Authority (“FCA”) for anti-money laundering and counter-terrorist financing (“AML/CTF”) purposes. In March 2024, the London Stock Exchange (“LSE”) confirmed that it will accept applications for the admission of BTC and ETH backed crypto ETNs commencing from the second quarter of 2024 (for professional investors only). The FCA concurrently updated its position on cryptoassets and stated that it will not object to requests to create a UK listed market segment for asset-backed crypto ETNs. The first such ETNs were listed in 2024 and the market has grown since.

 

In 2023, the government announced plans to legislate for a comprehensive future financial services regime for cryptoassets—accordingly, the FCA’s remit is expected to expand from the AML/CTF regime and financial promotions rules to cover wider conduct rules in relation to a broad variety of activities involving cryptoassets (including stablecoins) and various projects are underway in relation to these matters but further final rules are not expected until 2026. In December 2024, the FCA published consultations on admissions and disclosures, and the market abuse regime for cryptoassets. Additionally, in January 2025, new legislation came into force which clarifies that cryptoasset staking arrangements do not fall within scope of the definition of “collective investment schemes”. The Prudential Regulatory Authority (“PRA”) and the Bank of England (“BoE”) are also developing their policy approach towards the prudential treatment of cryptoasset exposures (in line with the standards set out in the updated Basel Framework) – to that effect, the PRA issued a data request in December 2024 seeking to gather information from firms to inform its approach. Further, the Digital Securities Sandbox (“DSS”) formally opened for applications in September 2024. The DSS is the first FMI sandbox created under the powers conferred on HM Treasury by FSMA 2023, and provides a regulated environment for firms, in particular financial market infrastructures (“FMIs”), to test new technologies such as distributed ledger technology (“DLT”) in the issuance, trading and settlement of transferable securities. Importantly, the UK government is seeking to deliver a pilot issuance of digital gilts (known as the Digital Gilt Instrument, or DIGIT) in the short to medium term, through the DSS.

 

In terms of legislative reform, the Law Commission of England and Wales has carried out extensive analysis on a number of digital asset related issues, including on smart contracts, property rights of digital assets, private international law challenges in matters involving digital assets, decentralised autonomous organisation (“DAOs”), and electronic trade documents. Following the recommendation of the Law Commission, the Property (Digital Assets etc.) Bill was introduced into Parliament in 2024, which seeks to clarify that under English law, things (such as digital assets) are not prevented from being capable of attracting property rights on the basis that they do not fit easily into existing categories of “property” (as defined under historic common law). The Bill is currently progressing through the legislative process.

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Venture Portfolio Exposure

 

Given the nature of the Company’s Venture activities, the results of operations and financial condition of the Company are dependent upon the market value of the securities, tokens and cryptocurrencies that comprise Venture’s portfolio assets. Market value can be reflective of the actual or anticipated operating results of companies or projects in the portfolio and/or the general market conditions that affect the technology, crypto and DeFi sectors. Various factors affecting these sectors could have a negative impact on the Company’s portfolio of investments and thereby have an adverse effect on its business. Additionally, the Company’s investments are mostly in early stage ventures that may never mature or generate adequate returns or may require a number of years to do so. Junior companies may never achieve commercial success. This may create an irregular pattern in the Company’s investment gains and revenues (if any) and an investment in the Company’s securities may only be suitable for investors who are prepared to hold their investment for a long period of time. Macro factors such as commodity prices, the growth and decline of disruptive technologies, including DeFi technologies, and global political and economic conditions could have an adverse effect on the mining, technological and Defi sectors, thereby negatively affecting the Company’s portfolio of investments. Company and project-specific risks, such as the risks associated with emerging companies and project in the technology, crypto and DeFi sectors generally, could have an adverse effect on one or more of the investments in the portfolio at any point in time. Company, project and industry-specific risks that materially adversely affect the Company’s investment portfolio may have a materially adverse impact on operating results.

 

Banks May Cut off Banking Services to Businesses that Provide Cryptocurrency-related Services

 

A number of companies that provide cryptocurrency-related services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, a number of such companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to cryptocurrency related companies or companies that accept cryptocurrencies for a number of reasons, such as perceived compliance risks or costs. The difficulty that many businesses that provide cryptocurrency-related services have and may continue to have in finding banks willing to provide them with bank accounts and other banking services may be currently decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies or could decrease its usefulness and harm its public perception in the future. Similarly, the usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks were to close the accounts of many or of a few key businesses providing cryptocurrency-related services. This could decrease the market prices of cryptocurrencies and adversely affect the value of the Company’s cryptocurrency inventory.

 

Impact of Geopolitical Events

 

Crises may motivate large-scale purchases of cryptocurrencies which could increase the price of cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of the Company’s cryptocurrency holdings. The possibility of large-scale purchases of cryptocurrencies in times of crisis may have a short-term positive impact on the prices of same. Future geopolitical crises may erode investors’ confidence in the stability of cryptocurrencies and may impair their price performance which would, in turn, adversely affect the Company’s cryptocurrency holdings.

 

As an alternative to fiat currencies that are backed by central governments, cryptocurrencies are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally. Large-scale sales of cryptocurrencies would result in a reduction in their market prices and adversely affect the Company’s operations and profitability.

 

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Further Development and Acceptance of Digital Assets and DeFi Networks

 

The further development and acceptance of digital assets and other cryptographic and algorithmic protocols governing the issuance of transactions in cryptocurrencies and DeFi Protocols, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of such networks may adversely affect the value of the corresponding cryptocurrencies and DeFi Protocol tokens, and thus may adversely affect the Company’s operations. The factors affecting the further development of the industry, include, but are not limited to the following:

 

●continued worldwide growth in the adoption and use of cryptocurrencies and DeFi;

 

●governmental and quasi-governmental regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency and DeFi systems;

 

●changes in consumer demographics and public tastes and preferences;

 

●the maintenance and development of the open-source software protocol of relevant networks;

 

●the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

●general economic conditions and the regulatory environment relating to digital assets and decentralized finance; and

 

●negative consumer sentiment and perception of cryptocurrencies.

 

Currently, there is relatively small use of digital assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect the Company’s operations, investment strategies, and profitability.

 

As relatively new products and technologies, cryptocurrencies have not been widely adopted, for example as a means of payment for goods and services, by major retail and commercial outlets. Conversely, a significant portion of digital asset demand is generated by speculators and investors seeking to profit from the short-term or long-term holding of digital assets. The relative lack of acceptance of digital assets in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services or other direct use cases that may arise. A lack of expansion by cryptocurrencies into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in their market prices, either of which could adversely impact the Company’s operations, investment strategies, and profitability. Further, if fees increase for recording transactions in the applicable Blockchain, demand for cryptocurrencies may be reduced and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the price of cryptocurrencies.

 

Trade Errors

 

We may make, or otherwise be subject to, trade errors. Errors may occur with respect to trades executed on our behalf. Trade errors can result from a variety of situations, including, for example, when the wrong investment is purchased or sold or when the wrong quantity is purchased or sold. Trade errors frequently result in losses, which could be material. To the extent that an error is caused by a third party, we may seek to recover any losses associated with the error, although there may be contractual limitations on any third party’s liability with respect to such error.

 

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Dependence on Investment Manager.

 

The success of the Company’s Equity Investments in Digital Assets is dependent upon the ability of the investment manager to manage the investment fund and effectively implement the investment fund’s investment program. The investment fund’s governing documents do not permit the Company participate in the management and affairs of the investment fund.

 

Discretion as to Distributions and Timing of Withdrawal

 

The investment manager of the Company’s Equity Investment in Digital Assets is not obligated to distribute digital assets in-kind nor to distribute the proceeds form the sale of any digital assets. The Company is permitted to make withdrawals, however, the ability to make withdrawals may be limited while the investment manager is actively engaged in investment strategies or for other purposes. The Company is required to be provide a significant advance notice in respect of any withdrawal and accordingly its ability to withdraw in a timely manner is limited.

 

Discretion as to Form of Payment.

 

The investment manager of the Company’s Equity Investments in Digital Assets has the discretion to make distribution and pay withdrawals in unlocked digital assets, cash or a combination. There can be no assurance as to (i) the form of distribution or payment, (ii) that the investment fund will have sufficient cash or unlocked digital assets to satisfy withdrawal requests, or that it will be able to liquidate investments at favorable prices at the time such withdrawals are requested. The Company has no right to request in-kind distributions, and should not expect the investment fund to accommodate any such request.

 

Conditions on Equity Investments in Digital Assets

 

The digital assets held by the Equity Investments in Digital Assets are subject to staggered lock up periods pursuant to which the digital assets are not freely tradeable. As a result, the Company may only request to withdraw the portion of it capital account balance that corresponds to its pro-rata share of the applicable digital assets that is no longer locked-up and freely transferable by the investment fund.

 

Development and Acceptance of the Digital Asset Networks

 

The growth and use of digital assets generally is subject to a high degree of uncertainty. The future of the industry likely depends on several factors, including, but not limited to: (a) economic and regulatory conditions relating to both fiat currencies and digital assets; (b) government regulation of the use of and access to digital assets; (c) government regulation of digital asset service providers, administrators or exchanges; and (d) the domestic and global market demand for—and availability of—other forms of digital asset or payment methods. Any slowing or stopping of the development or acceptance of digital assets may adversely affect the Company.

 

Digital Asset Audit Risk

 

Audits for entities holding digital assets are unlike audits for other types of entities. Special procedures must be taken to determine whether investments and transactions are properly accounted for and valued because independent confirmation of digital asset ownership (e.g., ownership of a balance on a digital asset exchange) differs dramatically from traditional confirmation with a securities broker or bank account. The Company requires satisfactory processes in place in order for the auditor to obtain the Company’s transaction history and properly prepare audited financials. Any breakdown in such processes may result in delays or other impediments of an audit. In addition, the complexity of digital assets generally may lead to difficulties in connection with the preparation of audited financials.

 

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Risk of Total Loss of Equity Investment in Digital Assets.

 

While all investments risk the loss of capital, the equity investment in digital assets should be considered substantially more speculative and significantly more likely to result in a total loss of capital than most other investment funds. The investment manager will not attempt to mitigate the potential of loss of capital through the use of risk management techniques. Rather, the investment manager generally intends only to sell the digital assets when such sales are necessary in order to satisfy withdrawal requests. Furthermore, the investment manager does not intend to hedge potential losses and will not make investment decisions based on the price of the digital assets. Consequently, the equity investment in Digital Assets could result in the total loss of the Company’s capital.

 

Risk of Loss, Theft or Destruction of Cryptocurrencies

 

There is a risk that some or all of the Company’s cryptocurrencies could be lost, stolen or destroyed. Digital assets of Valour that are held internally via multi-signature cold storage may be prone to loss or theft as a result of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. If the Company’s cryptocurrencies are lost, stolen or destroyed under circumstances rendering a party liable to the Company, the responsible party may not have the financial resources sufficient to satisfy the Company’s claim.

 

Irrevocability of Transactions

 

Bitcoin and most other cryptocurrency and DeFi protocol token transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies or DeFi protocol tokens may be irretrievable. Such transactions are not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of cryptocurrencies or a theft of cryptocurrencies generally will not be reversible and the Company may not be capable of seeking compensation for any such transfer or theft. To the extent that the Company is unable to seek a corrective transaction with the third party or is incapable of identifying the third party that has received the Company’s cryptocurrencies through error or theft, the Company will be unable to revert or otherwise recover incorrectly transferred cryptocurrencies. The Company will also be unable to convert or recover cryptocurrencies transferred to uncontrolled accounts.

 

Potential Failure to Maintain Digital Asset Networks

 

Many digital asset networks, including the Bitcoin Network, operate based on an open-source protocol maintained by the core developers of such networks and other contributors. As such protocols are not sold and their uses do not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating such network protocols. Consequently, there is a lack of financial incentive for developers to maintain or develop such networks and the core developers may lack the resources to adequately address emerging issues with such network protocol. Although the many networks, including the Bitcoin Network, are currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. To the extent that material issues arise with such network protocol and the core developers and open source contributors are unable to address the issues adequately or in a timely manner, such networks and an investment in the Common Shares may be adversely affected.

 

Potential Manipulation of Blockchain

 

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains control of more than 50% of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter or manipulate the Blockchain on which the Bitcoin Network and most Bitcoin transactions rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new Bitcoins or transactions using such control. The malicious actor could “double-spend” its own Bitcoins (i.e., spend the same Bitcoins in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the processing power on the Bitcoin Network or the Bitcoin community did not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible. To the extent that the Bitcoin ecosystem, including the core developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin Network will increase.

 

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Miners May Cease Operations

 

If the award of Bitcoins or other cryptocurrencies for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners in relevant networks, miners may cease expending processing power to solve blocks and confirmations of transactions on the Bitcoin Blockchain or other networks could be slowed. A reduction in the processing power expended by miners on the applicable blockchain network could increase the likelihood of a malicious actor or botnet obtaining control.

 

Risks Related to Insurance

 

The Company intends to insure its operations in accordance with technology industry practice. However, given the novelty of cryptocurrency mining and associated businesses, such insurance may not be available, may be uneconomical for the Company, or the nature or level may be insufficient to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the Company.

 

Concentration of Investments

 

Other than as described herein, there are no restrictions on the proportion of the Company’s funds and no limit on the amount of funds that may be allocated to any particular investment. The Company may participate in a limited number of investments and, as a consequence, its financial results may be substantially adversely affected by the unfavorable performance of a single investment. Completion of one or more investments may result in a highly concentrated investment in a particular company, commodity or geographic area resulting in the performance of the Company depending significantly on the performance of such company, commodity or geographic area. As at December 31, 2023, the Company’s investments through its Venture business arm comprise of C$44,184,021, which represented approximately 7.5% of the Company’s total assets.

 

Competition

 

The Company operates in a highly competitive industry and competes against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively.

 

The cryptoeconomy is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. The Company’s business line compete against several companies and expect that we will face even more competition in the future. These competitors could have various competitive advantages over us, including but not limited to:

 

●greater name recognition, longer operating histories, and larger market shares;

 

●larger sales and marketing budgets and organizations;

 

●more established marketing, banking, and compliance relationships;

 

●greater resources to make acquisitions;

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●lower labor, compliance, risk mitigation, and research and development costs;

 

●operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and

 

●substantially greater financial, technical, and other resources.

 

If the Company is unable to compete successfully, or if competing successfully requires the Company to take costly actions in response to the actions of the Company’s competitors, the Company’s business, operating results, and financial condition could be adversely affected.

 

Harm to the Company’s brand and reputation could adversely affect the Company’s business. The Company’s reputation and brand may be adversely affected by complaints and negative publicity about the Company, even if factually incorrect or based on isolated incidents. Damage to the Company’s brand and reputation may be caused by:

 

●cybersecurity attacks, privacy or data security breaches, or other security incidents;

 

●complaints or negative publicity about the Company, its ETPs, its management team, its other employees or contractors or third-party service providers;

 

●actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by its management team, its other employees or contractors or third-party service providers;

 

●unfavorable media coverage;

 

●litigation involving, or regulatory actions or investigations into its business;

 

●a failure to comply with legal, tax and regulatory requirements;

 

●any perceived or actual weakness in its financial strength or liquidity;

 

●any regulatory action that results in changes to or prohibits certain lines of its business;

 

●a failure to operate our business in a way that is consistent with its values and mission;

 

●a sustained downturn in general economic conditions; and

 

●any of the foregoing with respect to its competitors, to the extent the resulting negative perception affects the public’s perception of the Company or its industry as a whole.

 

Private Issuers and Illiquid Securities

 

Through its Ventures business line, the Company invests in securities and / or digital assets of private issuers or projects. These may be subject to trading restrictions, including hold periods, and there may not be any market for such securities or digital assets. These limitations may impair the Company’s ability to react quickly to market conditions or negotiate the most favourable terms for exiting such investments. Investments in private issuers or projects are subject to a relatively high degree of risk. There can be no assurance that a public market will develop for any of the Company’s private investments, or that the Company will otherwise be able to realize a return on such investments.

 

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The value attributed to securities and / or digital assets of private issuers or projects will be the cost thereof, subject to adjustment in limited circumstances, and therefore may not reflect the amount for which they can actually be sold. Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a ready market had existed for the investments.

 

The Company may also invest in illiquid securities of public issuers. A considerable period of time may elapse between the time a decision is made to sell such securities and the time the Company is able to do so, and the value of such securities could decline during such period. Illiquid investments are subject to various risks, particularly the risk that the Company will be unable to realize its investment objectives by sale or other disposition at attractive prices or otherwise be unable to complete any exit strategy. In some cases, the Company may be prohibited by contract or by law from selling such securities for a period of time or otherwise be restricted from disposing of such securities. Furthermore, the types of investments made may require a substantial length of time to liquidate.

 

The Company may also make direct investments in publicly traded securities that have low trading volumes. Accordingly, it may be difficult to make trades in these securities without adversely affecting the price of such securities.

 

Cash Flow, Revenue and Liquidity

 

The Company’s revenue and cash flow is generated primarily from financing activities, proceeds from the disposition of investments, management fees of ETPs and staking and lending activities of cryptocurrencies and DeFi protocol tokens. The availability of these sources of income and the amounts generated from these sources depend upon various factors, many of which are outside of the Company’s direct control. The Company’s liquidity and operating results may be adversely affected if its access to the capital markets is hindered, whether as a result of a downturn in the market conditions generally or to matters specific to us, if the value of our investments decline, resulting in losses upon disposition, if there is low demand for our ETPs, resulting in lack of management fees received, and if rates provided by counterparties for staking and lending decrease.

 

Risk Management

 

The Company seeks to mitigate risk and have established policies for the types of risk to which the Company is subject, including operational risk, credit risk, market risk, counterparty risk, exchange risk and liquidity risk. However, there are inherent limitations to our current and future risk management strategies, including risks that management has not appropriately anticipated or identified. Accurate and timely enterprise-wide risk information is necessary to enhance management’s decision- making in times of crisis. If the Company’s risk management framework proves ineffective or if our enterprise-wide management information is incomplete or inaccurate, we could suffer unexpected losses, which could materially adversely affect our business, results of operations and financial condition. The Company continually assesses its risk profile and risk management processes across the firm to identify opportunities for improvement and to consider whether it needs to address new technologies and innovations in its risk management processes and policies. While the Company has not identified any material gaps with respect to recent digital asset market events, the Company cannot guarantee that our risk management processes will continue to be effective in preventing or mitigating losses from future market events.

 

Dependence on Management Personnel

 

The Company is dependent upon the efforts, skill and business contacts of key members of management, the Board and the Advisory Board, for among other things, the information and deal flow they generate during the normal course of their activities and the synergies that exist amongst their various fields of expertise and knowledge. Accordingly, the Company’s success may depend upon the continued service of these individuals who are not obligated to remain consultants to the Company. The loss of the services of any of these individuals could have a material adverse effect on the Company’s revenues, net income and cash flows and could harm its ability to maintain or grow existing assets and raise additional funds in the future.

 

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Sensitivity to Macro-Economic Conditions

 

Due to the Company’s focus on decentralized finance industry, the success of the Company’s investments is interconnected to the growth of disruptive technologies. The Company may be adversely affected by the falling share prices of the securities of investee companies, cryptocurrencies, DeFi Protocol tokens and other digital assets, as the trading price for the Common Shares may reflect the estimated aggregate value of the Company’s portfolio of investments and assets under management. The factors affecting current macro-economic conditions are beyond the control of the Company.

 

Available Opportunities and Competition for Investments

 

The success of the Company’s Ventures line of business will depend upon: (i) the availability of appropriate investment opportunities; (ii) the Company’s ability to identify, select, acquire, grow and exit those investments; and (iii) the Company’s ability to generate funds for future investments. The Company can expect to encounter competition from other entities having similar investment objectives, including institutional investors and strategic investors. These groups may compete for the same investments as the Company, may be better capitalized, have more personnel, have a longer operating history and have different return targets. As a result, the Company may not be able to compete successfully for investments. In addition, competition for investments may lead to the price of such investments increasing which may further limit the Company’s ability to generate desired returns. There can be no assurance that there will be a sufficient number of suitable investment opportunities available to invest in or that such investments can be made within a reasonable period of time. There can be no assurance that the Company will be able to identify suitable investment opportunities, acquire them at a reasonable cost or achieve an appropriate rate of return. Identifying attractive opportunities is difficult, highly competitive and involves a high degree of uncertainty. Potential returns from investments will be diminished to the extent that the Company is unable to find and make a sufficient number of attractive investments.

 

Share Prices of Investments

 

Investments in securities of public companies are subject to volatility in the share prices of the companies. There can be no assurance that an active trading market for any of the subject shares is sustainable. The trading prices of the subject shares could be subject to wide fluctuations in response to various factors beyond the Company’s control, including quarterly variations in the subject companies’ results of operations, changes in earnings, results of exploration and development activities, estimates by analysts, conditions in the mining, technological and cryptocurrency industries and general market or economic conditions. In recent years equity markets have experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on market prices, often unrelated to the operating performance of the specific companies. Such market fluctuations could adversely affect the market price of the Company’s investments.

 

Additional Financing Requirements

 

The Company anticipates ongoing requirements for funds to support its growth and may seek to obtain additional funds for these purposes through public or private equity, or debt financing. There are no assurances that additional funding will be available on acceptable terms, at an acceptable level or at all. Any additional equity financing may cause shareholders to experience dilution, and any debt financing would result in interest expense and possible restrictions on the Company’s operations or ability to incur additional debt. Any limitations on the Company’s ability to access the capital markets for additional funds could have a material adverse effect on its ability to grow its investment portfolio.

 

No Guaranteed Return

 

There is no guarantee that an investment in the Company’s securities will earn any positive return in the short term or long term. The task of identifying investment opportunities, monitoring such investments and realizing a significant return is difficult. Many organizations operated by persons of competence and integrity have been unable to make, manage and realize a return on such investments. In addition, past performance provides no assurance of future success.

 

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Failure to Develop and Execute Successful Investment or Trading Strategies

 

The success of the Company’s investment and trading activities, including though DeFi Alpha, will depend on the ability of the investment team to identify overvalued and undervalued investment opportunities and to exploit price discrepancies. This process involves a high degree of uncertainty. No assurance can be given that the Company will be able to identify suitable or profitable investment opportunities in which to deploy our capital. The success of the trading activities also depends on the Company’s ability to remain competitive with other DeFi providers. Competition in trading is based on price, offerings, level of service, technology, relationships and market intelligence. The success of investment activities depends on the Company’s ability to source deals and obtain favorable terms. The barrier to entry in each of these businesses is very low and competitors can easily and will likely provide similar services in the near future. The success of the Company’s Venture investments and trading business could suffer if the Company is not able to remain competitive.

 

Management of the Company’s Growth

 

Significant growth in the business, as a result of acquisitions or otherwise, could place a strain on the Company’s managerial, operational and financial resources and information systems. Future operating results will depend on the ability of senior management to manage rapidly changing business conditions, and to implement and improve the Company’s technical, administrative and financial controls and reporting systems. No assurance can be given that the Company will succeed in these efforts. The failure to effectively manage and improve these systems could increase costs, which could have a materially adverse effect on the Company’s operating results and overall performance.

 

Social, Political, Environmental and Economic Risks in the Countries in which the Company’s Investments are Located

 

The Company’s investments are affected in varying degrees by the political and social stability, environmental and economic conditions in the countries in which its investments are located. Such investments may also be affected in varying degrees by terrorism, military conflict or repression, crime, populism, activism, labour unrest, renegotiation, nullification or failure to renew or grant existing concessions, licences permits and contracts, unstable or unreliable legal systems, changes in fiscal regimes including taxation, and other risks arising out of sovereignty issues.

 

Due Diligence

 

The due diligence process undertaken by the Company in connection with investment opportunities may not reveal all facts that may be relevant in connection with the investments. Before making investments, the Company conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, the Company may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, the Company relies on resources available including information provided by the target of the investment and, in some circumstances, third-party investigations. The due diligence process that is carried out with respect to investment opportunities may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful.

 

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Exchange Rate Fluctuations

 

A significant portion of the Company’s cryptocurrency, DeFi protocol tokens and digital asset holdings could be invested in United States dollar denominated investments or other foreign currencies. Changes in the value of the foreign currencies in which the Company’s investments are denominated could have a negative impact on the ultimate return on its investments and overall financial performance.

 

Non-controlling Interests

 

The Company’s investments include debt instruments and equity securities of companies that it does not control. Such instruments and securities may be acquired through trading activities or through purchases of securities directly from the issuer. These investments are subject to the risk that the company in which the investment is made may make business, financial or management decisions with which the Company does not agree or that the majority stakeholders or the management of the investee company may take risks or otherwise act in a manner that does not serve the Company’s interests. If any of the foregoing was to occur, the value of the Company’s investments could decrease and its financial condition, results of operations and cash flow could suffer as a result.

 

Changes in Legislation and Regulatory Risk

 

There can be no assurance that laws applicable to the Company or the businesses in which the Company invests, including securities legislation, will not be changed in a manner which adversely affects the Company. If such laws change, such changes could have a negative effect upon the value of the Company and upon investment opportunities available to the Company.

 

Risks Relating to the Business and Financial Condition of the Company

 

Limited Operating History as a DeFi Company

 

The Company announced its focus in the DeFi industry on January 19, 2021. The Company’s limited operating history and the lack of meaningful historical financial data makes it difficult to fully evaluate the Company’s prospects. To the extent that the Company is able to execute its business plan, its business will be subject to all of the problems that typically affect a business with a limited operating history, such as unanticipated expenses, capital shortfalls, delays in program development and possible cost overruns. Investment in the securities of the Company is highly speculative given the nature of the Company’s business.

 

The Company’s success will depend on many factors, including some which may be beyond its control or which cannot be accounted for at this time, such as the market’s acceptance of the products of its investee companies, the emergence of potential competitors, and changes in economic conditions. For the reasons discussed in this section and elsewhere in this AIF, it is possible that the Company may not generate revenues or profits in the foreseeable future or at all.

 

No History of Operating Revenue and Cash Flow

 

The Company is dependent on financings and future cash flows to meet its obligations. The future performance of the business and the ability of the Company’s subsidiaries to provide the Company with payments may be constrained by factors such as, among others: success of the Company’s corporate strategy, economic downturns; technological and regulatory changes; the cash flows generated by operations, investment activities and financing activities; and the level of taxation, particularly corporate profits and withholding taxes. If the Company is unable to generate sufficient cash from operations, the Company may be required to incur indebtedness, raise funds in a public or private equity or debt offering, or sell some or all of its assets. There can be no assurance that any such financing will be available on satisfactory terms or that it will be sufficient.

 

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The Company may be subject to limitations on the repatriation of earnings in each of the countries where the Company, including its investee companies, do business. In particular, there may be significant withholding taxes applicable to the repatriation of funds from foreign countries to Canada. There can be no assurance that changes in regulations, including tax treaties, in and among the relevant countries where the Company or its investee companies do business will not take place, and if such changes occur, they may adversely impact the Company’s ability to receive sufficient cash payments from its subsidiaries.

 

Insufficient Cash Flow and Funds in Reserve

 

The Company’s cash flow and funds in reserve may not be sufficient to fund its ongoing activities at all times and from time to time and it may require additional financing in order to carry out its activities. In addition, the Company may incur major unanticipated liabilities or expenses. Although the Company has been successful in the past in financing its activities, there can be no assurance that the Company will be able to obtain additional financing on commercially acceptable terms. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of Company. There is risk that if the economy and banking industry experienced unexpected and/or prolonged deterioration, the Company’s access to additional financing may be affected. This may be further complicated by the limited market liquidity for shares of smaller companies such as the Company, restricting access to some institutional investors. Due to uncertainty in the capital markets, the Company may from time to time have restricted access to capital and increased borrowing costs. To the extent that external sources of capital become limited, unavailable, or available on onerous terms, the Company’s ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition, results of operations and prospects may be affected materially and adversely as a result.

 

The Company, along with all other companies, may face reduced cash flow and restricted access to capital if the global economic situation deteriorates. A prolonged period of adverse market conditions may impede the Company’s ability to grow and complete additional acquisitions, if desired. In addition, a prolonged period of adverse market conditions may impede the Company’s ability to service any of its loans or arrange alternative financing when the existing loans become due. In each case, the Company’s business, financial condition, results of operations and prospects would be adversely affected.

 

Material Weakness in the Company’s Financial Statements

 

We identified a material weakness in our internal control over financial reporting and restated our financial statements for the three-month periods ended June 30, 2023, and September 30, 2023 as a result of factors related to that weakness. This may adversely affect the accuracy and reliability of our financial statements and, if we fail to maintain effective internal financial control reporting (“ICFR”) it could impact our reputation, business and the price of the Common Shares, as well as lead to a loss of investor confidence in us.

 

There can be no assurance that we will be able to successfully remediate the identified material weakness, or that we will not identify additional control deficiencies or material weaknesses in the future. If we are unable to successfully remediate our existing or any future material weaknesses in our ICFR, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities laws and CBOE listing requirements regarding the timely filing of periodic reports, investors may lose confidence in our financial reporting and the price of our stock may decline.

 

We continue to execute our plan to remediate the material weakness identified. The remediation measures are ongoing, and although not all inclusive, include implementing additional policies, procedures, and controls. We are working to remediate our material weakness as efficiently and effectively as possible. At this time, we cannot provide an estimate of the timing for achieving full remediation or the costs expected to be incurred in connection with implementing this remediation plan; however, these remediation measures will be time consuming, could result in us incurring significant costs, and could place significant demands on our financial and operational resources. We cannot assure you that the measures undertaken to remediate the material weakness will be sufficient or that they will prevent future material weaknesses. Additional material weaknesses or failure to maintain effective internal control over financial reporting could cause us to fail to meet our reporting obligations as a public company and may result in a restatement of our financial statements for prior periods.

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The preparation of financial statements and related disclosures in conformity with IFRS requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory or auditor views differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our needing to revise or restate prior period financial statements, cause damage to our reputation and the price of our common shares, and adversely affect our business, financial condition and results of operations.

 

Risks related to the Expense and Impact of Restatement of the Company’s Historical Financial Statements

 

The Company will need to restate certain historical financial statements to reflect a correction to its accounting for its digital assets. Specifically, the Company had previously valued its position in Equity Investments in Digital Assets subject to an extended lock-up period based on market price; however, in connection with the preparation of its financial statements for the year ended December 31, 2024, the Company’s auditors concluded that the valuation of the position should use a discounted valuation reflecting the lock-up. For more information, see “Restatement of Previously Issued Condense Interim Consolidated Financial Statements” in the Company’s Annual Management’s Discussion and Analysis for the year ended December 31, 2024.

 

It is difficult to predict all of the ramifications to the Company from the restatement. The restatement process is time and resource-intensive and involved substantial attention from management and significant costs and expenses, including for professional advisors assisting with the restatement. It is possible that the Company will receive inquiries from the Canadian securities regulators, and/or Cboe Canada regarding the restated financial statements or related matters, which could consume a significant amount of resources. Moreover, many companies that have been required to restate their historical financial statements have experienced volatility in stock prices and declines in stock prices and shareholder lawsuits, which can be expensive to defend and divert Management attention and resources. The Company may suffer similar consequences as a result of the restatement.

 

Lack of Comprehensive Accounting Guidance for Digital Assets under IFRS Accounting Standards

 

The holding of digital assets in Canada is an emerging industry with unique technological aspects, a number of novel auditing challenges have arisen. Audit firms, standard setters, and regulatory bodies continue to explore these challenges and potential solutions. Because there has been limited precedent set and a lack of specific accounting guidance for cryptocurrencies under certain applicable accounting standards, including, among other things, revenue recognition, it is unclear if DeFi companies (in particular, companies like the Company that utilize IFRS Accounting Standards) may be required to account for cryptocurrency operations, transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards, or interpretations thereof by the Canadian Securities Administrators, particularly as they relate to the Company and the financial accounting of its DeFi-related operations, could result in changes in the Company’s accounting policies. Further, unlike in the case of U.S. generally accepted accounting principles where the Financial Accounting Standards Board has recently issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain crypto assets, no similar guidance has yet been issued in respect of IFRS Accounting Standards. In addition, the accounting policies of many Bitcoin mining companies are being subjected to heightened scrutiny by regulators and the public.

 

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It is possible that, as a result of the determinations by applicable securities regulators as to the application of the relevant IFRS Accounting Standards, the Company could be obligated in the future to restate historical financial statements. In connection with any such restatement the market price of the Common Shares could be adversely affected, and the Company could become subject to private litigation or to investigations or enforcement actions by the Ontario Securities Commission or other regulatory authorities, all of which could require the Company’s expenditure of additional financial and management resources. Furthermore, continued uncertainty with regard to financial accounting matters, particularly as they relate to the Company, the financial accounting of its DeFi-related operations, could negatively impact the Company’s business, prospects, financial condition and results of operations and its ability to raise capital on terms acceptable to the Company or at all.

 

Conflicts of Interest may Arise

 

Certain current or future directors and officers of the Company and its subsidiaries may be shareholders, directors and officers of other companies that may operate in the same sectors as the Company. Such associations may give rise to conflicts of interest from time to time. The directors and officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in such conflict is required under the applicable corporate laws to disclose his or her interest and to abstain from voting on such matter.

 

Hedging Risk

 

Except as described in the Base Prospectus and the VDSL Base Prospectus We are not obligated to, and often times may not, hedge our exposures. However, from time to time, we may use a variety of financial instruments and derivatives, such as options, swaps, and forward contracts, for risk management purposes, including to: protect against possible changes in the market value of our investment or trading assets resulting from fluctuations in cryptocurrency markets or securities markets and changes in interest rates; protect our unrealized gains in the value of our investments or trading assets; facilitate the sale of any such assets; enhance or preserve returns, spreads or gains on any trade or investment; hedge the interest-rate or currency-exchange risk on any of our liabilities or assets; protect against any increase in the price of any assets that we anticipate purchasing at a later date; or to any other end that we deem appropriate. The success of any hedging activities by us will depend, in part, on our ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the assets being hedged. Since the characteristics of many assets change as markets change or time passes, the success of our hedging strategy will also be subject to our ability to continually recalculate, readjust and execute hedges in an efficient and timely manner. In addition, while we may enter into hedging transactions to seek to reduce risk, such transactions may actually increase risk or result in a poorer overall performance for us than if we had not engaged in such hedging transactions.

 

With respect to Valour, Valour’s hedging programs will not fully eliminate the market and other risks related to its ETPs, and the hedging programs themselves expose Vaour to additional risks. Valour’s hedging programs are not designed to completely offset all risks associated with the various exposures embedded in the ETPs. The profit (loss) on the hedge instruments employed may not completely offset the underlying losses (gains) related to its ETPs for many potential reasons including

 

●a portion of the yield on any ETP may not hedged;

 

●hedging instruments may have differing liquidity attributes as compared to the liquidity requirements of the ETPs;

 

●hedging instruments introduce additional risks to Valour, including counterparty risk;

 

●performance of the underlying funds hedged may differ from the performance of the corresponding hedge instruments; and

 

●not all other risks are hedged.

 

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Valour’s hedging programs may employ various types of instruments including, but not long and short direct and indirect positions on underlying assets, swaps, options, forwards and futures. Improper use of these instruments could have an adverse impact on earnings.

 

Risks Relating to the Common Shares

 

Market Price of Common Shares may Experience Volatility

 

The market price of the Common Shares has been volatile in the past and may continue to be volatile. The market price is, and could be, subject to wide fluctuations due to a number of factors, including actual or anticipated fluctuations in the Company’s results of operations, changes in estimates of its future results of operations by management or securities analysts, market rumours, investments or divestments by the Company or its competitors and general industry changes.

 

Many of the factors that could affect the market price of the Common Shares are outside of the Company’s control. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of the Common Shares. The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of the Common Shares.

 

Shareholders’ Interest in the Company may be Diluted in the Future

 

If the Company raises additional funding by issuing additional equity securities, or securities convertible into equity, such financing may substantially dilute the interests of shareholders.

 

The Company has Never Paid Dividends and may not do so in the Foreseeable Future

 

The Company has never paid cash dividends on its Common Shares. Currently, the Company intends to retain its future earnings, if any, to fund the development and growth of its business, and does not anticipate paying any cash dividends on its Common Shares in the near future. As a result, shareholders will have to rely on capital appreciation, if any, to earn a return on investment in any Common Shares in the foreseeable future. See “Dividends”.

 

DIVIDENDS

 

The Company has not paid any dividends since its incorporation. Any determination to pay any future dividends will be at the discretion of the Board and will be made based on the Company’s financial condition and other factors deemed relevant by the Board. There are currently no restrictions on the ability of the Company to pay dividends except as set out under the OBCA.

 

DESCRIPTION OF SHARE CAPITAL

 

The Company is authorized to issue an unlimited number of Common Shares without par value. The holders of Common Shares are entitled to dividends, subject to the rights of holders of any other class of shares of the Company, if, as and when declared by the Board. The holders of Common Shares are also entitled to one vote per Common Share at meetings of the shareholders of the Company and, subject to the rights of holders of any other class of shares of the Company, to share, on a pro rata basis with the other holders of Common Shares, the net assets of the Company, upon liquidation, dissolution or winding up of the Company. The Common Shares are not subject to call or assessment nor do they carry any pre-emptive or conversion rights. There are no provisions attached to such shares for redemption, purchase for cancellation, surrender or sinking or purchase funds.

 

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As of the date hereof, 327,070,307 Common Shares are issued and outstanding.

 

As of the date hereof, the Company also has 26,906,187 options, 23,125,000 warrants and 13,156,507 deferred share units (“DSUs”) issued and outstanding. See the notes to the Company’s audited financial statements for the year ended December 31, 2024 for additional information regarding the Company’s convertible securities.

 

MARKET FOR SECURITIES

 

Trading Price and Volume

 

The Common Shares are listed and posted for trading on Cboe Canada under the symbol “DEFI”. The following table sets forth, on a monthly basis, the reported high and low sale prices (which are not necessarily closing prices) and the aggregate volume of trading of the Common Shares on Cboe Canada during the financial year ended December 31, 2024.

 

Date

  

High ($)

  

Low ($)

  

Volume

January 2024   0.79   0.37   9,543,929
February 2024   0.76   0.56   5,809,359
March 2024   0.70   0.58   5,428,483
April 2024   0.98   0.62   10,001,542
May 2024   1.45   0.89   8,942,775
June 2024   3.33   1.08   40,332,763
July 2024   2.54   1.56   13,403,405
August 2024   3.10   1.70   17,396,415
September 2024   3.05   2.29   10,461,299
October 2024   2.91   2.42   9,660,366
November 2024   3.67   2.08   30,789,653
December 2024   5.24   3.12   26,313,589

 

Prior Sales

 

During the financial year ended December 31, 2024, with respect to each class of securities of the Company that is outstanding as of the date of this AIF and not listed or quoted on a marketplace, the Company issued the following securities:

 

Date of Issuance

  

Security

  

Number of Securities Issued

  

Exercise Price Per Security ($)

March 12, 2024   Options   125,000   $0.69
April 23, 2024   Options   250,000   $0.77
April 29, 2024   Options   250,000   $0.77
May 21, 2024   Options   200,000   $1.03
June 4, 2024   Options   4,000,000   $1.26
May 21, 2024   DSU   2,700,000   N/A
July 29, 2024   Options   3,667,187   $2.17
July 29, 2024   DSU   4,439,007   N/A
September 24, 2024   DSU   1,125,000   N/A
November 4, 2024   Options   146,500   $2.28
November 4, 2024   DSU   100,000   N/A
November 21, 2024   DSU   1,950,000   N/A
December 6, 2024   Options   635,000   $4.50
December 6, 2024   DSU   600,000   N/A

 

Escrowed securities

 

To the Company’s knowledge, no securities of the Company are held in escrow or that are subject to a contractual restriction.

 

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DIRECTORS AND OFFICERS

 

The following table sets forth for each director and executive officer of the Company as at the date of this AIF, each such individual’s name, province or state and country of residence, position(s) held with the Company, principal occupation(s) for the last five years, if currently a director, period(s) during which such individual has served as a director of the Company, and the number and percentage of issued and outstanding Common Shares beneficially owned, or controlled or directed, directly or indirectly, by such individual (for avoidance of doubt, excluding any convertible securities in the capital of the Company held by such individual). The statements as to principal occupation(s) for the last five years of, and the number and percentage of Common Shares beneficially owned, or controlled or directed, directly or indirectly, by, the directors and executive officers of the Company are in each instance based upon information furnished by the individuals concerned. All directors of the Company hold office until the next annual meeting of shareholders of the Company or until their successors are elected or appointed.

 

Name, Province/State and Country of Residence and Position(s)
with the Company		   Principal Occupation(s) for the Last Five Years   Period(s) Served
as a Director		   Number of
Common Shares
Beneficially Owned or Controlled or Directed		   Percentage of Common Shares Beneficially Owned or Controlled or Directed

Olivier Roussy Newton

Zug, Switzerland

Chief Executive Officer and Executive Chairman

  

Founder and Partner of Latent Capital since July 2015.

 

Chief Executive Officer of the Company since October 2022.

   Since June 30, 2023   17,947,810   5.48%

Paul Bozoki

Toronto, Canada

Chief Financial Officer

  Former Chief Financial Officer of Black Iron Inc.   N/A   0   0%

Kenny Choi

Toronto, Canada

Corporate Secretary

   Corporate Secretary of the Company since December 2018.   N/A   1,359,095   0.41%

Stefan Hascoet(1) (3)

Geneva, Switzerland

Director

   Managing Partner of Deep Knowledge Ventures Suisse   Since June 20, 2023   1,753,000   0.53%

Mikael Tandetnik(1) (3)

Geneva, Switzerland

Director

   Founder of Ariane Group SA   Since June 20, 2023   1,415,455   0.43%

Suzanne Ennis(1) (3)

Ontario, Canada

Director

   VP of Corporate Development at Hut 8   Since June 22, 2023   200,100   0.06%

Andrew Forson(3)

Switzerland

Director

   Head of Ventures and Investments at The Hasgraph Association   Since July 31, 2024   0   0%

Chase Ergen(3)

Leysin, Switzerland

Director

   Security Specialist at Nagravision SA   Since March 3, 2025   0   0%

 

Notes:

 

(1)Member of the Corporation’s audit committee.

 

(2)Member of the Compensation, Nomination and Governance Committee

 

(3)Independent director

 

As of the date hereof, the directors and executive officers of the Company, as a group, beneficially owned, or controlled or directed, directly or indirectly, 22,675,460 Common Shares, representing 6.9% of the total issued and outstanding Common Shares.

 

54

 

 

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

 

No director or executive officer of the Company is, as at the date hereof, or has been, within the ten years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that:

 

(a)was subject to a cease trade or similar order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days and that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or

 

(b)was subject to a cease trade or similar order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as a director, chief executive officer or chief financial officer.

 

No director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company:

 

(a)is, as at the date hereof, or has been, within the ten years before the date hereof, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

 

(b)has, within the ten years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.

 

As at the date hereof, no director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, has been subject to:

 

(a)any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

 

(b)any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

 

Conflicts of Interest

 

The directors and officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interests that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in a conflict is required to disclose his interest and abstain from voting on such matter in accordance with the OBCA. In appropriate cases, the Company will establish a special committee of independent non-executive directors to review a matter in which one or more directors or officers may have a conflict.

 

To the best of the Company’s knowledge, and other than as disclosed herein, there are no known existing or potential material conflicts of interest between the Company or a subsidiary of the Company and any director or officer of the Company or a subsidiary of the Company, except that certain of the directors and officers serve as directors and officers of other public or private companies and therefore it is possible that a conflict may arise between their duties as a director or officer of the Company and their duties as a director or officer of such other companies.

 

55

 

 

AUDIT COMMITTEE DISCLOSURE

 

National Instrument 52-110 – Audit Committees of the Canadian Securities Administrators (“NI 52 110”) requires the Company to have a written audit committee charter and to make the disclosure required by Form 52-110F1.

 

Audit Committee Charter

 

A copy of the Charter of the Audit Committee of the Board, which has been adopted by the Board in order to comply with NI 52 110 and to more properly define the role of the Audit Committee in the oversight of the financial reporting process of the Company is attached hereto as Schedule “A”. Nothing in the Charter is intended to restrict the ability of the Board or Committee to alter or vary procedures in order to comply more fully with the Instrument, as amended from time to time.

 

The Audit Committee is comprised of Suzanne Ennis, Mikael Tandetnik and Stefan Hascoet. Each member of the Audit Committee is independent of the Company and financially literate, as such terms are defined in NI 52 110.

 

Relevant Education and Experience

 

The following is a brief summary of the education and experience of each member of the Audit Committee that is relevant to the performance of his or her responsibilities as a member of the Audit Committee.


Sue Ennis is an award-winning technology and innovation advocate, currently serving as Head of Investor Relations at Hut 8, a major U.S data infrastructure operator and Bitcoin miner. With over 15 years of experience, she has raised over a billion dollars for Canadian and U.S structured product and small cap companies, emphasizing the fintech and digital asset sectors. Before Hut 8, she held roles at Shyft Networks, Coinsquare, Voyager, and Invesco. A chartered investment manager and certified blockchain expert, Sue is known for simplifying complex concepts as a global keynote speaker. She advises Locera Vision, a health tech spin-out from Tufts University. Ms. Ennis obtained a Bachelor of Arts degree from McMaster University.

 

Mr. Tandetnik is a seasoned wealth manager and CEO with a strong background in finance. He embarked on his career as a Salesperson for equity and structured products at BNP Paribas, gaining valuable experience in the field. Subsequently, he transitioned to various brokerage firms, honing his expertise in investment management. After founding LS Advisor in Paris and driven by his passion for the cryptocurrency industry, Mr. Tandetnik established Ariane Group SA in Geneva, a wealth management companies specializing in catering to cryptocurrency clients and investments. He played a pivotal role in numerous fundraising initiatives for both listed and unlisted private crypto companies, demonstrating his deep involvement in the crypto space. Mr. Tandetnik’s academic qualifications include a Bachelor’s degree in Business from the Ecole Supérieure de Gestion et Finance (ESGF) in France and a Master’s degree from ESLSCA, where he specialized in Trading and Options.

 

Mr. Hascoet is a capital markets professional who spent 12 years in the City of London in the field of equity derivatives and cross-asset structured products working for three global investment banks, including at RBC Capital Markets, leading a team covering Swiss clients. After his initial training in the institutional finance world, Mr. Hascoet decided to focus on the dual fields of finance & blockchains through various entrepreneurial endeavors, focusing on making blockchain assets investible and building bridges with the established banking systems and capital markets frameworks. Mr. Hascoet is a Swiss resident, based in Geneva, Managing Partner of Deep Knowledge Ventures Suisse, a data-driven investment holding of commercial and non-profit organizations active in the fields of DeepTech, Fintech and Longevity. Mr. Hascoet is a graduate of the French Grande Ecole system, having studied at l’Ecole Ste Genevieve in Versailles and ESCP Business School in Paris.

 

56

 

 

Audit Committee Oversight

 

At no time since the commencement of the Company’s most recently completed financial year has there been a recommendation of the Audit Committee to nominate or compensate an external auditor that was not adopted by the Board.

 

Reliance on Certain Exemptions

 

At no time since the commencement of the Company’s most recently completed financial year has the Company relied on any available exemption regarding the composition, responsibilities, independence, financial literacy or otherwise of the Audit Committee.

 

Pre-Approval Policies and Procedures

 

The Audit Committee has not adopted specific policies and procedures for the engagement of non audit services. In accordance with its charter, all non-audit services are pre-approved by the Audit Committee.

 

External Auditor Service Fees

 

Audit Fees

 

The Company’s external auditors, HDCPA Professional Corporation, billed the Company $524,342 in the financial year ended December 31, 2024 for audit fees and $186,450 in the financial year ended December 31, 2023 for audit fees.

 

Audit-Related Fees

 

The Company’s external auditors, HDCPA Professional Corporation, billed the Company $NIL in the financial year ending December 31, 2024 and $NIL in the financial year ending December 31, 2023 for assurance and related services related to the performance of the audit or review of the Company’s financial statements, which are not included in audit fees.

 

Tax Fees

 

The Company’s external auditors, HDCPA Professional Corporation, billed the Company $21,00 in the financial year ending December 31, 2024 and $NIL in the financial year ending December 31, 2023 for tax compliance, tax advice and tax planning.

 

All Other Fees

 

No other fees were charged by the external auditors for the financial years ended December 31, 2024 and December 31, 2023.

 

PROMOTER

 

The Company does not have a promoter.

 

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

 

The Company has not been since, and was not during, the financial year ended December 31, 2024 a party to any legal proceedings, nor has any of its property been since nor was any of its property during the financial year ended December 31, 2024, subject of any legal proceedings.

 

57

 

 

There have been no penalties or sanctions imposed against the Company by a court relating to securities legislation or by any securities regulatory authority since or during the financial year ended December 31, 2024, or any other penalties or sanctions imposed by a court or regulatory body against the Company that would likely be considered important to a reasonable investor in making an investment decision, and the Company has not entered into any settlement agreements with a court relating to securities legislation or with a securities regulatory authority since or during the financial year ended December 31, 2024.

 

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

 

Other than as disclosed herein, none of the directors or executive officers of the Company, nor any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued and outstanding Common Shares, nor any associate or affiliate of the foregoing persons or companies, has or has had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect the Company.

 

TRANSFER AGENT AND REGISTRAR

 

The transfer agent and registrar for the Common Shares is Odyssey Trust Company, at #702-67 Yonge Street, Toronto ON M5E 1J8.

 

MATERIAL CONTRACTS

 

The Company has no material contracts.

 

INTERESTS OF EXPERTS

 

The Company’s external auditor during the financial year ended December 31, 2023 was HDCPA Professional Corporation. HDCPA Professional Corporation has advised the Company that it is independent of the Company in accordance with the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario.

 

ADDITIONAL INFORMATION

 

Additional information relating to the Company may be found under the Company’s profile on SEDAR+ at www.sedarplus.ca.

 

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, is contained in the Company’s management information circular dated May 14, 2024 prepared in connection with the Company’s annual and special meeting of shareholders held on June 25, 2024.

 

Additional financial information is provided in the Company’s annual consolidated financial statements and management’s discussion and analysis for the financial year ended December 31, 2024, both of which are available under the Company’s profile on SEDAR+ at www.sedarplus.ca.

 

58

 

 

Schedule “A”

 

Audit Committee Charter

 

Mandate

 

The primary function of the audit committee (the “Committee”) is to assist the board of directors in fulfilling its financial oversight responsibilities by reviewing the financial reports and other financial information provided by the Company to regulatory authorities and shareholders, the Company’s systems of internal controls regarding finance and accounting and the Company’s auditing, accounting and financial reporting processes. Consistent with this function, the Committee will encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels. The Committee’s primary duties and responsibilities are to (i) serve as an independent and objective party to monitor the Company’s financial reporting and internal control system and review the Company’s financial statements; (ii) review and appraise the performance of the Company’s external auditors; and (iii) provide an open avenue of communication among the Company’s auditors, financial and senior management and the board of directors.

 

Composition

 

The Committee shall be comprised of three directors as determined by the board of directors, the majority of whom shall be free from any relationship that, in the opinion of the board of directors, would interfere with the exercise of his or her independent judgment as a member of the Committee.

 

At least one member of the Committee shall have accounting or related financial management expertise. All members of the Committee that are not financially literate will work towards becoming financially literate to obtain a working familiarity with basic finance and accounting practices. For the purposes of this Charter, the definition of “financially literate” is the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can presumably be expected to be raised by the Company’s financial statements.

 

The members of the Committee shall be elected by the board of directors at its first meeting following the annual shareholders’ meeting. Unless a Chair is elected by the full board of directors, the members of the Committee may designate a Chair by a majority vote of the full Committee membership.

 

Meetings

 

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee will meet at least annually with the Chief Financial Officer and the external auditors in separate sessions.

 

Responsibilities and Duties

 

To fulfil its responsibilities and duties, the Committee shall:

 

Documents/Reports Review

 

(a)Review and update this Charter annually.

 

(b)Review the Company’s financial statements, management discussion and analysis (“MD&A”) and any annual and interim earnings, press releases before the Company publicly discloses this informimation and any reports or other financial information (including quarterly financial statements), which are submitted to any governmental body, or to the public, including any certification, report, opinion or review rendered by the external auditors.

 

59

 

 

External Auditors

 

(a)Review annually the performance of the external auditors who shall be ultimately accountable to the board of directors and the Committee as representatives of the shareholders of the Company.

 

(b)Obtain annually a formal written statement of the external auditors setting forth all relationships between the external auditors and the Company, consistent with Independence Standards Board Standard 1.

 

(c)Review and discuss with the external auditors any disclosed relationships or services that may impact the objectivity and independence of the external auditors.

 

(d)Take or recommend that the full board of directors take appropriate action to oversee the independence of the external auditors.

 

(e)Recommend to the board of directors the selection and, where applicable, the replacement of the external auditors nominated annually for shareholder approval.

 

(f)At each meeting, consult with the external auditors, without the presence of management, about the quality of the Company’s accounting principles, internal controls and the completeness and accuracy of the Company’s financial statements.

 

(g)Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company.

 

(h)Review with management and the external auditors the audit plan for the year- end financial statements and intended template for such statements.

 

(i)Review and pre-approve all audit and audit-related services and the fees and other compensation related thereto, and any non-audit services, provided by the Company’s external auditors. The pre-approval requirement is waived with respect to the provision of non-audit services if:

 

(i)the aggregate amount of all such non-audit services provided to the Company constitutes not more than 5% of the total amount of revenues paid by the Company to its external auditors during the fiscal year in which the non-audit services are provided;

 

(ii)such services were not recognized by the Company at the time of the engagement to be non-audit services; and

 

(iii)such services are promptly brought to the attention of the Committee by the Company and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Committee.

 

Provided the pre-approval of the non-audit services is presented to the Committee’s first scheduled meeting following such approval such authority may be delegated by the Committee to one or more independent members of the Committee.

 

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Financial Reporting Processes

 

(a)In consultation with the external auditors, review with management the integrity of the Company’s financial reporting process, both internal and external.

 

(b)Consider the external auditor’s judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.

 

(c)Consider and approve, if appropriate, changes to the Company’s auditing and accounting principles and practices as suggested by the external auditors and management.

 

(d)Review significant judgments made by management in the preparation of the financial statements and the view of the external auditors as to appropriateness of such judgments.

 

(e)Following completion of the annual audit, review separately with management and the external auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

 

(f)Review any significant disagreement among management and the external auditors in connection with the preparation of the financial statements.

 

(g)Review with the external auditors and management the extent to which changes and improvements in financial or accounting practices have been implemented.

 

(h)Review any complaints or concerns about any questionable accounting, internal accounting controls or auditing matters.

 

(a)Review certification process.

 

(b)Establish a procedure for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

 

Other

 

Review any related party transactions.

 

61

Exhibit 99.127

 

FORM 52-109F1

CERTIFICATION OF ANNUAL FILINGS

FULL CERTIFICATE

 

I, Olivier Roussy Newton, Chief Executive Officer of DeFi Technologies Inc., certify the following:

 

1.I have reviewed the AIF, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in those documents (together, the “annual filings”) of DeFi Technologies Inc. (the “issuer”) for the financial year ended December 31, 2024.

 

2.Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

 

3.Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

 

4.The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

5.Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end

 

a.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

i.material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and

 

ii.information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

 

b.designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

 

5.1The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control - Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

5.2The issuer has disclosed in its annual MD&A for each material weakness relating to design existing at the financial year end

 

(a)a description of the material weakness;

 

(b)the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(c)the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

 

5.3N/A

 

6.The issuer’s other certifying officer(s) and I have

 

a.evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and

 

b.evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A

 

i.our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and

 

ii.for each material weakness relating to operation existing at the financial year end

 

(A)a description of the material weakness;

 

(B)the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(C)the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

7.The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning October 1, 2024 and ended on December 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

8.The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR.

 

Date: March 31, 2025  
   
(Signed) “Olivier Roussy Newton”  
Olivier Roussy Newton  
Chief Executive Officer  

 

 

 

 

 

Exhibit 99.128

 

FORM 52-109F1
CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE

 

I, Paul Bozoki, Chief Financial Officer of DeFi Technologies Inc., certify the following:

 

1. I have reviewed the AIF, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in those documents (together, the “annual filings”) of DeFi Technologies Inc. (the “issuer”) for the financial year ended December 31, 2024.

 

2. Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

 

3. Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

 

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

5. Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end

 

a.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

i.material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and

 

ii.information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

 

b.designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

 

5.1The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control - Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

5.2The issuer has disclosed in its annual MD&A for each material weakness relating to design existing at the financial year end

 

(a)a description of the material weakness;

 

(b)the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(c)the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

5.3N/A

 

 

 

 

6.The issuer’s other certifying officer(s) and I have

 

a.evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and

 

b.evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A

 

i.our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and

 

ii.for each material weakness relating to operation existing at the financial year end

 

(A)a description of the material weakness;

 

(B)the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(C)the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

7. The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning October 1, 2024 and ended on December 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

8. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR.

 

Date: March 31, 2025

 

(Signed) “Paul Bozoki”  
Paul Bozoki  
Chief Financial Officer  

 

 

 

 

 

Exhibit 99.129

 

DeFi Technologies Inc. Announces Record 2024 Financial Results: Adjusted Revenues of C$204.4 million (US$144.8 million), Adjusted EBITDA of $116.1 million (US$80.4 million) and Adjusted Net Income of C$115.07 million (US$84 million) and Notable Strategic Developments

 

●Adjusted Revenues, Adjusted EBITDA and Adjusted Net Income: DeFi Technologies recorded Adjusted Revenues of C$42.6 million (approximately US$31.1 million) and C$204.4 million (approximately US$144.8 million - annual) for the three and twelve months period ended December 31, 2024 and Adjusted Net Income of C$19.1 million (approximately US$13.9 million) and C$115.07 million (approximately US$84 million) for three and twelve months ended December 31, 2024. The Company also reports Adjusted EBITDA of C$20.08 million (US$14.6 million) and C$116.1 million (US$80.3 million) for the three and twelve months ended December 31, 2024, reflecting its strong operational performance and robust revenue growth.

.

●Substantial Growth in AUM: AUM grew by 132% since December 31, 2023, to approximately C$1.18 billion (US$819 million) as of December 31, 2024, driven by favorable market conditions, new product launches, and strategic corporate actions that enhanced trading volumes and overall financial performance.

 

●ETF/Index and Institutional Recognition: DeFi Technologies has been included in several prominent indices and institutional investment vehicles, including the MVIS Global Digital Assets Equity Index, VanEck Digital Transformation ETF, MSCI Canada Small Cap Index, Bitwise, Vanguard, and Melanion Capital—reflecting increasing institutional recognition of the Company’s performance, strategic direction, and role in the evolving digital asset ecosystem.

 

●2025 Outlook: Looking ahead, based on the current performance of its asset management business and prevailing market conditions, the Company forecasts annualized revenue of approximately C$227.2 million (US$159.9 million) for 2025. Continued growth in AUM may result in proportional increases in revenue over time.

 

TORONTO – March 31, 2025 – DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company focused on the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), announces its financial performance for the three and twelve months ended December 31, 2024 (all amounts in Canadian dollars, unless otherwise stated).

 

Financial Highlights

 

●Adjusted Revenue: Adjusted Revenues of C$42.6 million (approximately US$31.1 million - Q4) and C$204.3 million (approximately US$144.8 million - annual) for the three and twelve months period ended December 31, 2024

 

●Adjusted Net Income: Adjusted Net Income of C$19.1 million (approximately US$13.9 million) and C$115.07 million (approximately US$84 million) for three and twelve months ended December 31, 2024, reflecting robust operational performance.

 

 

 

 

●Adjusted EBITDA: Adjusted EBITDA of C$20.08 million (US$14.7 million) and C$116.1 million (US$80.4 million) for the three and twelve months ended December 31, 2024.

 

●Valour Staking/Lending & Management Fees: In Q4 2024, Valour generated staking and lending income of C$12.8 million (US$9.1 million) and management fees of C$2.9 million (US$2.1 million). For the fiscal year ended 2024 Valour generated staking and lending income of C$35.7 million (US$25.5 million) and management fees of C$8.8 million (US$6.3 million).

 

●DeFi Alpha Performance: For the twelve months ended December 31, 2024, DeFi Alpha generated C$132.1 million (US$96.7 million) with zero losses to date.

 

●Stillman Digital: For the three months ended December 31, 2024, Stillman Digital generated trading commissions of C$2.9 million (US$2.1 million) in revenue. Stillman Digital was acquired in October 2024.

 

●Reflexivity Research: In Q4 2024, Reflexivity Research generated research revenues of C$861,241 (US$615,964) for the three months ended December 31, 2024, and C$2.0 million (US$1.4 million) for the twelve months ended December 31, 2024

 

Cash and Treasury Position

 

●Cash Balance: As of December 31, 2024, cash balance of approximately C$22.4 million (US$16.7 million), up from C$6.7 million (US$4.2 million) on December 31, 2024.

 

●Treasury Holdings: As of December 31, 2024, the Company’s holdings included 208.8 BTC, 121 ETH, 586,683 ADA, 131,616 DOT, 14,375 SOL, 491 UNI, 433,322 AVAX and 1,707,703 CORE tokens, totaling approximately C$58.9 million (US$40.7 million).

 

●Venture Portfolio: Investments were valued at C$53.7 million (US$37.3 million) as of December 31, 2024, up from C$43.5 million (US$33.2 million) as of December 31, 2024.

 

Total Value of Cash, Treasury, and Venture Portfolio: C$135 million (US$93.8 million) as of December 31, 2024.

 

For the latest update on cash and digital asset treasury holdings as of February 28, 2025, see here.

 

2

 

 

Substantial AUM Growth

 

●Valour’s ETP business reported assets under management (AUM) of approximately C$1.18 billion (US$819 million) as of December 31, 2024, representing a 132% increase since December 31, 2023. This growth was driven by favorable market conditions, new product launches, and strategic corporate actions that boosted trading volumes and enhanced overall financial performance.

 

Q4 Strategic and Business Developments

 

Acquisitions and Partnerships:

 

●DeFi Technologies completed the acquisition of Stillman Digital Inc. and Stillman Digital Bermuda Ltd. (collectively doing business as “Stillman Digital”), a leading OTC desk and digital asset liquidity provider with over US$15 billion in trade volume since 2021, with US$5 billion of that occurring in Q2 2024 alone.

 

●Stillman Digital announces liquidity provision partnership with Finery Markets, a leading non-custodial crypto ECN and the provider of a SaaS trading platform for institutions.

 

●DeFi Technologies announced the upcoming launch of SolFi Technologies to expand shareholder exposure to the Solana (SOL) ecosystem.

 

●DeFi Technologies announced the upcoming launch of CoreFi Strategy, a MicroStrategy inspired approach for amplifying Bitcoin returns with CORE.

 

●DeFi Technologies signed a letter of intent to acquire a majority stake in Neuronomics AG, an AI-driven Swiss asset management firm.

 

●Reflexivity hosted a successful Crypto Investor Day in New York City, with moderation by Anthony Pompliano and sponsorship from Coinbase, Ledger, Copper, 3iQ, and more.

 

ETPs and Geographic Expansion

 

●Valour strengthened Nordic Market Strategy with Transfer of Crypto ETPs to Spotlight Stock Market.

 

●Valour signed a memorandum of understanding with SovFi and AsiaNext in Singapore to expand Valour’s ETP offerings across APAC through this strategic partnership.

 

●Valour signed a memorandum of understanding for the issuance and trading of exchange-traded products (“ETPs”) on the Nairobi Securities Exchange.

 

●Valour submitted its application for listing its ETPs on the Dubai Financial Market.

 

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●Valour expands offerings with first-ever Valour Bittensor (TAO) and Dogecoin (DOGE) ETP in the Nordics on Spotlight Stock Market.

 

●Valour announced the mega launch of 20 new digital asset ETPs on Spotlight Stock Market.

 

●Valour Digital Securities Limited and The Hashgraph Group (THG) expanded access to Hedera HBAR ETP with Euronext listing.

 

●Valour reported record monthly net inflows of C$56 Million (US$38.8 Million) in December 2024.

 

NASDAQ Listing Progress:

 

●DeFi Technologies filed a Form 40-F with the SEC in connection with its application to list its common shares on The Nasdaq Stock Market.

 

Elimination of Valour Debt :

 

●Valour substantially eliminated its outstanding debt in 2024, strengthening financial position for growth and expansion.

 

Comment from the CEO:

 

Olivier Roussy Newton, CEO of DeFi Technologies, stated, “2024 was a defining year for DeFi Technologies. We achieved our strongest financial performance to date, delivering Adjusted Revenues of C$204.3 million (US$144.8 million) and Adjusted Net Income of C$115.1 million (US$84 million)—results that position us among the few profitable public companies in the digital asset sector. These milestones reflect the strength of our business model, the operational discipline of our team, and the consistent execution of our long-term strategy.

 

Our AUM grew 132% year-over-year to C$1.18 billion (US$819 million), representing more than 900% growth from the market lows in late 2022. This expansion is a function of rising investor demand for regulated exposure to digital assets, as well as continued product innovation and distribution progress across our business lines.

 

Throughout the year, we enhanced and diversified our operations. The acquisition of Stillman Digital has expanded our institutional trading capabilities and laid the foundation for new business lines in foreign exchange, custody, and proprietary trading. DeFi Alpha delivered C$132.1 million (US$96.7 million) in returns with no losses—a key driver of our financial results. We also took our first step into AI-driven asset management through our majority investment in Neuronomics, reflecting our view that technology-led investment strategies will play an increasingly important role in the years ahead.

 

4

 

 

On the global front, we made important progress with our international expansion efforts. We announced joint ventures with AsiaNext and SovFi to bring Valour ETPs to the Asia-Pacific region, and signed a memorandum of understanding with the Nairobi Securities Exchange to develop digital asset products for the African market. These initiatives are actively progressing, and we are in ongoing discussions related to further expansion in other strategic regions.

 

We continue to operate with focus, discipline, and a long-term perspective. Our team remains committed to building a business that is resilient, scalable, and positioned to adapt in a dynamic market environment. Many of the initiatives launched in 2024 were developed and executed with agility, and we believe our ability to stay responsive while thinking strategically is a competitive strength.

 

While 2024 marked our strongest year to date, we do not view it as a high-water mark. We are focused on the next phase—scaling our existing business lines, launching new offerings, and thoughtfully pursuing opportunities that complement and strengthen our overall business. With a healthy balance sheet, no debt, and a growing portfolio of high-conviction businesses, DeFi Technologies is well-positioned to continue delivering long-term value to our shareholders as the digital asset landscape matures.”

 

Outlook for 2025

 

The outlooks for each business segment of the Company that follows supersedes all prior financial outlook statements made by the Company, constitutes forward-looking information within the meaning of applicable securities laws, and is based on a number of assumptions and subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond the Company’s control. Please see “Cautionary note regarding forward-looking information” and “Financial Outlook Assumptions” below for more information.

 

Asset Management Outlook for 2025

 

The Company has experienced substantial revenue growth since Q1 2024, driven by increased investor activity and broader market momentum. Valour’s ETPs have seen more than 900% increase in AUM since the market lows of late 2022, with continued growth in trading volumes. As of December 31, 2024, Valour’s ETP business reported approximately C$1.18 billion (US$819 million) in AUM, representing a 132% increase from December 31, 2023. This growth has been supported by favorable market conditions, the launch of new ETPs, and strategic corporate initiatives that have boosted both trading activity and overall financial performance.

 

Revenue from staking and lending, management fees, and mark-to-market changes in digital assets and ETP payables has remained closely correlated with both the level of capital inflow into Valour’s products and the performance of the underlying digital assets, which continued to appreciate through the end of 2024. Additionally, Valour continues to seek and optimize revenue generating opportunities of its digital asset holdings. Based on current performance, digital asset price levels and market trends, the Company’s annualized revenue for 2025 is forecasted at approximately C$227.2 million (US$159.9 million). Continued growth in AUM may lead to proportional increases in revenue going forward.

 

5

 

 

Valour’s Global Expansion and Strategic Market Development

 

Valour is making significant strides in expanding its global footprint, solidifying its position as a leader in the regulated digital asset space. With over 60 ETPs now listed across European and United Kingdom exchanges, Valour plans to increase its total ETP listings to 100 products by the end of 2025, including new offerings such as leveraged and warrant products. This expansion not only enhances Valour’s product portfolio but also strengthens its ability to meet the growing demand for regulated digital asset products.

 

As Valour continues to diversify and broaden its reach, the Company is also strategically entering new markets outside of Europe. This expansion into regions such as Africa, Asia, the Middle East, and other emerging areas offers Valour a first-mover advantage. This proactive market approach is a critical differentiator, allowing Valour to be at the forefront of digital asset adoption in key regions with significant growth potential.

 

Strategic Partnerships in Africa and Asia-Pacific

 

Valour’s global expansion has been significantly accelerated by recent partnerships in Africa and Asia-Pacific, positioning the company as a leader in emerging markets. These strategic collaborations in regions with rapidly growing digital asset adoption will provide a solid foundation for future growth.

 

●Africa Expansion: In July 2024, Valour signed a Memorandum of Understanding with the Nairobi Securities Exchange (“NSE”) and SovFi Inc. (“SovFi”) to develop and launch Valour’s ETPs in Africa (the “NSE MOU”). The NSE MOU leverages Kenya’s position as East Africa’s largest cryptocurrency market and its robust mobile money ecosystem, making it a prime market for Valour’s products. With 85% smartphone penetration and increasing adoption of digital assets, Kenya is positioning itself as a technological hub in the region. The partnership will enhance the NSE’s position as a financial hub and provide Valour with the opportunity to tap into a burgeoning investor base, increasing liquidity and market participation across the continent.

 

●Asia-Pacific Expansion: In November 2024, Valour further expanded its global footprint by signing an MOU with AsiaNext and SovFi to list and expand its ETPs on AsiaNext’s Singapore-licensed securities exchange (the “AsiaNext MOU”). The AsiaNext MOU strategically positions Valour to enhance institutional access across the Asia-Pacific (APAC) region, which is witnessing a surge in demand for regulated digital asset investments. The collaboration will provide Valour the opportunity to further solidify its leadership in APAC markets.

 

Market Expansion Strategy

 

DeFi Technologies and Valour are employing a comprehensive strategy to expand market share in both established and emerging regions. This approach revolves around four core pillars: Digital Strategy, Customer Management, Institutional Engagement, and Relationship Building. These pillars ensure that Valour is not only expanding its market presence but also deepening its institutional relationships and regulatory engagements.

 

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When evaluating new jurisdictions for expansion, Valour’s decision-making matrix requires regions to meet at least three of the following criteria:

 

●Liquidity and Leadership: Jurisdictions with securities exchanges offering significant liquidity and regional leadership.

 

●Governmental Support: Jurisdictions with strategic governmental initiatives for digital asset adoption.

 

●Untapped Markets: Areas with high populations of unregistered or untaxed digital asset consumers.

 

●Innovation-Focused Regions: Locations with national strategies focused on digital assets, AI, quantum computing, and other deep-tech sectors.

 

●Economic Diversification: Areas working to move away from natural resource-based economies.

 

●Young, Tech-Savvy Populations: Regions with younger, educated, and technology-driven populations.

 

●High Crypto Adoption: Jurisdictions with high levels of inflation and demonstrably high adoption of cryptocurrencies.

 

Regulatory Strategy and Education

 

Valour’s expansion is also underpinned by a commitment to regulatory clarity. Valour’s approach is built on the principle of being “regulated crypto without the keys and the wallets,” positioning its ETPs as safe, compliant, and transparent solutions. As part of its ongoing strategy, Valour is focused on:

 

●Building Access: Cultivating relationships with key regulatory bodies, securities exchange leadership, and capital market authorities.

 

●Local Partnerships: Partnering with local institutions to build appetite for regulated digital asset-backed ETPs.

 

●Regulatory Advocacy: Educating governments on the value of enabling tax revenue through regulated digital asset products.

 

Strategic Considerations for Growth

 

Valour’s strategy includes critical elements such as cross-listing, market-making, foreign exchange considerations, in-country marketing, and forming key partnerships with local institutional players. By leveraging these strategies, Valour is addressing the challenges of entering new markets, such as navigating regulatory frameworks, liquidity requirements, and cultural sensitivities. Valour is also forging the path forward in markets where digital asset regulation is either nascent or absent, positioning itself as a trailblazer.

 

7

 

 

Despite the challenges, Valour remains optimistic about the regulatory environment’s evolution. The Company is making steady progress in expanding its market presence with expected listings in the coming months and a robust pipeline of additional listings anticipated through the rest of 2025 and into 2026. Strategic locations yet to be announced will also play a key role in Valour’s expansion and its mission to bridge the gap between traditional securities and digital assets.

 

Accelerating Investor Demand

 

From January to October 2024, Valour saw total inflows of C$101.3M (US$70.5M), demonstrating strong investor interest. However, inflows have since surged from November 2024 to February 2025, with inflows surpassing the total for the previous months at C$141.7M (US$98.6M). This uptick in inflows highlights accelerating investor demand for Valour’s ETPs, underscoring the company’s ability to attract capital and expand its presence in the market.

 

Valour’s international expansion is not just about growing its product lineup—it’s about establishing a strong competitive moat, taking a leadership position in new markets, and positioning the company to capitalize on the global shift toward regulated digital assets. The company’s ongoing efforts are laying the foundation for continued success and increased market dominance in the years ahead.

 

Stillman Digital Outlook for 2025

 

As we move into 2025, Stillman Digital is positioned to build on the strong momentum achieved since its acquisition by DeFi Technologies. Stillman Digital’s strategic priorities for the year will focus on expanding business development efforts, enhancing global reach, and deepening capabilities in key areas such as foreign exchange and stablecoin services.

 

Financial Outlook:

 

●Based on current performance trends, Stillman Digital anticipates a revenue range of C$12 million to C$16 million for 2025, driven by continued growth in trade volumes and new business development initiatives.

 

●Q1’25 is on pace to generate approximately C$2.8 million to C$3 million in revenue, which, if annualized, puts the company on track for a C$12 million revenue run rate. Given the recency of the acquisition along with the volatility of market sentiment, the potential for further growth remains significant as Stillman realizes synergies with DeFi Technologies and Valour, with the December revenue run rate suggesting higher potential upside.

 

Strategic Focus:

 

●Business Development: A primary focus for Stillman Digital in 2025 will be the expansion of its business development team, with the goal of accelerating the acquisition of new institutional clients. The company is also intensifying efforts to penetrate international markets, particularly in Latin America and Europe.

 

●Product and Market Expansion: Stillman Digital plans to enhance its product offerings, particularly in FX and stablecoin services. These offerings will help hedge against altcoin volatility and further diversify its revenue streams.

 

8

 

 

●Strategic Partnerships: Continuing to expand global banking relationships is a key priority for Stillman Digital, with ongoing efforts to partner with new aggregators and ECNs. Additionally, partnerships with institutions like Bank Frick and Fireblocks will broaden client access and facilitate more seamless fiat transactions.

 

●Team Growth: Recent hires, including new backend developers and a Head of Trading with a background in astrophysics and quantitative trading, are expected to drive innovation and improve trading strategies. These additions will allow Stillman Digital to continue outperforming market benchmarks with new principal trading strategies.

 

●Brand Evolution: A rebranding effort will be launched to better position Stillman Digital as an institutional player, reflecting its maturity and focus on serving a high-value, global client base.

 

●Post-Acquisition Integration: While the post-acquisition integration process has been administratively intensive, it has set the stage for growth in 2025. With this work nearing completion, Stillman Digital will be able to fully concentrate on business development and strategic growth opportunities in the near term.

 

Looking ahead, Stillman Digital is well-positioned to accelerate its growth in 2025, leveraging DeFi Technologies’ support and strategic resources to unlock new opportunities and continue expanding its global footprint.

 

DeFi Alpha Outlook for 2025

 

The DeFi Alpha strategy has proven to be a pivotal driver of DeFi Technologies’ financial resilience, enhancing the Company’s position in an ever-evolving digital asset landscape. Through its arbitrage-focused approach, DeFi Alpha has strengthened the Company’s financial foundation, enabling debt repayment while supporting the deployment of a robust digital asset treasury strategy. This strategic model has proven effective in mitigating risks while maximizing returns, even in the face of market volatility.

 

Performance Update: For the twelve months ending December 31, 2024, DeFi Alpha generated C$132.1 million (US$96.7 million) in returns, maintaining an impressive track record with zero losses to date. This performance underscores the strength of the strategy and its ability to navigate a volatile market environment successfully.

 

Strategic Focus and Competitive Edge: DeFi Alpha was designed to capitalize on the Company’s balance sheet through both systematic and opportunistic trading strategies. The approach uniquely positions DeFi Alpha to take advantage of market opportunities while leveraging its balance sheet advantages. Many of the trades pursued are exclusive, backed by strong partnerships and significant holdings tied to ETPs, making these opportunities largely inaccessible to other firms. This exclusivity, combined with efficient execution in low-competition areas, is what gives DeFi Alpha its strategic edge in the market.

 

9

 

 

Systematic Earnings and Opportunistic Trades:

 

●Systematic Strategies: Focus on low-risk, model-driven arbitrage and short-term opportunities that do not expose the company to broader market fluctuations. These trades remain highly effective, providing steady and predictable earnings.

 

●Opportunistic Trades: These trades, often linked to partnerships and liquidity advantages, are a critical part of the strategy but are inherently harder to predict or guide on a quarterly basis. Despite this unpredictability, they remain an important growth avenue for DeFi Alpha.

 

Ecosystem and Market Growth: With the continued mainstream adoption of crypto and the broader ecosystem expansion, DeFi Alpha has seen an increase in market opportunities. Even with an expanded team, there are more opportunities than can be fully addressed, providing a clear path for continued growth.

 

Product Launches and AUM Expansion: The launch of new products, alongside a growing Assets Under Management (“AUM”), will further enhance DeFi Alpha’s ability to scale its systematic trading activities, driving revenue growth in 2025. The increase in liquidity from these initiatives will provide greater operational efficiency and open up trades that competitors are unable to execute, expanding DeFi Alpha’s competitive moat.

 

Long-Term Infrastructure Development: Investments in infrastructure, counterparty agreements, and research since Q2 2024 are laying the groundwork for sustained growth, with the full benefits expected to be realized as the year progresses. These long-term investments are crucial to building a foundation that will continue to support DeFi Alpha’s growth trajectory and its ability to capture future opportunities.

 

Outlook for 2025 and Beyond: Looking ahead, DeFi Alpha is poised to capitalize on its unique positioning, leveraging both systematic and exclusive trading opportunities, along with strong partnerships and continued market growth. At the same time, the ongoing infrastructure investments will ensure a solid foundation for long-term success, with sustained growth and continued strategic advancements as key focuses for 2025.

 

DeFi Alpha remains well-positioned to be a major contributor to DeFi Technologies’ continued success, driving both short-term gains and long-term value for the Company.

 

Neuronomics Outlook for 2025

 

On March 7, 2025, DeFi Technologies finalized the acquisition of a majority stake (52.5%) in Neuronomics AG, a Swiss asset management firm specializing in artificial intelligence and computational neuroscience.

 

Neuronomics is committed to driving sustainable growth through strategic innovation, global market expansion, and rigorous operational excellence. Building on our core strengths in artificial intelligence and computational neuroscience, our 2025 roadmap integrates new partnerships, diversified product launches, and a best-in-class compliance framework. These initiatives firmly position Neuronomics at the forefront of next-generation algorithmic asset management.

 

10

 

 

Strategic Growth Initiatives:

 

●Expanded AMC Program

 

In collaboration with Valour and other strategic partners, we will broaden our Active Managed Certificate (AMC) suite. This expansion leverages our proprietary AI technology—trusted for streamlining strategy development and rigorous back-testing—capabilities already proven through our flagship Neurofin investment product.

 

●Market Diversification

 

Beyond digital assets, we are extending our expertise into new asset classes. By Q3 2025, we plan to introduce an AI-powered rebalancing strategy focused on the technology sector. This approach will broaden our investor base and mitigate single-sector volatility.

 

Innovation and Product Pipeline

 

●Digital Asset Launches

 

○Smart Crypto AI (Q3 2025)

 

Employing our proprietary AI methodologies, this product targets top cryptocurrencies for high risk-adjusted returns across varying market conditions.

 

○Crypto Alpha AI (Q4 2025)

 

Designed to capture alpha within the broader digital asset space, offering efficient and diversified exposure for investors.

 

●Equity Market Solutions

 

○TechEquity AI (Q3 2025)

 

Our new equity-focused product applies advanced AI modeling to identify inefficiencies in technology stocks, aiming for both alpha generation and a stable beta profile.

 

Operational Excellence and Risk Management

 

●Regulatory Compliance

 

Operating under strict FINMA/AOOS supervision, we uphold a robust compliance framework. Our teams collaborate closely with regulators and external advisors to maintain full alignment with evolving industry standards.

 

●Technological Edge

 

Ongoing investment in AI research and development underpins each new product, reinforcing our leadership in algorithmic trading and continuous innovation.

 

●Scalable Infrastructure

 

We continue to optimize our global trading, analytics, and risk management platforms, ensuring that we can meet expanding investor demand seamlessly.

 

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Future Outlook

 

●Global Reach

 

Our broadened AMC offerings and diverse AI-driven product suite position Neuronomics to capture strong global demand for AI-based asset management solutions, driving revenue growth through 2025 and beyond.

 

●Shareholder Value

 

Targeted product launches, sustained R&D, and an unwavering focus on operational excellence underscore our commitment to delivering consistent value for investors and stakeholders, fortifying our market presence and financial performance.

 

Nasdaq Listing

 

On September 16, 2024, the Company filed a Form 40-F Registration Statement with the United States Securities and Exchange Commission (the “SEC”), in connection with its application to list its common shares on The Nasdaq Stock Market. The listing of the Company’s common shares on the Nasdaq remains subject to the approval of the Nasdaq and the satisfaction of all applicable listing and regulatory requirements, including Form 40-F being declared effective by the SEC. The Company filed an amended 40F Registration Statement on January 17, 2025, and continues to progress its application to list its common shares on the Nasdaq.

 

Earnings Conference Call

 

The DeFi Technologies 2024 Financial Results webcast will commence at 12:00 p.m. ET, Monday, March 31, 2025.

 

To register for the live webcast, please visit this link: https://zoom.us/webinar/register/WN_YpQiKECZQGKQ51DjvovWjw

 

Link to Q4 2024 presentation: https://drive.google.com/file/d/1c671nDQmo-4WE--RWOyl4yxVYdZnrRnW/view?usp=sharing

 

Supplemental Materials and Upcoming Communications

 

The Company has made available on its website materials designed to accompany the discussion of its results, along with certain supplemental financial information and other data. For important news and information regarding the Company, including investor presentations and the timing of future investor conferences, visit the Investor Relations section of the Company’s website: https://defi.tech/investor-relations.

 

Analyst Coverage of DeFi Technologies

 

A full list of DeFi Technologies analyst coverage can be found here: https://defi.tech/investor-relations#research.

 

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Upcoming Conferences & Events

 

Canaccord Genuity’s 5th Digital Assets Symposium
April 16, 2025
Wed, Apr 16 at 3:45-4:10 PM in Track 1
Presenters: Olivier Roussy Newton, Johan Wattenstrom

 

25th Annual B. Riley Securities Annual Investor Conference

May 21-22, 2025

The Ritz-Carlton, Marina Del Rey, California

 

Non-IFRS and Other Financial Measures

 

To supplement the Company’s consolidated financial statements, which are prepared and presented in accordance with IFRS Accounting Standards (“IFRS”), the Company uses certain non-IFRS and other financial measures to provide additional information in order to assist investors in understanding our financial and operating performance. These measures are not recognized measures for financial presentation under IFRS, do not have standardized meanings, and may not be comparable to similar measures presented by other public companies.

 

During the quarter-ended June 30, 2024, the Company made equity investments in two private investments funds, pursuant to which the Company gained exposure to 1,658,484.21 Solana and 931,445.6 Avalanche tokens (the “Locked Tokens”) acquired by the funds from a bankrupt company. In its quarters ended June 30, 2024 and September 30, 2024, the Company accounted for the tokens underlying its investments in the investment funds directly as if held at a third party custodian and classified all the tokens as current assets (the “Undiscounted Valuation”). The Locked Tokens, however, are subject to a lock up schedule extending to 2028 and as a result, for the financial statements for the year ended December 31, 2024 (the “Fiscal 2024 Financial Statements”) and going forward, the Company has applied a discount for lack of marketability (“DLOM”). The DLOM will decrease over time as the Locked Tokens are released, amortizing to zero by 2028 when the final tokens are unlocked. The lock-up schedule is not linear and includes bulk releases, including an approximate 25% release on March 31, 2025, which would reduce the DLOM at such time.

 

The application of the DLOM for the Fiscal 2024 Financial Statements resulted in a decrease in the “Unrealized gain on equity investments at FVTPL” on the Company’s Consolidated Statements of Operations and Comprehensive Loss and a decrease in “Equity Investments in digital assets, at FVTPL” on the Consolidated Statements of Financial Position.

 

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Paul Bozoki, Chief Financial Officer of the Company, stated, “During our audit of the Fiscal 2024 Financial Statements, we determined that the Locked Tokens were incorrectly accounted for in the Company’s June 30, 2024 and September 30, 2024 financial statements (the “Affected Periods”) as they were prepared without applying the DLOM. However, given that the DLOM represents an accounting adjustment that is not reflective of the operations and performance of the Company, we believe that using Adjusted Revenue, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Share would be helpful to investors to better understand the Company’s financial performance. The Locked Tokens were acquired in line with Valour’s policy to hedge its ETP liabilities, and the application of the DLOM does not reflect our ability to hedge such liabilities in the case of ETP redemptions. Furthermore, Valour’s policy is to stake a certain percentage of its digital assets to earn staking income, which is exactly what the Locked Tokens do while locked.”

 

“Adjusted Revenue” is a non-IFRS financial measure that is defined as revenue excluding (a) the application of the DLOM and (b) the effect of the adjustment in the value the BTC collateral held by Genesis Global Capital LLC (“Genesis”) to the fair value of the loan and interest held with Genesis (the “Genesis Adjustment”). Due to the ongoing bankruptcy related to Genesis, the Company is adjusting the BTC collateral position to the value of the loan and interest held at Genesis in accordance with the principles of IFRS. The Company continues to monitor and participate in the Genesis proceedings to determine the magnitude of the expected recovery as the proceedings progress.

 

“Adjusted Net Income” is a non-IFRS financial measure that is defined as net income excluding (a) the application of the DLOM, (b) the Genesis Adjustment and (c) the one-time effect of the impairment loss as a result of its acquisition on February 9, 2024 of intellectual property tailored to support the Solana-focused trading desk operated by the Company. At the time of acquisition, the intangible assets were in an early stage of research and development, with significant uncertainties surrounding its future market demand, sales price and production costs, and as such, the full amount was impaired (the “Solana IP Adjustment”).

 

“Adjusted EBITDA” is a non-IFRS financial measure that is defined as Adjusted Net Income and adding back interest, taxes, depreciation, amortization of property and equipment, right-of-use assets and other intangible assets.

 

“Adjusted Net Income Per Share” is a non-IFRS financial measure that is defined as Adjusted Net Income divided by the total number of common shares of the Company issued and outstanding.

 

These foregoing adjustments are non-IFRS measures, and the Company believes that they provide a focused view of its operational performance. The reconciliation of these adjustments helps stakeholders understand the impact of non-cash items on the Company’s financial results. The non-IFRS and other financial measures used herein should be considered as a supplement to, and not a substitute for, or superior to, the corresponding measures calculated in accordance with IFRS. See the financial tables below for a reconciliation of the non-IFRS measures.

 

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   Three months ended
December 31,		   Year ended
December 31,		 
   2024   2023   2023   2024 
   $   $   $   $ 
REVENUE RECONCILIATION                
Total Revenue (IFRS)  $5,713,682   $5,999,498   $55,214,292   $10,356,015 
add back: Discount for Lack of Marketability (DLOM)  $21,940,525   $0   $124,490,360   $0 
add back: Bitcoin collateral held by Genesis Capital LLC  $15,005,656   $0   $24,660,033   $0 
ADJUSTED REVENUE  $42,659,863   $5,999,498   $204,364,685   $10,356,015 
                     
NET LOSS (INCOME) RECONCILIATION                    
Net Loss  $(17,828,868)  $(2,894,938)  $(39,041,502)  $(20,291,963)
add back: Discount for Lack of Marketability (DLOM)  $21,940,525   $0   $124,490,360   $0 
add back: Bitcoin collateral held by Genesis Capital LLC  $15,005,656   $0   $24,660,033   $0 
add back: Impairment of Solana IP acquisition  $0   $0   $4,962,021   $0 
ADJUSTED NET INCOME (LOSS)  $19,117,313   $(2,894,938)  $115,070,912   $(20,291,963)
                     
EBITDA RECONCILIATION                    
Net Loss (IFRS)  $(17,828,868)  $(2,894,938)  $(39,041,502)  $(20,291,963)
Interest  $417,791   $1,082,576   $3,868,425   $4,161,136 
Depreciation & Amortization  $546,649   $512,811   $2,122,503   $2,051,245 
EBITDA  $(16,864,428)  $(1,299,551)  $(33,050,574)  $(14,079,582)
add back: Discount for Lack of Marketability (DLOM)  $21,940,525   $0   $124,490,360   $0 
add back: Bitcoin collateral held by Genesis Capital LLC  $15,005,656   $0   $24,660,033   $0 
add back: Impairment of Solana IP acquisition  $0   $0   $4,962,021   $0 
ADJUSTED EBITDA  $20,081,753   $(1,299,551)  $116,099,819   $(14,079,582)
                     
Net Income (loss) per share                    
Basic   (0.06)   (0.01)   (0.13)   (0.09)
Adjusted net income (loss) per share                    
Basic   0.06    (0.01)   0.39    (0.09)

 

The Company plans to restate the financial statements with respect to the Affected Periods. As a result, the financial statements for the Affected Periods should not be relied upon and similarly, any previously issued or filed reports, press releases, investor presentations or other Company communications describing the financial results or other financial information in connection with the Affected Periods should no longer be relied upon.

 

Based on the foregoing, the Company’s management has concluded that the Company has a material weakness in its internal control over financial reporting for the year ended December 31, 2024. Management is in the process of implementing remediation measures to address the material weakness in respect of the errors described above.

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionizing the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/

 

15

 

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets like Bitcoin in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF).

 

For more information on Valour, to subscribe, or to receive updates and financial information, visit valour.com.

 

About Reflexivity Research

 

Reflexivity Research LLC is a leading research firm specializing in the creation of high-quality, in-depth research reports for the bitcoin and digital asset industry, empowering investors with valuable insights. For more information please visit https://www.reflexivityresearch.com/

 

About Stillman Digital

 

Stillman Digital is a leading digital asset liquidity provider that offers limitless liquidity solutions for businesses, focusing on industry-leading trade execution, settlement, and technology. For more information, please visit https://www.stillmandigital.com

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the financial results of the Company; revenue outlook of the Company; growth of AUM; revenue generating opportunities for the Company’s digital asset holdings; upcoming ETP launches; revenue generation by DeFi Alpha; integration of Reflexivity Research, Stillman Digital and Neuronomics AG and their respective plans and outlooks for 2025; appreciation of digital asset prices; listing of the common shares of the Company on Nasdaq; the NSE MOU and the AsiaNext MOU; investment and interest in the digital asset sector; future collaborations and partnerships; development of ETPs; geographic expansion of the Company; future acquisitions by the Company; the regulatory environment with respect to the growth and adoption of decentralized finance; the restatement of historical financial information; the pursuit by DeFi Technologies and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; ability of the Company to successfully integrate and grow Reflexivity Research,Stillman Digital and Neuronomics AG; growth and development of DeFi and digital asset sector; rules and regulations with respect to DeFi and digital asset; fluctuation in digital asset price levels; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

16

 

 

Financial Outlook Assumptions

 

The financial outlook on revenue of the Company is based on a number of assumptions, including assumptions related to the application of IFRS to the Company’s financial statements; fluctuations in DLOM and its effect on the Company’s equity investments; inflation, changes in interest rates, volatility of the digital asset market, current and projected market prices of digital assets, in particular the digital assets underlying the Company’s ETPs, the Company’s ability to realize staking and lending income from digital assets held by the Company, the ability of DeFi Alpha to generate yield on the Company’s excess liquidity and identify and execute accretive trading opportunities, the return realized by the Company on staking and lending income, the return on management fees earned by the Company, business model of Reflexivity Research, trading volumes of Stillman Digital, successful implementation of technological upgrades at Stillman Digital, successful launch of products by Neuronomics AG, consumer interest in the Valour’s ETPs, foreign exchange rates and other macroeconomic conditions, the regulatory environment with respect to ETPs and digital assets in the jurisdictions that the Company operates in, introduction of future ETPs, “black swan events” in the digital asset industry, competitors that offer competing ETP products and market acceptance of the Company’s ETP offerings. The Company’s financial outlook, including the various underlying assumptions, constitutes forward-looking information and should be read in conjunction with the cautionary statement on forward-looking information above. Many factors may cause the Company’s actual results, level of activity, performance or achievements to differ materially from those expressed or implied by such forward-looking information, including the risks and uncertainties related to: macroeconomic factors affecting the digital asset industry, including inflation, changes in interest rates, investor confidence in digital assets; volatility of the digital assets and fluctuation in market value of digital assets; exchange rate fluctuations; any pandemic; fraud, misconduct or gross negligence by individuals within the digital asset industry; a negative regulatory environment with respect to digital assets; the Russian invasion of Ukraine and reactions thereto; the Israel-Hamas war and reactions thereto; the Company’s inability to attract purchasers of its ETPs; decrease in AUM as a result of investor selling the Company’s ETPs or a fall in the value of the underlying digital assets; Valour’s inability to launch attractive ETPs; the Valour’s inability to increase ETP sales; the Company’s inability to implement our growth strategy; the Company’s reliance on a small number of custodian and market participants to operate its ETP programs; decrease in the number of subscribers to Reflexivity Research; decrease in the number of trades or fees generated by Stillman Digital; the Company’s ability to prevent and manage information security breaches or other cyber-security threats; the Company’s ability to compete against competitors; strategic relations with third parties; changes to technologies on which ETPs are purchased and sold is reliant; Valour’s ability to distribute ETPs in jurisdictions it is not currently operating in; the Company’s ability to obtain, maintain and protect our intellectual property; the Company’s ability to execute on its acquisition strategy; the Company’s liquidity and capital resources; pending and threatened litigation and regulatory compliance; changes in tax laws and their application; the Company’s ability to expand its sales, marketing and support capability and capacity; and maintaining our customer service levels and reputation. The purpose of the forward-looking information is to provide the reader with a description of management’s expectations regarding our financial performance and may not be appropriate for other purposes.

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

17

 

Exhibit 99.130

 

FORM 13-502F1

CLASS 1 AND CLASS 3B REPORTING ISSUERS – PARTICIPATION FEE

 

MANAGEMENT CERTIFICATION
 

I, Paul Bozoki, an officer of the reporting issuer noted below have examined this Form 13-502F1 (the Form) being submitted hereunder to the Ontario Securities Commission and certify that to my knowledge, having exercised reasonable diligence, the information provided in the Form is complete and accurate.

 

/s/ “Paul Bozoki”   January 28, 2025
Name:   Paul Bozoki   Date:

Title:

Chief Financial Officer

    

 

Reporting Issuer Name: DeFi Technologies Inc.  
   
End date of previous financial year: December 31, 2024  
   
Type of Reporting Issuer: ■ Class 1 reporting issuer ☐ Class 3B reporting issuer
     
Highest Trading Marketplace: CBOE Canada  

(refer to the definition of “highest trading marketplace” under OSC Rule 13-502 Fees)

  

 

Market value of listed or quoted equity securities:
(in Canadian Dollars - refer to section 36 of OSC Rule 13-502 Fees)
 
Equity Symbol  

DEFI

     

1st Quarterly Period (dd/mm/yy)

(refer to the definition of “quarterly period” under OSC Rule 13-502 Fees)

  

January 1, 2024 to March 31, 2024

     

Closing price of the security in the class or series on the last trading day of the quarterly period in which such security was listed or quoted on the highest trading marketplace

  

$ 0.67 (i)

     

Number of securities in the class or series of such security outstanding at the end of the last trading day of the quarterly period

  

290,169,503 (ii)

     

Market value of class or series

 (i) x (ii)

$ 194,413,567  (A)

     

2nd Quarterly Period (dd/mm/yy)

(refer to the definition of “quarterly period” under OSC Rule 13-502 Fees)

  

April 1, 2024 to June 30, 2024

 

 

 

 

Closing price of the security in the class or series on the last trading day of the quarterly period in which such security was listed or quoted on the highest trading marketplace   $0.055 (iii)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the quarterly period   298,134,377 (iv)

 

Market value of class or series (iii) x (iv) $16,397,390 (B)

 

3rd Quarterly Period (dd/mm/yy)
(refer to the definition of “quarterly period” under OSC Rule 13-502 Fees)		   July 1, 2024 to September 30, 2024

 

Closing price of the security in the class or series on the last trading day of the quarterly period in which such security was listed or quoted on the highest trading marketplace   $2.84 (v)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the quarterly period   298,847,868 (vi)

 

Market value of class or series (v) x (vi) $848,727,945 (C)

 

4th Quarterly Period (dd/mm/yy)
(refer to the definition of “quarterly period” under OSC Rule 13-502 Fees)		   October 1, 2024 to December 31, 2024

 

Closing price of the security in the class or series on the last trading day of the quarterly period in which such security was listed or quoted on the highest trading marketplace   $3.88 (vii)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the quarterly period   322,697,173 (viii)

 

Market value of class or series (vii) x (viii)  $1,252,065,031 (D)

 

_________________ to ________________________

 

2

 

 

Average Market Value of Class or Series
(Calculate the simple average of the market value of the class or series of security for each applicable quarterly period (i.e. A through D above))		   $577,900,983 (1)

 

(Repeat the above calculation for each other class or series of equity securities of the reporting issuer (and a subsidiary pursuant to paragraph 9(1)(b) of OSC Rule 13-502 Fees, if applicable) that was listed or quoted on a marketplace at the end of the trading day of each quarterly period in the previous financial year of the reporting issuer.)

 

Fair value of outstanding debt securities:  
     
(See paragraph 9(1)(c), and if applicable, paragraphs 9(1)(d) and (e) of OSC Rule 13-502 Fees)   $0 (2)
     
(Provide details of how value was determined)    
     
Capitalization for the previous financial year (1) + (2) $577,900,983
     
Participation Fee  
(For Class 1 reporting issuers, from Appendix A of OSC Rule 13-502 Fees, select the participation fee)   $38,900
     
(For Class 3B reporting issuers, from Appendix B of OSC Rule 13-502 Fees, select the participation fee)    
     
Late Fee, if applicable  
(As determined under section 8 of OSC Rule 13-502 Fees)   $0
     
Total Fee Payable  
(Participation Fee plus Late Fee)   $38,900

 

 

3

 

 

Exhibit 99.131

 

Note: [09 Jun 2023]- The following is a consolidation of 13-501Fl. It incorporates amendments to this document that came into effect on March 1, 2017 and June 9, 2023. This consolidation is provided for your convenience and should not be relied on as authoritative.

 

FORM 13-501Fl

CLASS 1 REPORTING ISSUERS AND CLASS 3B REPORTING ISSUERS -

PARTICIPATION FEE

 

MANAGEMENT CERTIFICATION

 

I, Paul Bozoki, an officer of the reporting issuer noted below have examined this Form 13-501Fl (the Form) being submitted hereunder to the Alberta Securities Commission and certify that to my knowledge, having exercised reasonable diligence, the information provided in the Form is complete and accurate.

 

/s/ “Paul Bozoki”  
Name:  Paul Bozoki Date: January 28, 2025
Title: Chief Financial Officer

 

Reporting Issuer Name: DeFi Technologies Inc.
   

End date of previous financial year:

 December 31, 2024
   

Type of Reporting Issuer:

☒ Class 1 reporting issuer

☐ Class 3B reporting issuer

   

Highest Trading Marketplace:

 CBOE Canada

 

Market value of listed or quoted equity securities:

  
   
Equity Symbol DEFI

 

 

 

 

1st Specified Trading Period (dd/mm/yy) Jan 1, 2024 to Mar 31, 2024
     
Closing price of the security in the class or series on the last trading day of the specified trading period in which such security was listed or quoted on the highest trading marketplace   $0.67 (i)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the specified trading period   290,169,503 (ii)
     
Market value of class or series (i) x (ii) $194,413,567 (A)
     
2nd Specified Trading Period (dd/mm/yy) Apr 1, 2024 to Jun 30, 2024
     
Closing price of the security in the class or series on the last trading day of the specified trading period in which such security was listed or quoted on the highest trading marketplace   $0.055 (iii)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the specified trading period   298,134,377 (iv)
     
Market value of class or series (iii) x (iv) $16,397,390 (B)
     
3rd Specified Trading Period (dd/mm/yy) Jul 1, 2024 to Sept 30, 2024
     
Closing price of the security in the class or series on the last trading day of the specified trading period in which such security was listed or quoted on the highest trading marketplace   $2.84 (v)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the specified trading period   298,847,868 (vi)

 

-2-

 

 

Market value of class or series

(v) x (vi)

$ 848,727,945(C)

     
4th Specified Trading Period (dd/mm/yy)

Oct 1, 2024 to Dec 31, 2024

   

Closing price of the security in the class or series on the last trading day of the specified trading period in which such security was listed or quoted on the highest trading marketplace

 

$ 3.88 (vii)

   
   

Number of securities in the class or series of such security outstanding at the end of the last trading day of the specified trading period

  

322,697,173(viii)

     

Market value of class or series

 (vii) x (viii) $ 1,252,065,031(D)
   
     

5th Specified Trading Period (dd/mm/yy)

 _______________to____________
     
Closing price of the security in the class or series on the last trading day of the specified trading period in which such security was listed or quoted on the highest trading marketplace   $__________________
(ix)
     
Number of securities in the class or series of such security outstanding at the end of the last trading day of the specified trading period   ____________________

   (x)
     
Market value of class or series (ix) x (x) $____________________
    (E)
     

Average Market Value of Class or Series (Calculate the simple average of the market value of the class or series of security for each applicable specified trading period (i.e. A through E above))

  

$ 577,900,983 (1)

 

(Repeat the above calculation for each other class or series of equity securities of the reporting issuer (and a subsidiary, if applicable) that was listed or quoted on a marketplace at the end of the previous financial year)

 

Fair value of outstanding debt securities:  
     
(Provide details of how value was determined)   $0 (2)
     
Capitalization for the previous financial year (1) + (2) $577,900,983
     
Participation Fee   $19,000

 

 

-3-

 

Exhibit 99.132

 

 

DeFi Technologies Appoints Andrew Forson as President of DeFi Technologies and Chief Growth Officer of Valour

 

TORONTO, April 8, 2025 /CNW/ - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (CBOE CA DEFI) (GR: R9B)(OTC: DEFTF), a financial technology company focused on the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce the appointment of Andrew Forson as President of DeFi Technologies and Chief Growth Officer of Valour, the Company’s digital asset ETP business.

 

Andrew Forson, who joined DeFi Technologies’ board of directors in July 2024, has played an integral role in driving Valour’s recent geographic expansion efforts. In his new full-time leadership role, Andrew will spearhead DeFi Technologies’ global strategy and oversee Valour’s continued growth across European and international markets.

 

“Andrew’s track record in digital assets, structured finance, and venture strategy makes him uniquely positioned to lead the next phase of growth for both DeFi Technologies and Valour,” said Olivier Roussy Newton, CEO of DeFi Technologies. “His leadership has already helped shape our expansion roadmap, and we are excited to have him join us full time to continue building on that momentum.”

 

Andrew brings deep expertise from his previous role as Head of Ventures and Investments at the Hashgraph Group, the commercialization and enablement arm of Hedera. There, he was instrumental in advancing strategic investments and innovation across the Web3 ecosystem. His financial engineering background, combined with a strong understanding of digital asset markets, positions him to advance DeFi Technologies’ mission of making decentralized finance accessible through secure and compliant investment products.

 

“I’m honored to take on this expanded role at DeFi Technologies and Valour,” said Andrew Forson. “The opportunity to lead growth for such an innovative and forward-looking organization is incredibly exciting. I look forward to working closely with the team to expand access to digital assets globally and further establish DeFi Technologies as a market leader in digital finance.”

 

Andrew Forson holds an MBA from the prestigious Edinburgh Business School and has previously held senior positions across investment management, financial technology, and blockchain innovation.

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem. Follow DeFi Technologies on Linkedin and Twitter, and for more details, visit https://defi.tech/

 

About Valour

 

Valour Inc. and Valour Digital Securities Limited (together, “Valour”) issues exchange traded products (“ETPs”) that enable retail and institutional investors to access digital assets in a simple and secure way via their traditional bank account. Valour is part of the asset management business line of DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF). For more information about Valour, to subscribe, or to receive updates, visit valour.com.

 

Cautionary note regarding forward-looking information:

 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the appointment of officers at DeFi Technologies and Valour; global expansion of DeFi Technologies and Valour; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by DeFi and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

 

 

 

THE CBOE CANADA EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

 

View original content to download multimedia:

 

https://www.prnewswire.com/news-releases/defi-technologies-appoints-andrew-forson-as-president-of-defi-technologies-and-chief-growth-officer-of-valour-302423

 

SOURCE DeFi Technologies Inc.

 

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/April2025/08/c7481.html

 

%SEDAR: 00007675E

 

For further information: For further information, please contact: Olivier Roussy Newton, Chief Executive Officer,ir@defi.tech, (323) 537-7681

 

CO: DeFi Technologies Inc.

 

CNW 07:30e 08-APR-25

 

 

 

 

Exhibit 99.133

 

FORM 51-102F3 MATERIAL

CHANGE REPORT

 

ITEM 1Name and Address of Company:

 

DeFi Technologies Inc. (“DeFi” or the “Company”)

198 Davenport Road

Toronto, Ontario

M5R 1J2

 

ITEM 2Date of Material Change:

 

April 8, 2025

 

ITEM 3News Release:

 

A news release was issued by the Company on April 8, 2025 and subsequently filed on SEDAR.

 

ITEM 4Summary of Material Change:

 

The Company announced the appointment of Andrew Forson as President.

 

ITEM 5Full Description of Material Change:

 

The Company announced the appointment of Andrew Forson as President of DeFi Technologies and Chief Growth Officer of Valour, the Company’s digital asset ETP business.

 

ITEM 6Reliance on subsection 7.1(2) or (3) of National Instrument 51-102:

 

Not applicable.

 

ITEM 7Omitted Information:

 

Not applicable.

 

ITEM 8Executive Officer:

 

Olivier Roussy Newton

Chief Executive Officer

olivier@defi.tech

 

ITEM 9Date of Report:

 

April 10, 2025

Exhibit 99.134

 

NOTICE TO READER

 

During our audit of the Fiscal 2024 Financial Statements, we determined that locked tokens held by the Company were incorrectly accounted for in the Company’s June 30, 2024 financial statements.

 

The Company has re-filed its June 30, 2024 interim condensed consolidated financial statements (the “Refiled Q2 2024 FS”) to apply a discount for lack of marketability (“DLOM”) and adjust the current/non-current classification of its investments in equity investments in digital assets at fair value through profit and loss. The re-filed financial statements include the following adjustments: a) application of a DLOM to reduce total assets and equity by $98,657,552 b) reclassification of $122,794,452 of current assets to non-current assets c) increase in the three and six months ended net loss of $98,657,552 and $98,657,552 respectively due to the application of the DLOM.

 

These revised financial statements replace and supersede the original financial statements previously filed on SEDAR+.

 

 

 

 

 

 

 

 

 

 

 

 

 

AMENDED AND RESTATED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

 

For the three and six months ended June 30, 2024 and 2023

 

(expressed in Canadian dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

 

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

 

The Company’s independent auditor has not performed a review of these condensed consolidated interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada (CPA Canada) for a review of interim financial statements by an entity’s auditor.

 

 

 

 

DeFi Technologies Inc.

 

Table of Contents

 

Condensed consolidated interim statements of financial position 1
Condensed consolidated interim statements of operations and comprehensive income (loss) 2
Condensed consolidated interim statements of cash flows 3
Condensed consolidated interim statements of changes in equity 4
Notes to the condensed consolidated interim financial statements 5-48

 

i

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Financial Position

(Expressed in Canadian dollars)

 

 

      June 30, 2024   December 31,
2023		 
   Note  $   $ 
      (Restated - see note 27)     
Assets           
Current            
Cash and cash equivalents  3,18   19,529,425    6,727,482 
Amounts receivable  5,18   134,101    54,036 
Prepaid expenses  6   4,520,767    1,509,824 
Digital assets  7,18,26   341,319,331    188,342,579 
Digital assets loaned  7   78,942,257    270,362,684 
Digital assets staked  7   40,516,395    30,516,888 
Equity investments in digital assets, at FVTPL  24,27   87,238,682    - 
Total current assets      572,200,958    497,513,493 
              
Private investments, at fair value through profit and loss  4,18,21   40,994,025    43,540,534 
Digital assets  7   789,302    643,487 
Equity investments in digital assets, at FVTPL  24,27   122,794,452    - 
Equipment      2,349    7,679 
Intangible assets  8,9   2,957,613    3,542,888 
Goodwill  8,9   49,348,414    46,712,027 
Total assets      789,087,114    591,960,108 
Liabilities and shareholders' equity             
Current liabilities             
Accounts payable and accrued liabilities  10,18,21   36,416,277    9,174,846 
Loans payable  11,18   17,793,100    56,210,709 
ETP holders payable  12,18   730,068,689    508,130,490 
Deferred revenue      220,987    - 
Total current liabilities      784,499,053    573,516,045 
Shareholders' equity             
Common shares  16(b)   181,688,832    170,687,476 
Preferred shares      4,321,350    4,321,350 
Share-based payments reserves  17   30,390,898    28,631,887 
Accumulated other comprehensive income      (2,811,136)   (1,652,547)
Non-controlling interest      (457)   (4,871)
Deficit      (209,001,425)   (183,539,232)
Total equity      4,588,061    18,444,063 
Total liabilities and equity      789,087,114    591,960,108 
Nature of operations and going concern  1          
Commitments and contingencies  22          

 

Approved on behalf of the Board of Directors:    
     
"Olivier Roussy Newton"   "Stefan Hascoet"
Director   Director

 

See accompanying notes to these condensed consolidated interim financial statements

 

1

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)

(Expressed in Canadian dollars)

 

 

      Three months ended June 30,   Six months ended June 30, 
      2024   2023   2024   2023 
      $   $   $   $ 
      (Restated - see note 27)   (Restated - see Note 26)   (Restated - see note 27)   (Restated - see Note 26) 
Revenues                   
Realized and net change in unrealized gains and (losses) on digital assets  13   (170,854,812)   (12,555,609)   146,268,243    50,462,924 
Realized and net change in unrealized gains and (losses) on ETP payables  14   209,094,995    18,984,061    (119,158,890)   (56,529,430)
Staking and lending income      8,263,022    764,662    14,071,024    1,336,475 
Management fees      2,145,432    244,016    3,877,314    459,693 
Research revenue      338,583    -    840,451    - 
Node revenue      35    (845)   4,709    4,976 
Realized gain (loss) on investments  4   634,271    (3,438)   634,271    (4,025)
Unrealized loss on investments  4   (659,386)   (42,491)   (2,498,418)   314,862 
Unrealized loss on equity investments in digital assets at FVTPL  25,27   (14,453,469)   -    (14,453,469)   - 
Interest income      644    (572)   1,512    257 
Total revenues      34,509,314    7,389,784    29,586,747    (3,954,267)
Expenses                       
Operating, general and administration  15,21   30,511,981    1,755,467    33,480,118    3,871,936 
Share based payments  17   3,433,990    501,594    5,051,505    1,442,880 
Depreciation - property, plant and equipment      2,092    3,236    5,328    6,472 
Depreciation - right of use assets      -    (34,034)   -    - 
Amortization - intangibles  9   514,154    509,575    1,031,379    1,019,150 
Finance costs      929,255    275,063    2,666,769    1,561,529 
Transaction costs      1,089,807    86,944    1,580,204    319,719 
Foreign exchange loss      6,318,062    4,743,568    7,141,206    4,754,029 
Impairment loss  9   -    -    4,962,021    - 
Total expenses      42,799,341    7,841,413    55,918,530    12,975,715 
Loss before other item      (8,290,026)   (451,629)   (26,331,783)   (16,929,983)
Loss on settlement of debt      -    (198,482)   -    (198,482)
Net loss for the period      (8,290,026)   (650,111)   (26,331,783)   (17,128,465)
Other comprehensive income (loss)                       
Foreign currency translation gain (loss)      110,463    1,692,615    (1,158,589)   1,726,504 
Net income (loss) and comprehensive income (loss) for the period      (8,179,564)   1,042,504    (27,490,372)   (15,401,961)
Net (loss) income attributed to: Owners of the parent      (8,253,546)   (650,111)   (26,336,197)   (17,128,465)
Non-controlling interests      (36,480)   -    4,414    - 
       (8,290,026)   (650,111)   (26,331,783)   (17,128,465)
Net (loss) income and comprehensive (loss) income attributed to:                       
Owners of the parent      (8,143,084)   1,042,504    (27,494,786)   (15,401,961)
Non-controlling interests      (36,480)   -    4,414    - 
       (8,179,564)   1,042,504    (27,490,372)   (15,401,961)
Loss per share                       
Basic      (0.03)   (0.00)   (0.09)   (0.08)
Weighted average number of shares outstanding:                       
Basic  291,902,102        220,295,703    288,018,114    219,656,652 

 

See accompanying notes to these condensed consolidated interim financial statements

 

2

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian dollars)

  

 

      Six months ended
June 30,		 
      2024   2023 
   Note  $   $ 
      (Restated - see   (Restated - See Note 24) 
Cash (used in) provided by operations:           
Net loss for the period     $(26,331,783)  $(17,128,465)
Adjustments to reconcile net (loss) income to cash (used in) operating activities:             
Share-based payments  17   5,051,505    1,442,880 
Loss on debt for shares      -    198,482 
Impairment loss  9   4,962,021    - 
Interest expense      -    1,561,529 
Interest income      -    (32,273)
Depreciation - Property, plant & equipment      5,328    6,472 
Depreciation - right of use assets      -    - 
Amortization - Intangible asset  9   1,031,379    1,019,150 
Realized loss on investments, net      (634,271)   4,025 
Unrealized (gain) loss on investments, net      2,498,418    (314,862)
Realized and net change in unrealized (gains) and loss on digital assets  13   (146,268,243)   (50,462,924)
Realized and net change in unrealized (gains) and loss on ETP  14   119,158,890    56,529,430 
Unrealized loss on equity investments  25,27   14,453,469    - 
Staking and lending income      (14,071,024)   (1,336,475)
Management fees      (3,877,314)   (459,693)
Node revenue      (4,709)   (4,976)
Unrealized loss on foreign exchange      (1,353,077)   1,471,425 
       (45,379,411)   (7,506,275)
Adjustment for:             
Purchase of digital assets      (345,760,641)   (40,495,137)
Disposal of digital assets      568,751,078    34,356,040 
Purchase of equity investments      (238,090,603)   - 
Disposal of investments      -    12,496 
Change in amounts receivable      5,216    (125,932)
Change in prepaid expenses and deposits      (3,010,943)   (1,227,869)
Change in accounts payable and accrued liabilities      27,463,792    185,178 
Net cash (used in) operating activities      (36,021,512)   (14,801,499)
Investing activities             
Cash received from acquisition of subsidiary      319,643    - 
Net cash provided by investing activities      319,643    - 
Financing activities             
Proceeds from ETP holders      406,189,410    56,747,554 
Payments to ETP holders      (318,755,385)   (47,387,053)
Loan Payable      -    4,319,901 
Loan repaid  11   (40,376,650)   - 
Proceeds from investments      752,230    - 
Proceds from option exercises  17   455,450    - 
Proceeds from exercise of warrants  17   1,379,414    - 
NCIB  16   (1,314,018)   - 
Net cash provided by financing activities      48,330,450    13,680,402 
              
Effect of exchange rate changes on cash and cash equivalents      173,361    (104,240)
Change in cash and cash equivalents      12,801,943    (1,225,337)
Cash, beginning of year      6,727,482    4,906,165 
Cash and cash equivalents, end of period     $19,529,425   $3,680,828 

 

See accompanying notes to these condensed consolidated interim financial statements

 

3

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Changes in Equity

(Expressed in Canadian dollars)

 

 

                        Share-based payments                      
    Number of Common Shares    Common Shares    Number of Preferred Shares    Preferred Shares    Options    Deferred Shares unit (DSU)    Treasury shares    Warrants    Share-based Payments Reserve    Accumulated other comprehensive income    Non-controlling income    Deficit    Total 
Balance, December 31, 2023   276,658,208   $170,687,476    4,500,000   $4,321,350   $17,968,263   $8,040,660   $27,453   $2,595,513   $28,631,889    (1,652,548)   (4,871)   (183,539,232)   18,444,063 
Acquisition of Reflxivity   5,000,000    3,100,000    -    -    -    -    -    -    -    -    -    -    3,100,000 
Acquisition of Solana IP   7,297,090    4,962,021    -    -    -    -    -    -    -    -    -    -    4,962,021 
Warrants exercised   5,691,798    1,787,346    -    -    -    -    -    (407,932)   (407,932)   -    -    -    1,379,414 
Option exercised   1,380,000    712,024    -    -    (256,574)   -    -    -    (256,574)   -    -    -    455,451 
DSU exercised   2,107,281    1,753,984    -    -    -    (1,753,984)   -    -    (1,753,984)   -    -    -    - 
Option expiry   -    -    -    -    (874,002)   -    -    -    (874,002)   -    -    874,002    - 
NCIB   (680,000)   (1,314,018)   -    -    -    -    -    -    -    -    -    -    (1,314,018)
Share-based payments   -    -    -    -    3,034,858    2,016,642    -    -    5,051,501    -    -    -    5,051,501 
Net inome (loss) and comprehensive income (loss) for the period   -    -    -    -    -    -    -    -    -    (1,158,589)   4,414    (26,336,197)   (27,490,372)
Balance, June 30, 2024   297,454,377   $181,688,832    4,500,000   $4,321,350   $19,872,546   $8,303,318   $27,453   $2,187,581   $30,390,898   $(2,811,136)  $(457)  $(209,001,426)  $4,588,061 
                                                                  
Balance, December 31, 2022   219,010,501   $166,151,401    4,500,000   $4,321,350   $20,317,312   $6,977,106   $27,453   $588,113   $27,909,984    (2,996,218)   -    (167,477,256)   27,909,261 
Shares issued for debt settlement   7,939,268    873,320    -    -    -    -    -    -    -    -    -    -    873,320 
Warrants expired   -    -    -    -    -    -    -    (423,261)   (423,261)   -    -    423,261    - 
Options cancelled   -    -    -    -    (2,831,533)   -    -    -    (2,831,533)   -    -    2,831,533    - 
DSUs exercised   500,000    107,500    -    -    -    (107,500)   -    -    (107,500)   -    -    -    - 
Share-based payments   -    -    -    -    277,139    1,165,743    -    -    1,442,882    -    -    -    1,442,882 
Net (loss) and comprehensive (loss) for the period   -    -    -    -    -    -    -    -    -    1,726,504    -    (17,128,465)   (15,401,961)
Balance, June 30, 2023   227,449,769   $167,132,221    4,500,000   $4,321,350   $17,762,918   $8,035,349   $27,453   $164,852   $25,990,572   $(1,269,714)  $-   $(181,350,927)  $14,823,502 

 

See accompanying notes to these condensed consolidated interim financial statements

 

4

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

1.Nature of operations and going concern

 

DeFi Technologies Inc. (the “Company” or “DeFi”), is a publicly listed company incorporated in the Province of British Columbia and continued under the laws of the Province of Ontario. On January 21, 2021, the Company up listed its shares to NEO Exchange (“NEO”) under the symbol of “DEFI”. DeFi is a Canadian technology company bridging the gap between traditional capital markets and decentralized finance. The Company generates revenues through the issuance of exchange traded products that synthetically track the value of a single DeFi protocol, investments in various companies and leading protocols across the decentralized finance ecosystem to build a diversified portfolio of decentralized finance assets, providing premium membership for research reports to investors and offering node management of decentralized protocols to support governance, security and transaction validation. The Company’s head office is located at 198 Davenport Road, Toronto, Ontario, Canada, M5R 1J2.

 

These condensed consolidated interim financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. As at June 30, 2024, the Company has a working capital deficiency of $212,298,095 (December 31, 2023 - working capital deficiency of $76,002,552), including cash of $19,529,425 (December 31, 2023 - $6,727,482) and for the six months ended June 30, 2024 had a net loss and comprehensive loss of $27,490,372 (for the six months ended June 30, 2023 – net loss and comprehensive loss of $15,401,961). The Company’s current source of operating cash flow is dependent on the success of its business model and operations and there can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. The Company’s status as a going concern is contingent upon raising the necessary funds through the selling of investments, digital assets and issuance of equity or debt. Management believes its working capital will be sufficient to support activities for the next twelve months and expects to raise additional funds when required and available. There can be no assurance that funds will be available to the Company with acceptable terms or at all. These matters constitute material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.

 

These condensed consolidated interim financial statements do not reflect adjustments in the carrying value of the assets and liabilities, the reported revenues and expenses and the balance sheet classifications that would be necessary if the going concern assumption were not appropriate. These adjustments could be material.

 

International conflict and other geopolitical tensions and events, including war, military action, terrorism, trade disputes, and international responses thereto have historically led to, and may in the future lead to, uncertainty or volatility in global commodity and financial markets and supply chains. Russia's invasion of Ukraine has led to sanctions being levied against Russia by the international community and may result in additional sanctions or other international action and the escalation of war between Israel and Hamas in Gaza, any of which may have a destabilizing effect on commodity prices, supply chains, and global economies more broadly. Volatility in digital asset prices and supply chain disruptions may adversely affect the Corporation's business, financial condition, financing options, and results of operations. The extent and duration of the current Russia-Ukraine conflict or the Israel and Hamas conflict in Gaza and related international action cannot be accurately predicted at this time and the effects of such conflict may magnify the impact of the other risks, including those relating to digital asset price volatility and global financial conditions. The situation is rapidly changing and unforeseeable impacts, including on shareholders of the Corporation, and third parties with which the Corporation relies on or transacts, may materialize and may have an adverse effect on the Corporation's business, results of operation, and financial condition.

 

5

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information

 

(a)Statement of compliance

 

These condensed consolidated interim financial statements of the Company were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB) applicable to the preparation of interim financial statements, including IAS 34 – Interim Financial Reporting. These condensed consolidated interim financial statements should be read in conjunction with the annual audited consolidated financial statements for the years ended December 31, 2023 and 2022, which was prepared in accordance with IFRS as issued by the IASB. These condensed consolidated interim financial statements of the Company were approved for issue by the Board of Directors on April 14, 2025.

 

(b)Basis of consolidation

 

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases. The condensed consolidated interim financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiary after eliminating inter-entity balances and transactions.

 

These condensed consolidated interim financial statements comprise the financial statements of the Company and its wholly owned subsidiaries Electrum Streaming Inc. (“ESI”), DeFi Capital Inc. (“DeFi Capital”), DeFi Holdings (Bermuda) Ltd. (“DeFi Bermuda”), Reflexivity LLC, Valour Inc., DeFi Europe AG, and Valour Digital Securities Limited. All material intercompany transactions and balances between the Company and its subsidiary have been eliminated on consolidation.

 

Intercompany balances and any unrealized gains and losses or income and expenses arising from intercompany transactions are eliminated in preparing the condensed consolidated interim financial statements.

 

(c)Basis of preparation and functional currency

 

These condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments and investments that have been measured at fair value. In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting except for cash flow information.

 

Foreign currency transactions are recorded at the exchange rate as at the date of the transaction. At each statement of financial position date, monetary assets and liabilities in foreign currencies other than the functional currency are translated using the year end foreign exchange rate. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities in foreign currencies other than the functional currency are translated using the historical rate. All gains and losses on translation of these foreign currency transactions and balances are included in the profit and loss. The functional currency for DeFi, DeFi Capital, and ESI is the Canadian dollar, and the functional currency for DeFi Bermuda, Reflexivity LLC, Valour Inc., DeFi Europe AG, and Valour Digital Securities Limited is US Dollars.

 

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

●assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet,

 

●income and expenses for each statement of loss and comprehensive loss are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

 

●all resulting exchange differences are recognized in other comprehensive loss.

 

6

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(c)Basis of preparation and functional currency (continued)

 

On consolidation, exchange differences arising from the translation of any net investment in foreign entities and of borrowings are recognized in other comprehensive loss. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

 

(d)Change in accounting policy

 

During the year ended December 31, 2023, the Company changed its accounting policy regarding the treatment for when the Company sells a portion of its digital asset holdings or when there’s redemptions of its ETP payables. The Company has adopted first in, first out (“FIFO”) to identify the units sold and determine the cost basis to use. As a result, for six months ended June 30, 2023, realized gains (loss) on digital assets increased (decreased) by $(11,399,582) and unrealized gains (loss) (decreased) increased by $11,399,582. As a result, for the six months ended June 30, 2023, realized gains (loss) on ETP payables increased (decreased) by $4,725,198 and unrealized gains (loss) (decreased) increased by $(4,725,198).

 

There were no changes to the condensed consolidated interim statements of financial position, condensed consolidated interim statements of operations and comprehensive (loss) or condensed consolidated interim statements of cash flow.

 

(e)Equity investments in digital assets at fair value through profit and loss (“FVTPL”)

 

Investments in equity instruments at fair value through profit or loss - Included in investments in equity instruments at fair value through profit or loss are investments in a US private company (LLC), and a U.S. Limited Liability Partnership via a Cayman Island domiciled feeder Limited Liability Partnership.

 

Management accounted for such investments at fair value to profit or loss under IFRS 9, because the Company does not exercise significant influence over the investee. The Company does not have any contractual right to appoint any representative to the investee’s board of directors. In addition, the Company does not have any participation in policymaking processes and does not have any material transactions with the investee. The fair value of investments in investment funds which are not quoted in an active market is determined by using net asset value as determined by the investment fund’s administrator and include a discount for lack of marketability (“DLOM”). Management deems the net asset value to be the fair value after considering key factors such as the liquidity of the investment fund or its underlying investments, any restrictions on redemptions and basis of accounting.

 

The Company classifies equity investments it intends to sell within twelve months as current and those where the expectation is to hold for periods longer than a year as non-current. These are included in Level 3 disclosed in Note 18.

 

(f)Significant accounting judgements, estimates and assumptions

 

The preparation of these condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the condensed consolidated interim financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.

 

7

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Significant accounting judgements, estimates and assumptions (continued)

 

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the condensed consolidated interim financial statements are as follows:

 

(i)Accounting for digital assets

 

Among its digital asset holdings, only USDC was classified by the Company as a financial asset. The rest of its digital assets were classified following the IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2 - Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss. Digital currencies consist of cryptocurrency denominated assets (see Note 7) and are included in current and long-term assets. Digital currencies are carried at their fair value determined by the spot rate less costs to sell. The cost to sell digital assets is nominal. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value is determined by taking the mid-point price at 17:30 CET digital asset exchanges consistent with the final terms for each exchange traded product (“ETP”). The primary digital asset exchanges used to value digital assets are Kraken, Bitfinex, Binance, Coinbase and Bitstamp. Where digital assets held do not have pricing on these exchanges, other exchanges would be used. On all material coins, Kraken, Bitfinex, Coinbase and Bitstamp were used. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Volmex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com. The Company revalues its digital assets quarterly.

 

(ii)Accounting for ETP holder payables

 

Financial liabilities at fair value through profit or loss held includes ETP holders payable. Liabilities arising in connection with ETPs issued by the Company referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company elected not to designate this as a hedging instrument. The ETPS are actively traded on the Nordic Growth Market (“NGM”) and Germany Borse Frankfurt Zertifikate AG.

 

(iii)Fair value of financial derivatives

 

Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. Valuation technique such as Black Scholes model is used to value these instruments. Refer to Notes 4 and 18 for further details.

 

(iv)Fair value of equity investment not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Refer to Notes 18, 24, and 25 for further details.

 

8

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Significant accounting judgements, estimates and assumptions (continued)

 

(v)Share-based payments

 

The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk-free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense.

 

(vi)Business combinations and goodwill

 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Goodwill is assessed for impairment annually.

 

(vii)Estimated useful lives and impairment considerations

 

Amortization of intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

 

(viii) Impairment of non-financial assets

 

The Company’s non-financial assets include prepaid expenses, digital assets excluding USDC, equipment and right of use assets, intangibles and goodwill. Impairment of these non-financial assets exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. See Note 9 for the discussion regarding impairment of the Company’s non-financial assets.

 

(ix)Functional currency

 

The functional currency of the Company has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and the currencies in which expenses are settled, by each entity, as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency.

 

(x)Assessment of transaction as an asset purchase or business combination

 

Assessment of a transaction as an asset purchase or a business combination requires judgements to be made at the date of acquisition in relation to determining whether the acquiree meets the definition of a business. The three elements of a business include inputs, processes and outputs. When the acquiree does not have outputs, it may still meet the definition of a business if its processes are substantive which includes assessment of whether the process is critical and whether the inputs acquired include both an organized workforce and inputs that the organized workforce could convert into outputs.

 

9

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Significant accounting judgements, estimates and assumptions (continued)

 

(xi)Control

 

Significant judgment is involved in the determination whether the Company controls under IFRS 10. The Company is deemed to control an investee when it demonstrates: power over the investee, exposure, or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. There is judgement required to determine whether these criterions are met. The Company determined it controlled Valour Digital Securities Limited through its role as arranger.

 

(xii)Accounting for digital assets held as collateral

 

The Company has provided digital assets as collateral for loans provided by digital asset liquidity provider. These digital assets held as collateral are included with digital assets and valued at fair value consistent with the Company’s accounting policy for its digital assets. See note 2(e)(i).

 

(xiii) Valuation of equity investments at FVTPL

 

Significant judgement is required in the determination of the fair value of the Company’s investments in Equity investments (collectively the “Funds”) in digital asset at FVTPL given the lock up periods applied to the digital cryptocurrencies owned by the Funds. The Company assesses the discount for lack of marketability applied by the Fund managers for reasonableness in their calculated net asset values. The Fund managers calculate the discount for lack of marketability (“DLOM”) using an option pricing model.

 

10

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

3.Cash and cash equivalents

 

   30-Jun-24   31-Dec-23 
Cash at banks  $2,144,257   $306,920 
Cash at brokers   14,941,680    6,417,725 
Cash at digital currency exchanges   2,443,488    2,837 
   $19,529,425   $6,727,482 

 

4.Investments, at fair value through profit and loss

 

At June 30, 2024, the Company’s investment portfolio consisted of nine private investments for a total estimated fair value of $40,994,025 (December 31, 2023 – nine private investments for a total estimated fair value of 43,540,534).

 

During the three and six months ended June 30, 2024, the Company had a realized gain of $634,271 and $634,271 and an unrealized (loss) of $(659,386) and $(2,498,418) (June 30, 2023 – realized (loss) of ($3,438) and $(4,025) and an unrealized (loss) / gain of $(42,491) and $314,862) on private and public investments.

 

Private Investments

 

At June 30, 2024, the Company’s nine private investments had a total fair value of $40,994,025.

 

Private Issuer  Note   Security description  Cost   Estimated Fair Value   %
of FV		 
3iQ Corp.       61,712 common shares  $86,319   $415,569    1.0%
Amina Bank AG       3,906,250 non-voting shares   34,498,750    38,067,500    92.9%
Brazil Potash Corp.   (i)   404,200 common shares   1,998,668    1,697,640    4.1%
Earnity Inc.       85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation       201,633 preferred shares   630,505    684,418    1.7%
Neuronomics AG       724 common shares   128,898    128,898    0.3%
SDK:meta, LLC       1,000,000 units   3,420,000    -    0.0%
Skolem Technologies Ltd.       16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation       Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments          $41,109,383   $40,994,025    100.0%

 

(i)Investments in related party entities

 

11

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

4.Investments, at fair value through profit and loss (continued)

 

At December 31, 2023, the Company’s nine private investments had a total fair value of $43,540,534.

 

Private Issuer  Note   Security description  Cost   Estimated Fair Value   %
of FV		 
3iQ Corp.       187,007 common shares  $261,605   $1,216,890    2.8%
Brazil Potash Corp.   (i)   404,200 common shares   1,998,668    2,138,380    4.9%
Earnity Inc.       85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation       201,633 preferred shares   630,505    661,366    1.5%
Neuronomics AG       724 common shares   128,898    128,898    0.3%
SDK:meta, LLC       1,000,000 units   3,420,000    -    0.0%
Amina Bank AG (formerly SEBA Bank AG)   (i)   3,906,250 non-voting shares   34,498,750    39,395,000    90.5%
Skolem Technologies Ltd.       16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation       Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments          $41,284,669   $43,540,534    100.0%

 

5.Amounts receivable

 

   30-Jun-24   31-Dec-23 
Other receivables   $134,101   $54,036 

 

6.Prepaid expenses

 

   30-Jun-24   31-Dec-23 
Prepaid insurance  $98,247   $42,335 
Prepaid expenses   4,422,520    1,467,489 
   $4,520,767   $1,509,824 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked

 

As at June 30, 2024, the Company’s digital assets consisted of the below digital currencies, with a fair value of $461,567,285 (December 31, 2023 - $489,865,638). Digital currencies are recorded at their fair value on the date they are acquired and are revalued to their current market value at each reporting date. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase and other exchanges consistent with the final terms for each ETP. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Volmex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

12

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The Company’s holdings of digital assets consist of the following:

 

   June 30, 2024   December 31, 2023 
   Quantity   $   Quantity   $ 
Binance Coin   1,833.1116    1,435,764    236.4452    97,710 
Bitcoin   2,544.2313    181,934,285    2,271.3329    108,983,280 
Ethereum   21,425.6087    100,059,573    21,537.4066    65,956,320 
EthereumPoW   -    -    0.2000    1 
Cardano   62,374,745.9926    33,354,333    54,210,783.1700    43,306,306 
Polkadot   2,174,109.2288    18,811,801    1,666,147.7880    18,371,365 
Solana   122,711.82    28,992,123    1,682,112.49    235,733,109 
Shyft   4,879,446.3958    49,806    4,539,407.2792    78,314 
Uniswap   326,938.2981    4,179,467    296,352.0602    2,932,687 
USDC        698         673 
USDT        54,473,100         111,856 
Litecoin   -    -    17.3931    1,719 
Doge   404,126.4335    69,086    220,474.3947    26,652 
Cosmos   21,278.72    202,569.12    11,700.0000    171,497 
Avalanche   481,576.7021    18,607,286    248,151.6644    13,148,105 
Matic   19,504.9463    14,598    0.0003    - 
Ripple   7,323,969.3011    4,771,762    76,029.7317    62,737 
Enjin   66,737.8886    17,556    432,342.3671    223,237 
Tron   128,246.2765    21,064    118,490.5094    16,581 
Terra Luna   203,702.1876    -    202,302.5360    - 
Shiba Inu   2,351,900,000.0000    54,724    -    - 
ICP   1,020,042.1003    11,140,987    -    - 
Core   431,105.7669    791,440           
AAVE   1.5265    201    -    - 
LINK   16,691.6367    327,361    -    - 
TON   135,790.0000    1,404,661    -    - 
HARB   594,000.0000    63,740    -    - 
Current   2,432,650,528    460,777,983    63,728,357    489,222,151 
Blocto   266,780.1712    2,873    264,559.703    10,503 
Boba Network   250,000.0000    -    250,000.00    - 
Clover   480,000.0000    20,764    450,000.00    19,831 
Maps   285,713.0000    -    285,713.000    - 
Mobilecoin   2,855.5045    -    2,855.5045    - 
Oxygen   400,000.0000    -    400,000.000    - 
Pyth   2,500,000.0000    666,446    2,500,000.00    503,669 
Saffron.finance   86.2100    2,612    86.21    2,619 
Sovryn   15,458.9500    13,292    15,458.95    12,863 
Wilder World   148,810.0000    83,316    148,810.00    94,002 
Volmex Labs   2,925,878.0000    -    2,925,878.0000    - 
Long-Term        789,302         643,487 
Total Digital Assets        461,567,285         489,865,638 
Current Digital Assets                    
Digital assets        341,319,331         188,342,579 
Digital assets loaned        78,942,257         270,362,684 
Digital assets staked        40,516,395         30,516,888 
Total Current Digital Assets        460,777,983         489,222,151 
Non-Current Digital assets                    
Digital assets        789,302         643,487 
Total Non-Current Digital Assets        789,302         643,487 
Total Digital Assets        461,567,285         489,865,638 

 

13

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The continuity of digital assets for the six months ended June 30, 2024 and year ended December 31, 2023:

 

   June 30,
2024		   December 31, 2023 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   345,760,641    318,355,007 
Digital assets disposed   (568,751,078)   (244,656,544)
Realized gain (loss) on digital assets   282,549,869    (1,017,247)
Digital assets earned from staking, lending and fees   14,071,024    3,554,587 
Net change in unrealized gains and losses on digital assets   (136,281,626)   324,976,115 
Foreign exchange gain (loss)   34,352,817    (15,548,363)
   $461,567,285   $489,865,638 
Current Digital Assets          
Digital assets   341,319,331    188,342,579 
Digital assets loaned   78,942,257    270,362,684 
Digital assets staked   40,516,395    30,516,888 
Total Current Digital Assets  $460,777,983   $489,222,151 
Non-Current Digital assets Digital assets   789,302    643,487 
Total Non-Current           
Digital Assets  $789,302   $643,487 
Total Digital Assets  $461,567,285   $489,865,638 

 

Digital assets held by counterparty for the six months ended June 30, 2024 and year ended December 31, 2023 is the following:

 

   June 30,
2024		   December 31, 2023 
Counterparty A  $130,941,393   $421,687,911 
Counterparty B   20,520,801    30,592,947 
Counterparty C   2,558,611    2,775,287 
Counterparty D   59,706    11,785,440 
Counterparty E   9,203,964    8,633,491 
Counterparty F   13,464,318    837,948 
Counterparty G   13,202,820    8,840,988 
Counterparty H   11,978,801    - 
Counterparty I   -    - 
Counterparty J   -    - 
Other   3,083,236    248,294 
Self custody   256,553,635    4,463,332 
Total  $461,567,285   $489,865,638 
Current Digital Assets          
Digital assets   341,319,331    188,342,579 
Digital assets loaned   78,942,257    270,362,684 
Digital assets staked   40,516,395    30,516,888 
Total Current Digital Assets  $460,777,983   $489,222,151 
Non-Current Digital assets          
Digital assets   789,302    643,487 
Total Non-Current Digital Assets  $789,302   $643,487 
Total Digital Assets  $461,567,285   $489,865,638 

 

14

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of June 30, 2024, digital assets held by lenders as collateral consisted of the following:

 

   Number of
coins on loan		   Fair Value 
Bitcoin   633.2614   $22,406,784 
Ethereum   1,845.0000    8,616,789 
Total   2,478.2614   $31,023,573 

 

As at June 30, 2024, the 475 Bitcoin held by Genesis Global Capital LLC (“Genesis”) as collateral against a loan has been written down to $9,203,964 (US$6,724,603), the fair value of the loan and interest held with Genesis.

 

As of December 31, 2023, digital assets held by lenders as collateral consisted of the following:

 

   Number of
coins on loan		    Fair Value 
Bitcoin   1,158.2614    46,860,266 
Ethereum   9,263.7800    28,369,770 
Total   10,422.0414   $75,230,036 

 

As at December 31, 2023, the 475 Bitcoin held by Genesis as collateral against a loan has been written down to $8,690,623 (US$6,570,862), the fair value of the loan and interest held with Genesis.

 

In the normal course of business, the Company enters into open-ended lending arrangements with certain financial institutions, whereby the Company loans certain fiat and digital assets in exchange for interest income. The Company can demand the repayment of the loans and accrued interest at any time. The digital assets on loan are included in digital assets balances above.

 

Digital Assets loaned

 

As of June 30, 2024, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.3% to 9.2% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.4% to 9.7% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of June 30, 2024, digital assets on loan consisted of the following:

 

   Number of
coins on loan		   Fair Value   Fair Value Share 
Digital assets on loan:            
Ethereum   8,500.0000    39,697,946    50%
Cardano   19,000,000.0000    10,160,271    13%
Polkadot   1,800,000.0000    15,574,766    20%
Uniswap   150,000.0000    1,917,549    2%
Avalanche   300,000.0000    11,591,726    15%
Total   21,258,500.0000   $78,942,257    100%

 

15

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of December 31, 2023, digital assets on loan consisted of the following:

 

   Number of
coins on loan		   Fair Value   Fair Value Share 
Digital on loan:            
Ethereum   7,000.0000    21,437,084    8%
Cardano   8,500,000.0000    6,790,228    3%
Polkdot   1,373,835.0000    15,148,250    6%
Solana   1,572,441.0000    220,363,625    82%
Avalanche   125,009.0000    6,623,496    2%
Total   11,578,285.0000   $270,362,684    100%

 

As of June 30, 2024, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest rates  Number of
coins on loan		   Fair Value 
Digital assets on loan:             
Counterparty A  2.3% to 9.2%   21,258,500.0000    78,942,257 
Total      21,258,500.0000   $78,942,257 

 

As of December 31, 2023, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest rates  Number of
coins on loan		   Fair Value 
Digital on loan:             
Counterparty A  2.4% to 9.7%   11,578,285.0000    270,362,684 
Total      11,578,285.0000   $270,362,684 

 

As of June 30, 2024, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  June 30,
2024		 
Digital assets on loan:         
Counterparty A  Cayman Islands   100%
Total      100%

 

As of December 31, 2023, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on loan:         
Counterparty A   Cayman Islands   100%
Total      100%

 

The Company’s digital assets on loan are exposed to credit risk. The Company limits its credit risk by placing its digital assets on loan with high credit quality financial institutions that have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company's due diligence procedures may include, but are not limited to, review of the financial position of the borrower, review of the internal control practices and procedures of the borrower, review of market information, and monitoring the Company’s risk exposure thresholds. As of June 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets on loan. While the Company intends to only transact with counterparties that it believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

Digital Assets Staked

 

As of June 30, 2024, the Company has skated select digital assets to borrowers at annual rates ranging from approximately 2.99% to 9.48% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

16

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of December 31, 2023, the Company has skated select digital assets to borrowers at annual rates ranging from approximately 3.15% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of June 30, 2024, digital assets staked consisted of the following:

 

   Number of
coins staked		   Fair Value   Fair Value Share 
Digital assets on staked:                
Cardano   38,202,110.3050    20,428,620    50%
Bitcoin   1,610.0324    5,589,577    14%
Solana   48,149.8681    14,498,198    36%
Total   38,251,870.2055   $40,516,395    100%

 

As of December 31, 2023, digital assets staked consisted of the following:

 

   Number of
coins staked		   Fair Value   Fair Value Share 
Digital on staked:                
Cardano   38,201,004.7950    30,516,888    100%
Total   38,201,004.7950   $30,516,888    100%

 

As of June 30, 2024, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates   Number of
coins staked		   Fair Value   Fair Value Share 
Digital on staked:                
Counterparty B   2.99%   38,201,004.7950    20,428,029    50%
Self custody   7.57 to 9.48%    50,865.4105    20,088,366    50%
Total        38,251,870.2055   $40,516,395    100%

 

As of December 31, 2023, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates   Number of
coins staked		   Fair Value 
Digital on staked:            
Counterparty B   3.15%   38,201,004.7950    30,516,888 
Total        38,201,004.7950   $30,516,888 

 

17

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of June 30, 2024, digital assets staked were concentrated with counterparties as follows:

 

   Geography   June 30,
2024		 
Digital on staked:        
Counterparty B   Switzerland    50%
Self custody   Switzerland    50%
Total        100%

 

As of December 31, 2023, digital assets staked were concentrated with counterparties as follows:

 

   Geography   June 30,
2024		 
Digital on staked:        
Counterparty B   Switzerland    50%
Self custody   Switzerland    50%
Total        100%

 

The Company’s digital assets staked are exposed to market risk, liquidity risk, lockup duration risk, loss or theft of assets and return duration risk. The Company places allocation limits by counterparty and only deals with high credit quality financial institutions that are believed to have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company's due diligence procedures may include, but are not limited to, review of the financial position of the counterparty, review of the internal control practices and procedures of the counterparty, review of market information, and monitoring the Company’s risk exposure thresholds. As of June 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets staked. While the Company intends to only transact with counterparties that it believes to meets the Company staking policy criteria, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

18

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

8.Acquisition of Reflexivity

 

On February 6, 2024, the Company acquired 100% interest in Reflexivity LLC (“Reflexivity”) by issuing 5,000,000 common shares. Reflexivity is a private company incorporated in the United States that operates a premier private research firm that specializes in producing cutting-edge research reports for the cryptocurrency industry.

 

Details of the consideration for acquisition, net assets acquired and goodwill are as follows:

 

Purchase price consider paid:     
Fair value of shares issued  $3,100,000 
Fair value of shares issued  $3,100,000 
      
Fair value of assets and liabilities assumed:     
Cash  $319,643 
Amounts receivable   18,131 
Prepaid expenses   21,448 
Client relationships   315,000 
Brand Name   66,000 
Technology   78,000 
Accounts payable   (1,383)
Deferred revenue   (353,226)
   $463,613 
Goodwill   2,636,387 
Total net assets aquired  $3,100,000 

 

The goodwill acquired as part of the Reflexivity acquisition is made up of assembled workforce and implied goodwill related to Reflexivity’s management and staff experiences and Reflexivity’s reputation in the industry. It will not be deductible for tax purposes.

 

19

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

9.Intangibles and goodwill

 

     
Cost  Client relationships   Technology   Brand Name   Total 
Balance, December 31, 2023 and 2022  $-   $-   $42,789,968   $42,789,968 
Acquisition of Reflexivty LLC   315,000    78,000    66,000    459,000 
Acquisition of Solana IP   -    4,962,021    -    4,962,021 
Balance, June 30, 2024  $315,000   $5,040,021   $42,855,968   $48,210,989 

 

Accumulated Amortization          Brand Name   Total 
Balance, December 31, 2022  $-   $-   $(37,208,780)  $(37,208,780)
Amortization   -    -    (2,038,300)   (2,038,300)
Balance, December 31, 2023  $-   $-   $(39,247,080)  $(39,247,080)
Amortization   (13,125)   (6,500)   (1,024,650)   (1,044,275)
Impairment loss   -    (4,962,021)   -    (4,962,021)
Balance, June 30, 2024  $(13,125)  $(4,968,521)  $(40,271,730)  $(45,253,376)
                     
Balance, December 31, 2023  $-   $-   $3,542,888   $3,542,888 
Balance, June 30, 2024  $301,875   $71,500   $2,584,238   $2,957,613 

 

On February 9, 2024, the Company acquired intellectual property by issuing 7,297,090 common shares of the Company. The intellectual property acquired encompasses a suite of sophisticated features, including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by the Company. At the time of acquisition, the intangible assets were in an early stage of research and development, with significant uncertainties surrounding its future market demand, sales price and production costs, and as such, on February 9, 2024, the Company recognized an impairment loss of $4,962,021.

 

10.Accounts payable and accrued liabilities

 

   30-Jun-24   31-Dec-23 
Corporate payables  $31,560,993   $4,443,937 
Digital asset liquidity provider   4,760,890    4,402,557 
Related party payable (Note 21)   94,394    328,352 
   $36,416,277   $9,174,846 

 

20

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

11.Loans payable

 

On January 14, 2022 and January 17, 2022, the Company entered into various loans with a digital asset liquidity provider totaling $46,235,200 (US$37,000,000). On April 4, 2022, the Company entered into a loan with a second digital asset provider for US$5,500,000. In April 2022, the Company partially repaid of one of the loans of US$3,500,000, while the remainder of these loans have since been renewed and continue to be outstanding. The Company has spread the loans among three different digital asset liquidity providers to reduce single entity concentration and be able to obtain more competitive rates. During the six months ended June 30, 2024, the Company repaid loans of US$29,500,000. As of June 30, 2024, the loan principal of $13,687,000 (US$10,000,000) (December 31, 2023 - $52,242,700 (US$39,500,000)) was outstanding. The loans terms are 90 days have interest rates ranging from 7.25% and 10.5% The extended loans are secured with 475 BTC and 1845 ETH.

 

One of Company’s digital asset liquidity provider loans payable is held with Genesis. On January 20, 2023, Genesis declared bankruptcy and currently is not allowing withdrawals and not extending new loans. On March 15, 2023, the Court ruled that the Genesis debtors may not sell, buy, trade in crypto assets without prior consent by the creditors. The Court also allowed for the payment of some service providers required for upholding the operations but nothing beyond that. The Company’s loan with Genesis is an open term loan. The Genesis loan and interest payable is US$6,724,603 and secured with 475 BTC. See Note 7.

 

On March 23, 2023, the Company entered into a loan agreement with an institutional investment firm that specializes in long-term asset backed financing for secured loan of $4,101,300 (US$3,000,001). The loan is secured by 158.2614 BTC. The Company paid a 1% origination fee to the lender. The principal is due eighteen months from the closing date. Interest payments of US$24,375 are due quarterly with the first payment due on June 23, 2023. As of June 30, 2024, the loan principal of $4,106,100 (US$3,000,001) (December 31, 2023 - $3,967,801 (US$3,000,001)) was outstanding.

 

21

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

12.ETP holders payable

 

The fair market value of the Company’s ETPs as at June 30, 2024 and December 31, 2023 were as follows:

 

  

June 30, 2024

$

  

December 31, 2023

$

 
Valour Bitcoin Zero EUR   21,638,739    13,325,026 
Valour Bitcoin Zero SEK   177,425,985    113,727,037 
Valour Ethereum Zero EUR   2,428,454    1,426,174 
Valour Ethereum Zero SEK   95,530,104    64,723,237 
Valour Polkadot EUR   139,967    217,017 
Valour Polkadot SEK   18,547,831    18,056,128 
Valour Cardano EUR   107,328    105,209 
Valour Cardano SEK   32,884,793    43,131,123 
Valour Uniswap EUR   190,107    132,960 
Valour Uniswap SEK   3,973,205    2,780,982 
Valour Binance EUR   43,888    1,560 
Valour Binance SEK   1,128,578    - 
Valour Solana EUR   7,160,499    4,215,658 
Valour Solana SEK   327,713,756    232,410,677 
Valour Cosmos EUR   188,318    159,572 
Valour Digital Asset Basket 10 EUR   594,865    301,427 
Valour Digital Asset Basket 10 SEK   4,446    42,770 
Valour Bitcoin Carbon Neutral EUR   18,382    5,288 
Valour Avalanche EUR   358,273    137,447 
Valour Avalanche SEK   18,227,456    13,034,136 
Valour Enjin EUR   17,436    197,061 
Valour Ripple SEK   4,517,635    - 
Valour Toncoin SEK   1,406,069    - 
Valour Chainlink SEK   293,597    - 
Valour ICP SEK   938,521    - 
Valour Bitcoin Staking SEK   2,442,085    - 
Valour Hedera EUR   65,192    - 
Valour Hedera SEK   11,729    - 
Valour CORE SEK   14,290    - 
Valour BTC Staking EUR   5,694    - 
Valour Short BTC SEK   75,332    - 
1Valour Bitcoin Physical Carbon Neutral   357,156    - 
1Valour Ethereum Physical Staking   458,647    - 
1Valour Internet Computer Physical Carbon Neutral   10,177,818    - 
1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip   982,511    - 
    730,068,689    508,130,490 

 

22

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

12.ETP holders payable (continued)

 

The Company’s ETP certificates are unsecured and trade on the Nordic Growth Market “(NGM”) and / or Germany Borse Frankfurt Zertifikate AG. ETPs issued by the Company referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company’s policy is always to hedge 100% of the market risk by holding the underlying digital asset. Hedging is done continuously and in direct correspondence to the issuance of certificates to investors.

 

13.Realized and net change in unrealized gains and (losses) on digital assets

 

   Three months ended June,   Six months ended June, 
   2024   2023   2024   2023 
Realized gains / (loss) on digital assets  $212,860,087   $(16,138,894)  $282,549,869   $(25,746,890)
Unrealized gains / (loss) on digital assets   (383,714,899)   3,583,285    (136,281,626)   76,209,814 
   $(170,854,812)  $(12,555,609)  $146,268,243   $50,462,924 

 

14.Realized and net change in unrealized gains and (losses) on ETP payables

 

   Three months ended June,   Six months ended June, 
   2024   2023   2024   2023 
Realized gains / (loss) on ETPs  $(34,477,869)  $(5,588,510)  $(134,238,059)  $27,245,938 
Unrealized gains / (loss) on ETPs   243,572,864    24,572,571    15,079,169    (83,775,368)
   $209,094,995   $18,984,061   $(119,158,890)  $(56,529,430)

 

15.Expenses by nature

 

   Three months ended June 30,   Six months ended June 30 
   2024   2023   2024   2023 
Management and consulting fees  $28,831,959   $1,195,609   $30,285,078   $2,285,224 
General and administration   1,029,962    122,323    1,604,496    239,616 
Office and rent   (134,658)   224,026    460,906    852,654 
Accounting and legal   754,137    157,068    1,007,043    370,594 
Regulatory and transfer agent   30,580    56,441    122,595    123,848 
   $30,511,981   $1,755,467   $33,480,118   $3,871,936 

 

16.Share Capital

 

a)As at June 30, 2024 and December 31, 2023, the Company is authorized to issue:

 

I.Unlimited number of common shares with no par value;

 

II.20,000,000 preferred shares, 9% cumulative dividends, non-voting, non-participating, non-redeemable, non-retractable, and non-convertible by the holder. The preferred shares are redeemable by the Company in certain circumstances.

 

23

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

16.Share Capital (continued)

 

b)Issued and outstanding shares

 

   Number of Common Shares   Amount 
Balance, December 31, 2022   219,010,501   $166,151,401 
Private placement financings   11,812,500    1,117,145 
Shares issued for debt settlement   13,697,095    1,449,102 
Warrant allocation        (243,330)
Options exercised   575,000    181,585 
DSU exercised   757,500    317,150 
Issued on convertible debt   30,000,000    1,585,524 
Shares issued on acquisition of investment   805,612    128,898 
Balance, December 31, 2023   276,658,208   $170,687,476 
Acquisition of Refelxivty LLC (see Note 8)   5,000,000    3,100,000 
Acquisiton of Solana IP (see Note 9)   7,297,090    4,962,021 
DSU exercised   2,107,281    1,753,984 
Options exercised   1,380,000    712,024 
Warrant exercised   5,691,798    1,787,347 
NCIB   (680,000)   (1,314,019)
Balance, June 30, 2024   297,454,377   $181,688,832 

 

During the year ended December 31, 2023, the Company issued 13,697,095 common shares at an issue price of $0.11 per share to settle existing debt with consultants and management resulting in a loss on settlement of debt in the amount of $172,093. Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

On October 24, 2023, the Company issued convertible debt in exchange for $3,000,000, the notes mature two years from issuance and accrue interest at 8% per annum. Upon conversion or at the maturity of the note the notes were convertible for an equal number of common shares and share purchase warrants, of the Company with an exercise price of $0.20. An officer of the Company subscribed for $361,250 convertible debt.

 

On November 6, 2023, the conversion option was exercised resulting in the issuance of 30,000,000 common shares of the Company and 30,000,000 warrants, each warrant entitles the holder to acquire one additional common share of the Company at an exercise price of $0.20 for a period of 60 months following the closing date. At the issue date, the fair value of the warrants was estimated at $0.10 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 151.9%; risk-free interest rate of 3.87% and an expected life of 5 years. As a result of the conversion option, an officer of the Company received 3,612,500 common shares and 3,612,500 warrants for his convertible debenture.

 

On November 6, 2023, the Company issued 805,612 common shares of the Company in exchange for a $128,898 investment in Neuronomics AG. The shares were valued based on the closing price of the Company’s stock at the date of the exchange. An officer of the Company received 402,808 common shares in exchange for 362 shares of Neuromomics AG.

 

On November 22, 2023, the Company closed a non-brokered private placement financing and issued 11,812,500 units for gross proceeds of $1,890,000 at a price of $0.16 per unit, each unit consists of one common shares of the company and one warrant, each warrant entitles the holder to acquire one additional common share of the Company at an exercise price of $0.23 for a period of 24 months following the closing date. An officer of the Company subscribed 3,125,000 units for $335,167. At the issue date, the fair value of the warrants was estimated at $0.16 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 139.6%; risk-free interest rate of 4.40% and an expected life of 2 years.

 

24

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

16.Share Capital (continued)

 

b)Issued and outstanding shares (continued)

 

On June 11, 2024, under the terms of the NCIB, the Company may, if considered advisable, purchase its common shares in open market transactions through the facilities of the exchange and/or other Canadian alternative trading platforms, not to exceed up to 10 per cent of the public float for the common shares as of June 3, 2024, or 26,996,392 common shares, purchased in aggregate. The price that the company will pay for the common shares shall be the prevailing market price at the time of purchase and all purchased common shares will be cancelled by the company. In accordance with exchange rules, daily purchases (other than pursuant to a block purchase exception) on the exchange under the NCIB cannot exceed 25 per cent of the average daily trading volume on the exchange, as measured from Dec. 1, 2023, to May 31, 2024. The NCIB shall commence on June 10, 2024, and run through June 9, 2025, or on such earlier date as the NCIB is complete.

 

During the six months ended June 30, 2024, the Company purchased and cancelled 680,000 shares at an average price of $1.93 (December 31, 2023 – purchased and cancelled no shares).

 

17.Share-based payments reserves

 

Stock options, DSUs and Warrants

 

   Options   DSU   Warrants     
   Number of   Weighted average exercise   Value of   Number of   Value of   Number of   Weighted average exercise   Number of   Total 
   Options   prices   options   DSU   DSU   warrants   prices   warrants   Value 
December 31, 2022   17,777,500  $1.27    20,344,765    6,370,000   $6,977,106    16,740,486  $0.20   $588,113   $27,909,984 
Granted   8,900,000    0.10    875,928    4,359,286    2,044,291    41,812,500    0.21    2,430,661    5,350,880 
Exercised   (575,000)   0.15    (86,710)   (757,500)   (317,150)   -    -    -    (403,860)
Expired / cancelled   (2,697,500)   1.11    (3,138,269)   (327,500)   (663,587)   (12,684,560)   0.03    (423,261)   (4,225,117)
December 31, 2023   23,405,000  $0.84   $17,995,714    9,644,286   $8,040,660    45,868,426  $0.30   $2,595,513   $28,631,887 
Granted   4,825,000    0.63    3,034,858    2,700,000    2,016,642    -    -    -    5,051,501 
Exercised   (1,380,000)   0.19    256,572    (2,107,281)   (1,753,984)   (5,089,425)   0.08    (407,932)   (2,418,488)
Expired / cancelled   (450,000)   1.94    (874,002)   (1,000,000)   -    -    -         (874,002)
June 30, 2024   26,400,000  $0.84   $19,899,998    9,237,005   $8,303,318    40,779,002  $0.21   $2,187,581   $30,390,898 

 

Stock option plan

 

The Company has an ownership-based compensation scheme for executives and employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, officers, directors and consultants of the Company may be granted options to purchase common shares with the exercise prices determined at the time of grant. The Company has adopted a Floating Stock Option Plan (the “Plan”), whereby the number of common shares reserved for issuance under the Plan is equivalent of up to 10% of the issued and outstanding shares of the Company from time to time.

 

Each employee share option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

 

On March 12, 2024, the Company granted 125,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.69 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $79,575 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 149.1%; risk-free interest rate of 3.71%; and an expected average life of 5 years.

 

On April 23, 2024, the Company granted 250,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.77 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $163,325 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.79%; and an expected average life of 5 years.

 

25

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Stock option plan (continued)

 

On May 1, 2024, the Company granted 250,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.77 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $172,950 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.63%; and an expected average life of 5 years.

 

On May 21, 2024, the Company granted 200,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $1.03 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $190,380 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.79%; and an expected average life of 5 years.

 

On June 4, 2024, the Company granted 4,000,000 stock options to consultants of Company to purchase common shares of the Company for the price of $1.26 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $4,658,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.5%; risk-free interest rate of 4.08%; and an expected average life of 5 years.

 

On July 13, 2023, the Company granted 1,000,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.115 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $105,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.47%; and an expected average life of 5 years.

 

On November 24, 2023, the Company granted 2,650,000 stock options to a consultant and directors of the Company to purchase common shares of the Company for the price of $0.29 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $731,400 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 151.7%; risk-free interest rate of 3.83%; and an expected average life of 5 years. Directors of the received 2,500,000 options.

 

On December 4, 2023, the Company granted 4,500,000 stock options to an officer of the Company to purchase common shares of the Company for the price of $0.45 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $2,162,700 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 151.9%; risk-free interest rate of 3.54%; and an expected average life of 5 years.

 

On December 11, 2023, the Company granted 750,000 stock options to a consult and directors of the Company to purchase common shares of the Company for the price of $0.52 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $192,525 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 69.6%; risk-free interest rate of 3.53%; and an expected average life of 5 years. Directors of the received 500,000 options.

 

On December 11, 2023, the Company granted 750,000 stock options to a consult and directors of the Company to purchase common shares of the Company for the price of $0.52 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $308,700 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 153.1%; risk-free interest rate of 3.53%; and an expected average life of 5 years. Directors of the received 500,000 options.

 

26

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Stock option plan (continued)

 

The Company recorded $3,034,862 of share-based payments during the six months ended June 30, 2024 (six months ended June 30, 2023 - $277,136).

 

The following share-based payment arrangements were in existence at June 30, 2024:

 

Number outstanding   Number exercisable   Grant date  Expiry date  Exercise price   Fair value at grant date   Grant date share price   Expected volatility   Expected life (yrs)   Expected dividend yield   Risk-free interest rate 
 480,000    480,000   16-Nov-20  16-Nov-25   $0.09    38,016   $0.09    138.70%   5    0%   0.46%
 1,000,000    1,000,000   22-Mar-21  22-Mar-26  $1.58    1,906,500   $2.12    145.70%   5    0%   0.99%
 2,070,000    2,070,000   09-Apr-21  09-Apr-26  $1.58    3,309,102   $1.78    145.20%   5    0%   0.95%
 2,800,000    2,800,000   18-May-21  18-May-26   $1.22    3,150,560   $1.25    145.60%   5    0%   0.95%
 1,000,000    1,000,000   18-May-21  18-May-26   $1.22    1,125,200   $1.25    145.60%   5    0%   0.95%
 1,950,000    1,950,000   25-May-21  25-May-26   $1.11    1,944,540   $1.11    145.50%   5    0%   0.86%
 1,150,000    1,150,000   13-Aug-21  13-Aug-26   $1.58    1,461,305   $1.43    143.70%   5    0%   0.84%
 250,000    250,000   21-Sep-21  21-Sep-26   $1.70    380,375   $1.70    144.00%   5    0%   0.85%
 250,000    250,000   13-Oct-21  13-Oct-26   $2.10    470,375   $2.10    144.00%   5    0%   1.27%
 500,000    500,000   09-Nov-21  09-Nov-26   $3.92    1,758,050   $3.92    144.30%   5    0%   1.37%
 250,000    250,000   31-Dec-21  31-Dec-26   $3.11    698,525   $3.11    145.00%   5    0%   1.25%
 500,000    500,000   09-May-22  09-May-27  $2.00    591,950   $1.34    146.00%   5    0%   2.76%
 500,000    500,000   20-May-22  20-May-27  $1.00    334,300   $0.75    146.80%   5    0%   2.70%
 400,000    400,000   21-Jul-22  21-Jul-27   $0.80    195,640   $0.50    147.50%   5    0%   3.00%
 500,000    500,000   17-Oct-22  17-Oct-27   $0.17    75,350   $0.17    149.50%   5    0%   3.60%
 225,000    225,000   19-Oct-22  19-Oct-27   $0.17    33,930   $0.17    149.40%   5    0%   3.71%
 1,000,000    500,000   13-Jul-23  13-Jul-28   $0.115    105,000   $0.12    149.10%   5    0%   3.71%
 1,875,000    937,500   24-Nov-23  24-Nov-28   $0.29    517,500   $0.29    151.70%   5    0%   3.83%
 4,500,000    3,375,000   04-Dec-23  04-Dec-28   $0.45    2,162,700   $0.45    151.90%   5    0%   3.54%
 375,000    -   11-Dec-23  11-Dec-28   $0.52    154,350   $0.52    153.10%   5    0%   3.53%
 125,000    31,250   12-Mar-24  12-Mar-29   $0.69    79,575   $0.69    154.30%   5    0%   3.47%
 250,000    -   23-Apr-24  23-Apr-29   $0.77    163,325   $0.77    154.30%   5    0%   3.79%
 250,000    -   01-May-24  01-May-29   $0.77    172,950   $0.77    154.30%   5    0%   3.63%
 200,000    -   21-May-24  21-May-29   $1.03    190,380   $1.03    154.30%   5    0%   3.79%
 4,000,000    -   04-Jun-24  04-Jun-29  $1.26    4,658,000   $1.26    154.50%   5    0%   4.08%
 26,400,000    18,668,750               25,677,498                          

 

The weighted average remaining contractual life of the options exercisable at June 30, 2024 was 2.4 years (December 31, 2023 – 3.46 years).

 

27

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Warrants

 

As at June 30, 2024, the Company had share purchase warrants outstanding as follows:

 

   Number outstanding & exercisable   Grant date   Expiry date   Exercise price   Fair value at grant date   Grand sate share price   Expected volatility   Expected life (yrs)   Expected dividend yield   Risk-free interest rate 
Warrants   3,360,509    14-Nov-22    14-Nov-24    $0.30    286,125   $0.17    152.7%       2    0%   3.87%
Warrants   187,493    14-Nov-22    14-Nov-24    $0.30    19,865   $0.17    152.7%   2    0%   3.87%
Warrants   106,000    29-Nov-22    29-Nov-24    $0.30    9,610   $0.18    141.7%   2    0%   3.95%
Warrants   30,000,000    06-Nov-23    06-Nov-28    $0.20    1,414,476   $0.17    151.9%   5    0%   3.87%
Warrants   7,125,000    22-Nov-23    22-Nov-25    $0.23    466,167   $0.33    139.6%   2    0%   4,40%
Warrant issue costs                       (8,661)                         
    40,779,002                   2,187,581                          

 

Deferred Share Units Plan (DSUs)

 

On August 15, 2021, the Company adopted the DSUs plan. Eligible participants of the DSU Plan include any director, officer, employee or consultant of the Company. The Board fixes the vesting terms it deems appropriate when granting DSUs. The number of DSUs that may be granted under the DSU Plan may not exceed 5% of the total issued and outstanding Common Shares at the time of grant.

 

On May 21, 2024, the Company granted 1,000,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $1,185,000 and vest immediately.

 

On May 21, 2024, the Company granted 1,500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $1,777,500 and vest in six months from the grant day.

 

On May 21, 2024, the Company granted 200,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $237,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On February 1, 2023, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $107,500 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On February 1, 2023, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $107,500 and vest immediately.

 

On July 13, 2023, the Company granted 1,000,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $145,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On November 24, 2023, the Company granted 1,434,286 DSUs to consultants of the Company. These DSUs have a grant day fair value of $277,500 and vest immediately.

 

On November 24, 2023, the Company granted 925,000 DSUs to officers and consultants of the Company. These DSUs have a grant day fair value of $145,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day. Officers of the Company received 400,000 DSUs.

 

The Company recorded $2,016,642 in share-based compensation during the six months ended June 30, 2024 (six months ended June 30, 2023 - $1,165,743).

 

28

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments

 

Financial assets and financial liabilities as at June 30, 2024 and December 31, 2023 are as follows:

 

   Asset / (liabilities) at amortized cost   Assets /(liabilities) at fair value through profit/(loss)   Total 
December 31, 2023        
Cash  $6,727,482   $-   $6,727,482 
Amounts receivable   54,036    -    54,036 
Private investments   -    43,540,534    43,540,534 
USDC   -    1,586    1,586 
Accounts payable and accrued liabilities   (9,174,846)   -    (9,174,846)
Loan payable   (56,210,709)   -    (56,210,709)
ETP holders payable   -    (508,130,490)   (508,130,490)
June 30, 2024               
Cash  $19,529,425   $-   $19,529,425 
Amounts receivable   134,101    -    134,101 
Private investments   -    40,994,025    40,994,025 
USDC   -    698    698 
Equity investments   -    210,033,134    210,033,134 
Accounts payable and accrued liabilities   (36,416,277)   -    (36,416,277)
Loan payable   (17,793,100)   -    (17,793,100)
ETP holders payable   -    (730,068,689)   (730,068,689)

 

The Company’s financial instruments are exposed to several risks, including market, liquidity, credit and currency risks. There have been no significant changes in the risks, objectives, policies and procedures from the previous year. A discussion of the Company’s use of financial instruments and their associated risks is provided below:

 

Credit risk

 

Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash carries an investment grade rating as assessed by external rating agencies. The Company maintains all or substantially all of its cash with a major financial institution domiciled in Canada, the United States and Europe. Deposits held with this institution may exceed the amount of insurance provided on such deposits.

 

Regulatory Risks

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company. Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation.

 

29

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Custodian Risks

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line as well as for digital assets underlying Valour Cayman ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investments declines, resulting in losses upon disposition. In addition, some of the investments the Company holds are lightly traded public corporations or not publicly traded and may not be easily liquidated. The Company generates cash flow from proceeds from the disposition of its investments and digital assets. There can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. All of the Company’s assets, liabilities and obligations are due within one to three years.

 

The Company manages liquidity risk by maintaining adequate cash balances and liquid investments and digital assets. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial and non-financial assets and liabilities. As at June 30, 2024, the Company had current assets of $572,200,958 (December 31, 2023 - $497,513,493) to settle current liabilities of $784,499,053 (December 31, 2023 - $573,516,045).

 

30

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Liquidity risk (continued)

 

The following table shows the Company’s source of liquidity by assets / (liabilities) as at June 30, 2024 and December 31, 2023:

 

June 30, 2024
   Total   Less than 1 year   1-3 years 
Cash  $19,529,425   $19,529,425   $- 
Amounts receivable   134,101    134,101    - 
Prepaid expenses   4,520,767    4,520,767    - 
Digital assets   461,567,285    460,777,983    789,302 
Private investments   40,994,025    -    40,994,025 
Equity investments   210,033,134    87,238,682    122,794,452 
Accounts payable and accrued liabilities   (36,416,277)   (36,416,277)   - 
Loans payable   (17,793,100)   (17,793,100)   - 
ETP holders payable   (730,068,689)   (730,068,689)   - 
Total assets / (liabilities) - June 30, 2024  $(47,499,329)  $(212,077,108)  $164,577,779 

 

December 31, 2023 
   Total   Less than 1 year   1-3 years 
Cash   6,727,482   $6,727,482   $- 
Amounts receivable   54,036    54,036    - 
Prepaid expenses   1,509,824    1,509,824    - 
Digital assets   489,865,638    489,222,151    643,487 
Private investments   43,540,534    -    43,540,534 
Accounts payable and accrued liabilities   (9,174,846)   (9,174,846)   - 
Loan payable   (56,210,709)   (56,210,709)   - 
ETP holders payable   (508,130,490)   (508,130,490)   - 
Total assets / (liabilities) - December 31, 2023  $(31,818,531)  $(76,002,552)  $44,184,021 

 

Digital assets included in the table above are non-financial assets except USDC. For the purposes of liquidity risk analysis, these non-financial assets were included as they are mainly utilized to pay off any redemptions related to ETP holders payable, a financial liability. The lent and staked digital assets fall under the “less than 1 year” bucket.

 

Market risk

 

Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate because of changes in market prices.

 

(a)Price and concentration risk

 

The Company is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favorable prices. In addition, most of the Company’s investments are in the technology and resource sector. At June 30, 2024, two investments made up approximately 4.5% (December 31, 2023 – two investments of 7.0%) of the total assets of the Company.

 

For the six months ended June 30, 2024, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $4.0 million, or $0.01 per share.

 

For the year ended December 31, 2023, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $4.2 million, or $0.02 per share.

 

31

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Market risk (continued)

 

(b)Interest rate risk

 

The Company’s cash is subject to interest rate cash flow risk as it carries variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash balances on hand at June 30, 2024, a 1% change in interest rates could result in approximately $195,000 change in net loss.

 

(c)Currency risk

 

Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company’s operations are exposed to foreign exchange fluctuations, which could have a significant adverse effect on its results of operations from time to time. The Company’s foreign currency risk arises primarily with respect to United States dollar, Euro, Swiss Franc, Swedish Krona and British Pound. Fluctuations in the exchange rates between this currency and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. The Company reduces its currency risk by maintaining minimal cash balances held in foreign currency.

 

As at June 30, 2024 and December 31, 2023, the Company had the following financial and non-financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:

 

June 30, 2024
    United States     British     Swiss     Euro     SEK  
Cash   $ (4,638,863 )   $ 8,058     $ 3,634,977     $ 1,909,325     $ 2,486,173  
Receivables     98,443       -       24,022       -       -  
Private investments     2,510,956       -       38,067,500       -       -  
Prepaid expenses     1,800       -       166,897       -       -  
Digital assets     461,567,285       -       -       -       -  
Equity iinvestment     210,033,134       -       -       -       -  
Accounts payable and accrued liabilities     (1,059,415 )     (153,037 )     (411,456 )     21,989       -  
Loan payable     (17,793,100 )     -       -       -       -  
ETP holders payable     (730,068,689 )     -       -       -       -  
Net assets (liabilities)   $ (79,348,449 )   $ (144,979 )   $ 41,481,940     $ 1,887,336     $ 2,486,173  

 

December 31, 2023
    United States Dollars    British
Pound		    Swiss Franc    European Euro 
Cash  $6,668,518   $-   $-   $- 
Receivables   47,159    -    -    - 
Private investments   4,016,636    -    39,395,000    - 
Prepaid investment   1,509,824    -    -    - 
Digital assets   489,865,637    -    -    - 
Accounts payable and accrued liabilities   (3,080,229)   (74,466)   (101,828)   (21,939)
Loan payable   (56,210,709)               
ETP holders payable   (508,130,490)   -    -    - 
Net assets (liabilities)  $(65,313,654)  $(74,466)  $39,293,172   $(21,939)

 

A 10% increase (decrease) in the value of the Canadian dollar against all foreign currencies in which the Company held financial instruments as of June 30, 2024 would result in an estimated increase (decrease) in net income of approximately $6,502,000 (December 31, 2023 - $2,601,500).

 

32

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

(d)Digital currency risk factors: Perception, Evolution, Validation and Valuation

 

A digital currency does not represent an intrinsic value or a form of credit. Its value is a function of the perspective of the participants within the marketplace for that digital currency. The price of the digital currency fluctuates as a result of supply and demand pressures that accumulate in the market for it.

 

Having a finite supply (in the case of many but not all digital currencies), the more people who want to own that digital currency, the more the market price increases and vice-versa.

 

The most common means of determining the value of a digital currency is through one or more cryptocurrency exchanges where that digital currency is traded. Such exchanges publicly disclose the “times and sales” of the various listed pairs. As the marketplace for digital currencies evolves, the process for assessing value will become increasingly sophisticated.

 

(e)Fair value of financial instruments

 

The Company has determined the carrying values of its financial instruments as follows:

 

i.The carrying values of cash, amounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

 

ii.Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 in the Company’s December 31, 2023 financial statements.

 

iii.Digital assets classified as financial assets relate to USDC which is measured at fair value.

 

The following table illustrates the classification and hierarchy of the Company's financial instruments, measured at fair value in the statements of financial position as at June 30, 2024 and December 31, 2023.

 

Investments, fair value 

(Quoted Market price)

  

(Valuation technique -observable

market Inputs)

  

(Valuation technique -

non-observable

market inputs)

   Total 
Publicly traded investments
  $     -   $-   $-   $- 
Privately traded invesments   -    -    40,994,025    40,994,025 
Digital assets   -    698    -    698 
Equity investments   -    -    210,033,134    210,033,134 
June 30, 2024  $    -   $     698   $251,027,159   $251,027,857 
Publicly traded investments  $-   $-   $-   $- 
Privately traded invesments   -    -    43,540,534    43,540,534 
Digital assets   -    673    -    673 
December 31, 2023  $-   $673   $43,540,534   $43,541,207 

 

33

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

Level 2 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 2 during the periods ended June 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   June 30,   December 31, 
Investments, fair value for the period ended  2024   2023 
Balance, beginning of period  $673   $1,586 
Acquired (disposal)   25    (913)
Balance, end of period  $698   $673 

 

Level 3 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the periods ended June 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

Investments, fair value for the period ended  June 30,
2024		   December 31,
2023		 
Balance, beginning of period  $43,540,534   $30,015,445 
Purchases   224,486,603    128,898 
Unrealized gain/(loss) net   (16,999,978)   13,396,191 
Balance, end of period  $251,027,159   $43,540,534 

 

Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly traded companies.

 

As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results.

 

The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at June 30, 2024 and December 31, 2023.

 

34

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

Description  Fair vaue  

Valuation technique

 

Significant unobservable input(s)

 

Range of significant unobservable input(s)

3iQ Corp.
  $415,569   Recent financing  Marketability of shares  0% discount
Brazil Potash Corp.   1,697,640   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   684,418   Recent financing  Marketability of shares  0% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Amina Bank   38,067,500   Market approach  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
Equity investments in digital assets  210,033,134   Recent financing  Discount for lack of marketability  30.4% discount
June 30, 2024  $251,027,159          
               
3iQ Corp.
  $1,216,890   Recent financing  Marketability of shares  0% discount
               
Brazil Potash Corp.   2,138,380   Recent financing  Marketability of shares  0% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   661,366   Recent financing  Marketability of shares  0% discount
SEBA Bank AG   39,395,000   Market approach  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
December 31, 2023  $43,540,534          

  

3iQ Corp. (“3iQ”)

 

On March 31, 2020, the Company acquired 187,007 common shares of 3iQ as part of the Company’s acquisition of Valour. As at June 30, 2024, the valuation of 3iQ was based on the recent transaction which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of 3iQ will result in a corresponding +/- $41,557 (December 31, 2023 - $121,689) change in the carrying amount.

 

Amina Bank AG (formerly SEBA Bank AG) (“Amina”)

 

On January 14, 2022, the Company invested $34,498,750 to acquire 3,906,250 non-votes shares of Amina. As at June 30, 2024, the valuation of Amina was based on a market approach which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of Amina will result in a corresponding +/- $3,806,750 (December 31, 2023 +/- $3,939,500) change in the carrying amount.

 

Brazil Potash Corp. (“BPC”)

 

On September 11, 2020, the Company received 404,200 common shares of BPC as consideration of selling the Company’s Royalties to a non-arms length party of the Company. As at June 30, 2024, the valuation of BPC was based on BPC weighted average of comparable public market stock prices of $4.20 per share, which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of BPC will result in a corresponding +/- $169,764 (December 31, 2023 - $213,828) change in the carrying amount.

 

35

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

(e)Fair value of financial instruments (continued)

 

Earnity Inc. (“Earnity”)

 

On April 13, 2021, the Company subscribed US$40,000 ($50,076) to acquire certain rights to certain future equity of Earnity. As at June 30, 2024, the valuation of Earnity was determined to be nil based on Earnity ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at June 30, 2024, a +/- 10% change in the fair value of Earnity will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Luxor Technology Corporation (“LTC”)

 

On December 29, 2020, the Company subscribed US$100,000 ($128,060) to acquire certain rights to the preferred shares of LTC. The transaction was closed on February 15, 2021. On May 11, 2021, the Company subscribed additional rights of US$62,500 ($75,787). As at June 30, 2024, the valuation of LTC was based on the December 2021 financing which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024. a +/- 10% change in the fair value of LTC will result in a corresponding +/- $68,442 (December 31, 2023 - $66,137) change in the carrying amount.

 

SDK:Meta LLC

 

On June 3, 2021, the Company entered into a share exchange agreement with SDK exchanging 1,000,000 membership units of SDK with 3,000,000 shares of the Company valuing the investment at $3,420,000. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at June 30, 2024, the valuation of SDK:Meta LLC was $nil (December 31, 2023 - $nil). Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at June 30, 2024, a +/- 10% change in the fair value of SDK:Meta LLC will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Skolem Technologies Ltd. (“STL”)

 

On December 29, 2020, the Company invested US$20,000 ($25,612) to acquire certain rights to the preferred shares of STL. On October 29, 2021, the Company rights were converted into 16,354 series A preferred shares. As at June 30, 2024, the valuation of STL was determined to be nil based on STL ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of STL will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

VolMEX Labs Corporation (“VLC”)

 

On February 23, 2021, the Company invested US$30,000 ($37,809) to acquire certain rights to the preferred shares of VLC. As at June 30, 2024, the valuation of VLC was nil. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of VLC will result in a corresponding +/- nil (December 31, 2023 - $nil) change in the carrying amount.

 

Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at June 30, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $21,003,313 change in the carrying amount.

 

36

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

19.Digital asset risk

 

(a)Digital currency risk factors: Risks due to the technical design of cryptocurrencies

 

The source code of many digital currencies, such as Bitcoin, is public and may be downloaded and viewed by anyone. As with all code, there may be a bug in the respective code which is yet to be found and repaired and can ultimately jeopardize the integrity and security of one or more of these networks.

 

Should miners for reasons yet unknown cease to register completed transactions within blocks which have been detached from the block chain, the confidence in the protocol and network will be reduced, which will reduce the value of the digital currency associated with that protocol, and the ETP payable balances that are valued with reference to the respective digital asset.

 

Protocols for most digital assets or cryptocurrencies are public open-source software, they could be particularly vulnerable to hacker attacks, which could be damaging for the digital currency market and may be the cause for investors to choose other currencies or assets to invest in.

 

(b)Digital currency risk factors: Ownership, Wallets

 

Rather than the actual cryptocurrency (which are “stored” on the blockchain), a cryptocurrency wallet stores the information necessary to transact the cryptocurrency. Those digital credentials are needed so one can access and spend the underlying digital assets. Some use public-key cryptography in which two cryptographic keys, one public and one private, are generated and stored in a wallet. There are several types of wallets:

 

-Hardware wallets are USB-like hardware devices with a small screen built specifically for handling private keys and public keys/addresses.

 

-Paper wallets are simply paper printouts of private and public addresses.

 

-Desktop wallets are installable software programs/apps downloaded from the internet that hold your private and public keys/addresses.
   
-Mobile wallets are wallets installed on a mobile device and are thus always available and connected to the internet.

 

-Web wallets are hot wallets that are always connected to the internet that can be stored in a browser or can be “hosted” by third party providers such as an exchange.

 

(c)Digital currency risk factors: Political, regulatory risk and technology in the market of digital currencies

 

The legal status of digital currencies, inter alia Bitcoin varies between different countries. The lack of consensus concerning the regulation of digital currencies and how such currencies shall be handled tax wise causes insecurity regarding their legal status. As all digital currencies remain largely unregulated assets, there is a risk that politics and future regulations may negatively impact the market of digital currencies and companies operating in such market. It is impossible to estimate how politics and future regulations may affect the market. However, future regulations and changes in the legal status of the digital currencies is a political risk which may affect the price development of the tracked digital currencies.

 

The perception (and the extent to which it is held) that there is significant usage of the digital assets in connection with criminal or other illicit purposes, could materially influence the development and regulation of digital assets (potentially by curtailing the same).

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack.

 

37

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

20.Capital management

 

The Company considers its capital to consist of share capital, share based payments reserves and deficit. The Company’s objectives when managing capital are:

 

a)to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments;

 

b)to give shareholders sustained growth in value by increasing shareholders’ equity; while

 

c)taking a conservative approach towards financial leverage and management of financial risks.

 

The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:

 

a)raising capital through equity financings; and

 

b)realizing proceeds from the disposition of its investments

 

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million. There were no changes to the Company’s capital management during the six months ended June 30, 2024.

 

21.Related party disclosures

 

a)The condensed consolidated interim financial statements include the financial statements of the Company and its subsidiaries and its respective ownership listed below:

 

   % equity interest 
DeFi Capital Inc.   100 
DeFi Holdings (Bermuda) Ltd.   100 
Electrum Streaming Inc.   100 
Reflexivity LLC   100 
Valour Inc.   100 
DeFi Europe AG   100 
Valour Digital Securities Limited   0 

 

b)Compensation of key management personnel of the Company

 

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. The remuneration of directors and other members of key management personnel during the three and six months ended June 30, 2024 and 2023 were as follows:

 

   Three months ended June 30,   Six months ended June 30, 
   2024   2023   2024   2023 
Short-term benefits  $330,006   $239,975   $660,012   $532,568 
Shared-based payments   674,004    72,360    1,905,741    197,331 
   $1,004,010   $312,335   $2,565,753   $729,899 

 

38

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Related party disclosures (continued)

 

As at June 30, 2024, the Company had $83,435 (December 31, 2023 - $147,485) owing to its current key management, and $314,136 (December 31, 2023 - $314,136) owing to its former key management. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment or “due on demand”.

 

c)During the three and six months ended June 30, 2024 and 2023, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

 

   Three months ended
June 30,		   Six months ended
June 30,		 
   2024   2023   2024   2023 
2227929 Ontario Inc.  $30,000   $30,000   $60,000   $60,000 
   $30,000   $30,000   $60,000   $60,000 

 

The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at June 30, 2024, the Company had a payable balance of $293,800 (December 31, 2023 - $226,000) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former director and former officer of the Company, is also a director of 2227929 Ontario Inc.

 

As at June 30, 2024, the Company incurred $14,917 (June 30, 2023 - $92,447) in legal fees to a firm in which a director of the Company is a partner. Included in accounts payable and accrued liabilities were legal expenses of $10,959 (December 31, 2023 – $165,868) incurred in the ordinary course of business at a law firm where a director of the company is a Partner.

 

Included in accounts payable and accrued liabilities were expenses of GBP 44,228 ($76,519) (December 31, 2023 - $74,466) expenses owed to Vik Pathak, a former director and officer of the Company.

 

See Note 17.

 

d)The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of June 30, 2024 and December 31, 2023.

 

Investment  Nature of relationship to invesment  Estimated Fair value 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $1,697,640 
Aminna Bank AG *  Former Director (Olivier Roussy Newton) of investee   38,067,500 
Total investment - June 30, 2024     $39,765,140 

 

 Investment   Nature of relationship to invesment  Estimated Fair value 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $2,138,380 
Aminna Bank AG (formerlt SEBA Bank AG)*  Former Director (Olivier Roussy Newton) of investee   39,395,000 
Total investment - December 31, 2023     $41,533,380 

 

* Private companies

 

The Company has a diversified base of investors. To the Company’s knowledge, no one holds more than 10% of the Company’s shares on a basic share and partially diluted share basis as at June 30, 2024.

 

39

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Related party disclosures (continued)

 

During the year ended December 31, 2023, Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

During the year ended December 31, 2023, the Company also issued 2,724,941 common shares of the Company to former key management at an issue price of $0.11 per share to settle existing debt of $231,620 resulting in a loss on settlement of debt in the amount of $68,124.

 

Valour Inc. holds 4,000,000 common shares of the Company.

 

22.Commitments and contingencies

 

The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $2,312,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these condensed consolidated interim financial statements. Minimum commitments remaining under these contracts were approximately $974,000, all due within one year.

 

The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

 

23.Operating segments

 

Geographical information

 

The Company operates in Canada where its head office is located and in the Untied States, Bermuda and Cayman Islands where its operating business are located. Cayman Islands operates the Company’s ETPs business line which involves issuing ETPs, hedging against the underlying digital asset, lending and staking of digital assets and management fees earned on the ETPs. Bermuda operates the Company’s Venture portfolio and node business lines. The United States operates the Company’s research firm. Information about the Company’s assets by geographical location is detailed below.

 

June 30, 2024  Canada   United States   Bermuda   Cayman
Islands		   Total 
Cash   601,490    271,935    -    18,656,000    19,529,425 
Amounts receivable   -    98,443    -    35,658    134,101 
Prepaid expenses   1,899,937    2,464    6,354    2,612,012    4,520,767 
Digital Assets   666,446    -    172,663    460,728,176    461,567,285 
Equity investments   -    -    -    210,033,134    210,033,134 
Property, plant and equipment   -    -    982    1,367    2,349 
Other non-current assets   93,300,052    -    -    -    93,300,052 
Total assets   96,467,925    372,842    179,999    692,066,347    789,087,113 

 

December 31, 2023  Canada   Bermuda   Cayman Islands   Total 
Cash   59,069    -    6,668,412    6,727,481 
Amounts receivable   6,878    -    47,159    54,037 
Public investments   -    -    -    - 
Prepaid expenses   77,521    -    1,432,303    1,509,824 
Digital Assets   503,669    218,131    489,143,837    489,865,637 
Property, plant and equipment   -    5,073    2,606    7,679 
Other non-current assets   92,578,559    -    1,216,890    93,795,449 
Total assets   93,225,696    223,204    498,511,207    591,960,107 

 

40

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

23.Operating segments (continued)

 

Information about the Company’s revenues and expenses by subsidiary are detailed below:

 

For the six months ended June 30, 2024  DeFi   Reflexivity   DeFi Bermuda   Defi Alpha   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digita   162,777         (57,451)   111,475,008    34,677,528    146,268,243 
Realized and net change in unrealized gains and (losses) on ETP payables   -    -    -    -    (119,158,890)   (119,158,890)
Staking and lending income   -    -    61    -    14,070,962    14,071,024 
Management fees   -    -    -    -    3,877,314    3,877,314 
Research revenue   -    840,451    -    -    -    840,451 
Node revenue   -    -    4,709    -    -    4,709 
Realized (loss) on investments, net   -    -    -    -    634,271    634,271 
Unrealized (loss) on investments, net   (1,745,187)   -    -    -    (753,231)   (2,498,418)
Unrealized loss on equity investments   -    -    -    -    (14,453,469)   (14,453,469)
Interest income   1,512    -    -    -    -    1,512 
Total revenue   (1,580,898)   850,832    (52,681)   111,475,008    (81,105,514)   29,586,747 
Expenses                              
Operating, general and administration   2,132,333    612,461    6,307    27,172,254    3,556,763    33,480,118 
Share based payments   5,051,505    -    -    -    -    5,051,505 
Depreciation - property, plant and equipment   -    -    4,091    -    1,237    5,328 
Amortization - intangibles   1,031,379    -    -    -    -    1,031,379 
Finance costs   10,684    -    -    -    2,656,085    2,666,769 
Transaction costs   13,220    -    -    841,294    725,690    1,580,204 
Foreign exchange (gain) loss   40,952    -    -    -    7,100,254    7,141,206 
Impairment loss   4,962,021    -    -    -    -    4,962,021 
Total expenses   13,242,094    612,461    10,398    28,013,548    14,040,030    55,918,530 
Loss before other item   (14,822,992)   238,371    (63,078)   83,461,460    (95,145,544)   (26,331,783)
Other comprehensive income (loss)                              
Foreign currency translation (loss) gain   -    1,832    5,984    -    (1,166,405)   (1,158,589)
Net (loss) income and   (14,822,992)   240,203    (57,094)   83,461,460    (96,311,949)   (27,490,372)

 

For the six months ended June 30, 2023  DeFi   DeFi Bermuda   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digital assets   -    (5,029)   50,467,953    50,462,924 
Realized and net change in unrealized gains and (losses) on ETP payables   -    -    (56,529,430)   (56,529,430)
Realized (loss) of derivative asset   -    -    -    - 
Staking and lending income   -    122    1,336,353    1,336,475 
Management fees   -    -    459,693    459,693 
Node revenue   -    4,976    -    4,976 
Realized (loss) on investments, net   -    -    (4,025)   (4,025)
Unrealized (loss) on investments, net   221,401    -    93,461    314,862 
Interest income   570    -    (313)   257 
Total revenue   221,971    69    (4,176,307)   (3,954,267)
Expenses Operating, general and administration   1,677,555    16,346    2,178,035    3,871,936 
Share based payments   1,442,880    -    -    1,442,880 
Depreciation - property, plant and equipment   -    5,235    1,237    6,472 
Depreciation - right of use assets   -    -    -    - 
Amortization - intangibles   1,019,150    -    -    1,019,150 
Finance costs        -    1,561,529    1,561,529 
Transaction costs   -    -    319,719    319,719 
Foreign exchange (gain) loss   (44,754)   -    4,798,783    4,754,029 
Total expenses   4,094,831    21,581    8,859,303    12,975,715 
Income (loss) before other item   (3,872,860)   (21,512)   (13,035,611)   (16,929,983)
Loss on settlement of debt   (198,482)             (198,482)
(Loss) before other item   (4,071,342)   (21,512)   (13,035,611)   (17,128,465)
Other comprehensive loss Foreign currency translation (loss) gain   -    (2,378)   1,728,882    1,726,504 
Net (loss) and comprehensive (loss) for the period   (4,071,342)   (23,890)   (11,306,729)   (15,401,961)

 

41

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

24.Equity investments in digital assets at fair value through profit and loss (“FVTPL”)

 

   Current   Long Term   Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   206,943.0000   $26,919,767    284,306.0000   $36,983,378    491,249.0000   $63,903,145 
Fund B - Solana (SOL)   463,695.6000   $60,318,916    659,664.0000   $85,811,073    1,123,359.6000   $146,129,989 
Total       $87,238,683        $122,794,451        $210,033,134 

 

Fund A

 

During the six months ended June 30, 2024, the Company through a subsidiary, invested US$51,741,683 in two tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company. The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana.

 

The Solana acquired by the Company is locked and staked, earning striking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM.   The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

Fund B

 

During the six months ended June 30, 2024, the Company invested through a subsidiary, $153,516,846 (US$112,072,458) in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company.

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning striking rewards during the lock period. Staking rewards will accrue while Soltana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25% of the Soltana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM.   The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

42

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

25.Unrealized gains on equity instruments in digital assets at FVTPL

 

   Three months ended June,   Six months ended June, 
   2024   2023   2024   2023 
Unrealized loss on equity investments  $(14,453,469)  $-   $(14,453,469)  $- 
   $(14,453,469)  $-   $(14,453,469)  $- 

 

26.Restatement of financial results as at and for the three and six months ended June 30, 2023

 

The Company has restated its June 30, 2023 condensed consolidated interim statement of financial position, condensed consolidated interim statement of operations and comprehensive loss and condensed consolidated interim statement of cash flow to correct material errors and omissions in its prior filing. The following tables present the impact of the restatement adjustments on the Company's previously issued condensed consolidated interim financial statements for the three and six months ended June 30, 2023:

 

a.To impair the digital assets held at Genesis to its recoverable amount of $8,325,658 (US$6,288,411).

 

b.To revalue the fair value 3iQ investments to $1,246,816.

 

c.To revalue the fair value of SEBA Bank AG to $26,014,500.

 

Condensed Consolidated Interim Statements of Financial Position

(Expressed in Canadian dollars)

 

 

   June 30,
2024		       June 30,
2024		 
   $       $ 
   As previously reported   Restatement    
As Restated		 
Assets            
Current               
Cash and cash equivalents   19,529,425         19,529,425 
Amounts receivable   134,102         134,102 
Prepaid expenses   4,520,767         4,520,767 
Digital assets   345,725,251         345,725,251 
Digital assets loaned   78,942,257         78,942,257 
Digital assets staked   344,801,161    (313,830,039)   30,971,122 
Equity investments, at fair value through profit and loss, staked   -    130,351,452    130,351,452 
Total current assets   793,652,963    (183,478,587)   610,174,376 
Private investments, at fair value through profit and loss   40,994,025         40,994,025 
Digital assets   789,302         789,302 
Equity investments, at fair value through profit and loss staked   -    183,478,587    183,478,587 
Equipment   2,349         2,349 
Intangible assets   2,957,613         2,957,613 
Goodwill   49,348,414         49,348,414 
Total assets   887,744,666    -    887,744,666 
Liabilities and shareholders' equity               
Current liabilities               
Accounts payable and accrued liabilities   36,416,276         36,416,276 
Loans payable   17,793,100         17,793,100 
ETP holders payable   730,068,689         730,068,689 
Deferred revenue   220,987         220,987 
Total current liabilities   784,499,052    -    784,499,052 
Shareholders' equity               
Common shares   181,688,832         181,688,832 
Preferred shares   4,321,350         4,321,350 
Share-based payments reserves   30,390,898         30,390,898 
Accumulated other comprehensive income   (2,811,136)        (2,811,136)
Non-controlling interest   (457)        (457)
Deficit   (110,343,873)   -    (110,343,873)
Total equity   103,245,614    -    103,245,614 
Total liabilities and equity   887,744,666    -    887,744,666 

 

43

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

26.Restatement of financial results as at and for the three and six months ended June 30, 2023 (continued)

 

  Three months ended June 30,         Six months ended June 30,        
  2024   2024     2024     2024  
  $   $     $     $  
    As previously reported     Restatement     As Restated     As previously reported     Restatement      
As Restated		 
Revenues                                    
Realized and net change in unrealized gains and (losses) on digital assets     (86,650,729 )     (88,957,104 )     (175,607,833 )     230,472,326       (88,957,104 )     141,515,222  
Realized and net change in unrealized gains and (losses) on ETP payables     209,094,995               209,094,995       (119,158,890 )             (119,158,890 )
Staking and lending income     8,263,022               8,263,022       14,071,024               14,071,024  
Management fees     2,145,432               2,145,432       3,877,314               3,877,314  
Research revenue     338,583               338,583       840,451               840,451  
Node revenue     35               35       4,709               4,709  
Realized (loss) on investments, net     634,271               634,271       634,271               634,271  
Unrealized (loss) on investments, net     (659,386 )             (659,386 )     (2,498,418 )             (2,498,418 )
Unrealized gain on equity investments     -       88,957,104       88,957,104       -       88,957,104       88,957,104  
Interest income     644               644       1,512               1,512  
Total revenues     133,166,867       -       133,166,867       128,244,299       -       128,244,299  
Expenses                                                
Operating, general and administration     30,511,981               30,511,981       33,480,118               33,480,118  
Share based payments     3,433,990               3,433,990       5,051,505               5,051,505  
Depreciation - property, plant and equipment     2,092               2,092       5,328               5,328  
Amortization - intangibles     514,154               514,154       1,031,379               1,031,379  
Finance costs     929,255               929,255       2,666,769               2,666,769  
Transaction costs     1,089,807               1,089,807       1,580,204               1,580,204  
Foreign exchange gains (loss)     6,318,062               6,318,062       7,141,206               7,141,206  
Impairment loss     -               -       4,962,021               4,962,021  
Total expenses     42,799,341       -       42,799,341       55,918,530       -       55,918,530  
Net income (loss) for the period     90,367,526       -       90,367,526       72,325,769       -       72,325,769  
Other comprehensive loss                                                
Foreign currency translation loss     110,463       -       110,463               -       -  
Net income (loss) and comprehensive income (loss) for the period     90,477,989       -       90,477,989       72,325,769       -       72,325,769  
(Loss) per share                                                
Basic     0.31               0.31       0.25               0.25  
Diluted     0.27               0.27       0.22               0.22  
                                                 
Weighted average number of shares outstanding:                                                  
Basic     291,902,102               291,902,102       288,018,114               288,018,114  
Diluted     332,820,561               332,820,561       325,349,322               325,349,322  

 

44

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

26.Restatement of financial results as at and for the three and six months ended June 30, 2023 (continued)

 

   Six months ended June 30, 
  

2024

      

2024

 
   $       $ 
   As previously reported   Restatement   As Restated 
Cash (used in) provided by operations:            
Net (loss) for the year  $72,325,769        $72,325,769 
Adjustments to reconcile net (loss) income to cash (used in) operating activities:               
Share-based payments   5,051,505         5,051,505 
Loss on debt for shares   -         - 
Impairment loss   4,962,021         4,962,021 
Interest expense   -         - 
Interest income   -         - 
Depreciation - Property, plant & equipment   5,328         5,328 
Depreciation - right of use assets   -         - 
Amortization - Intangible asset   1,031,379         1,031,379 
Realized loss on investments, net   (634,271)        (634,271)
Unrealized (gain) loss on investments, net   2,498,418         2,498,418 
Realized and net change in unrealized (gains) and loss on digital assets   (230,472,326)   88,957,104    (141,515,222)
Realized and net change in unrealized (gains) and loss on ETP   119,158,890         119,158,890 
Unrealized gains on equity investments   -    (88,957,104)   (88,957,104)
Staking and lending income   (14,071,024)        (14,071,024)
Management fees   (3,877,314)        (3,877,314)
Node revenue   (4,709)        (4,709)
Unrealized loss on foreign exchange   (1,353,077)        (1,353,077)
    (45,379,411)   -    (45,379,411)
Adjustment for:               
Purchase of digital assets   (583,851,244)        (583,851,244)
Disposal of digital assets    568,751,078         568,751,078 
Disposal of investments   -         - 
Change in amounts receivable   5,216         5,216 
Change in prepaid expenses and deposits   (3,010,943)        (3,010,943)
Change in accounts payable and accrued liabilities   27,463,792         27,463,792 
Net cash (used in) operating activities   (36,021,512)   -    (36,021,512)
Investing activities                
Cash received from acquisiton of subsidiaries   319,643         319,643 
Net cash provided by investing activities   319,643    -    319,643 
Financing activities                
Proceeds from ETP holders   406,189,410         406,189,410 
Payments to ETP holders   (318,755,385)        (318,755,385)
Loan Payable   -         - 
Loan repaid   (40,376,650)        (40,376,650)
Proceeds from investments   752,230         752,230 
Proceeds from option exercises   455,450         455,450 
Proceeds from exercise of warrants   1,379,414         1,379,414 
NCIB   (1,314,018)        (1,314,018)
Net cash provided by financing activities   48,330,450        48,330,450 
Effect of exchange rate changes on cash and cash equivalents   173,361    -    173,361 
Change in cash and cash equivalents   12,801,943    -    12,801,943 
Cash, beginning of year   6,727,482    -    6,727,482 
Cash and cash equivalents, end of period  $19,529,425   $-   $19,529,425 

 

45

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

27.Restatement of financial results as at and for the three and six months ended June 30, 2024

 

The Company has restated its June 30, 2024 condensed consolidated interim statement of financial position, condensed consolidated interim statement of operations and comprehensive loss and condensed consolidated interim statement of cash flow to correct material errors and omissions in its prior filing. The following tables present the impact of the restatement adjustments on the Company's previously issued condensed consolidated interim financial statements for the three and six months ended June 30, 2024:

 

a.To reclassify current equity investments of $87,238,682 and long-term locked equity investments of $122,794,452 from current digital assets
   
b.To reclassify $84,204,083 of unrealized gains from digital assets to unrealized gains from equity investments
   
c.To record DLOM of $98,657,552 for equity investments

 

Condensed Consolidated Interim Statements of Financial Position

(Expressed in Canadian dollars)

 

 

   June 30,
2024		       June 30,
2024		 
   $      $ 
   As previously reported   Restatement  

As Restated

 
Assets            
Current            
Cash and cash equivalents   19,529,425         19,529,425 
Amounts receivable   134,102         134,102 
Prepaid expenses   4,520,767         4,520,767 
Digital assets   345,725,251    (4,405,920)   341,319,331 
Digital assets loaned   78,942,257         78,942,257 
Digital assets staked   344,801,161    (304,284,766)   40,516,395 
Equity investments, at fair value through profit and loss, staked   -    87,238,682    87,238,682 
Total current assets   793,652,963    (221,452,004)   572,200,959 
Private investments, at fair value through profit and loss   40,994,025         40,994,025 
Digital assets   789,302         789,302 
Equity investments, at fair value through profit and loss staked   -    122,794,452    122,794,452 
Equipment   2,349         2,349 
Intangible assets   2,957,613         2,957,613 
Goodwill   49,348,414         49,348,414 
Total assets   887,744,666    (98,657,552)   789,087,114 
Liabilities and shareholders' equity               
Current liabilities               
Accounts payable and accrued liabilities   36,416,276         36,416,276 
Loans payable   17,793,100         17,793,100 
ETP holders payable   730,068,689         730,068,689 
Deferred revenue   220,987         220,987 
Total current liabilities   784,499,052    -    784,499,052 
Shareholders' equity               
Common shares   181,688,832         181,688,832 
Preferred shares   4,321,350         4,321,350 
Share-based payments reserves   30,390,898         30,390,898 
Accumulated other comprehensive income   (2,811,136)        (2,811,136)
Non-controlling interest   (457)        (457)
Deficit   (110,343,873)   (98,657,552)   (209,001,425)
Total equity   103,245,614    (98,657,552)   4,588,062 
Total liabilities and equity   887,744,666    (98,657,552)   789,087,114 

 

46

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

27.Restatement of financial results as at and for the three and six months ended June 30, 2024 (continued)

 

Condensed Consolidated Interim Statements of Operations and Comprehensive (Loss)

(Expressed in Canadian dollars)

 

 

  Three months ended June 30,      Six months ended June 30,     
  2024  2024   2024   2024 
  $  $   $   $ 
   As previously reported   Restatement   As Restated   As previously reported   Restatement   As Restated 
Revenues                        
Realized and net change in unrealized gains and (losses) on digital assets   (86,650,729)   (84,204,083)   (170,854,812)   230,472,326    (84,204,083)   146,268,243 
Realized and net change in unrealized gains and (losses) on ETP payables   209,094,995         209,094,995    (119,158,890)        (119,158,890)
Staking and lending income   8,263,022         8,263,022    14,071,024         14,071,024 
Management fees   2,145,432         2,145,432    3,877,314         3,877,314 
Research revenue   338,583         338,583    840,451         840,451 
Node revenue   35         35    4,709         4,709 
Realized gain on investments, net   634,271         634,271    634,271         634,271 
Unrealized loss on investments, net   (659,386)        (659,386)   (2,498,418)        (2,498,418)
Unrealized loss on equity investments   -    (14,453,469)   (14,453,469)   -    (14,453,469)   (14,453,469)
Interest income   644         644    1,512         1,512 
Total revenues   133,166,867    (98,657,552)   34,509,315    128,244,299    (98,657,552)   29,586,747 
Expenses                              

Operating, general and administration

   30,511,981         30,511,981    33,480,118         33,480,118 
Share based payments   3,433,990         3,433,990    5,051,505         5,051,505 
Depreciation - property, plant and equipment   2,092         2,092    5,328         5,328 
Amortization - intangibles   514,154         514,154    1,031,379         1,031,379 
Finance costs   929,255         929,255    2,666,769         2,666,769 
Transaction costs   1,089,807         1,089,807    1,580,204         1,580,204 
Foreign exchange gains (loss)   6,318,062         6,318,062    7,141,206         7,141,206 
Impairment loss   -         -    4,962,021         4,962,021 
Total expenses   42,799,341    -    42,799,341    55,918,530    -    55,918,530 
Net income (loss) for the period   90,367,526    (98,657,552)   (8,290,026)   72,325,769    (98,657,552)   (26,331,783)
Other comprehensive loss
Foreign currency translation loss		   110,463    -    110,463         -    -

Net income (loss) and comprehensive income (loss) for the period

   90,477,989    (98,657,552)   (8,179,563)   72,325,769    (98,657,552)   (26,331,783)

(Loss) per share

                              
Basic   0.31         (0.03)   0.25         (0.09)

Weighted average number of shares outstanding: Basic

   

291,902,102

         

291,902,102

    

288,018,114

         

288,018,114

 

 

 

 

47

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and six months ended June 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

27.Restatement of financial results as at and for the three and six months ended June 30, 2024 (continued)

 

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in Canadian dollars)

 

 

   Six months ended June 30, 
  

2024

      

2024

 
   $       $ 
   As previously reported   Restatement  
As Restated		 
Cash (used in) provided by operations:               

Net (loss) for the year

  $72,325,769   $(98,657,552)  $(26,331,783)
Adjustments to reconcile net (loss) income to cash (used in) operating activities:                
Share-based payments   5,051,505         5,051,505 
Loss on debt for shares   -         - 
Impairment loss   4,962,021         4,962,021 
Interest expense   -         - 
Interest income   -         - 
Depreciation - Property, plant & equipment   5,328         5,328 
Depreciation - right of use assets   -         - 
Amortization - Intangible asset   1,031,379         1,031,379 
Realized loss on investments, net   (634,271)        (634,271)
Unrealized (gain) loss on investments, net   2,498,418         2,498,418 
Realized and net change in unrealized (gains) and loss on digital assets   (230,472,326)   84,204,083    (146,268,243)
Realized and net change in unrealized (gains) and loss on ETP   119,158,890         119,158,890 
Unrealized loss on equity investments   -    14,453,469    14,453,469 
Staking and lending income   (14,071,024)        (14,071,024)
Management fees   (3,877,314)        (3,877,314)
Node revenue   (4,709)        (4,709)
Unrealized loss on foreign exchange   (1,353,077)        (1,353,077)
    (45,379,411)   -    (45,379,411)
Adjustment for:                
Purchase of digital assets   (583,851,244)   238,090,603    (345,760,641)
Disposal of digital assets   568,751,078         568,751,078 
Purchase of equity investments   -    (238,090,603)   (238,090,603)
Disposal of investments   -         - 
Change in amounts receivable   5,216         5,216 
Change in prepaid expenses and deposits   (3,010,943)        (3,010,943)
Change in accounts payable and accrued liabilities   27,463,792         27,463,792 
Net cash (used in) operating activities   (36,021,512)   -    (36,021,512)
Investing activities               

Cash received from acquisiton of subsidiaries

   319,643         319,643 
Net cash provided by investing activities   319,643    -    319,643 
Financing activities               

Proceeds from ETP holders

   406,189,410         406,189,410 
Payments to ETP holders   (318,755,385)        (318,755,385)
Loan Payable   -         - 
Loan repaid   (40,376,650)        (40,376,650)
Proceeds from investments   752,230         752,230 
Proceds from option exercises   455,450         455,450 
Proceeds from exercise of warrants   1,379,414         1,379,414 
NCIB   (1,314,018)        (1,314,018)
Net cash provided by financing activities   48,330,450    -    48,330,450 
Effect of exchange rate changes on cash and cash equivalents   173,361    -    173,361 
Change in cash and cash equivalents   12,801,943    -    12,801,943 
Cash, beginning of year   6,727,482    -    6,727,482 
Cash and cash equivalents, end of period  $19,529,425   $-   $19,529,425 

 

 

48

 

 

Exhibit 99.135

 

 

 

 

 

 

 

 

AMENDED AND RESTATED MANAGEMENT’S DISCUSSION AND ANALYSIS

 

 

 

 

 

Six months ended June 30, 2024

 

 

 

 

 

 

 

 

 

Background

 

 

This Management’s Discussion and Analysis (“MD&A”) has been prepared based on information available to DeFi Technologies Inc. (“we”, “our”, “us”, “DeFi” or the “Company”) containing information through April 14, 2025, unless otherwise noted. The MD&A provides a detailed analysis of the Company’s operations and compares its financial results for the three and six months ended June 30, 2024 and 2023. The financial statements and related notes of DeFi have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS”). Please refer to the notes of the December 31, 2023 annual audited consolidated financial statements for disclosure of the Company’s significant accounting policies. The Company’s presentation currency is the Canadian dollar. Unless otherwise noted, all references to currency in this MD&A refer to Canadian dollars.

 

Additional information, including our press releases, have been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) and is available online under the Company’s SEDAR profile at www.sedar.com.

 

Cautionary Statement Regarding Forward Looking Information

 

 

Except for statements of historical fact relating to DeFi certain information contained herein constitutes forward-looking information under Canadian securities legislation. The use of any of the words “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “goal”, “predict”, “potential”, “should”, “believe”, “intend” or the negative of these terms and similar expressions are intended to identify forward- looking information and statements. The information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information and statements. Such statements reflect the Company’s current views with respect to certain events, and are subject to certain risks, uncertainties and assumptions. Many factors could cause the Company’s actual results, performance, or achievements to vary from those described in this MD&A. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this MD&A as intended, planned, anticipated, believed, estimated, or expected. With respect to the forward-looking statements contained herein, although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the Company’s lack of operating history as an investment company; the volatility of the market price of the common shares of the Company; risks relating to the trading price of the common shares of the Company relative to net asset value; risks relating to available investment opportunities and competition for investments; the volatility of the share prices of investments in public companies; the dependence on management, directors and the investment committee; risks relating to additional funding requirements; potential conflicts of interest and potential transaction and legal risks, conflict of interests and litigation risks, as more particularly described under the heading “Risk Factors” in this MD&A and in the Company’s Annual Information Form (“AIF”) filed with Canadian securities regulators. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.

 

2

 

 

Restatement of Previously Issued Condensed Interim Consolidated Financial Statements

 

 

Change in Valuation and classification of Equity Investments in Digital Assets, at FVTPL

 

During our audit of the Fiscal 2024 Financial Statements, we determined that locked tokens held by the Company were incorrectly accounted for in the Company’s June 30, 2024 financial statements.

 

The Company has re-filed is June 30, 2024 interim condensed consolidated financial statements (the “Refiled Q2 2024 FS”) to apply a discount for lack of marketability (“DLOM”) and adjust the current/non- current classification of its investments in equity investments in digital assets at fair value through profit and loss. The re-filed financial statements include the following adjustments: a) application of a DLOM to reduce total assets and equity by $98,657,552 b) reclassification of $122,794,452 of current assets to non- current assets c) increase in the three and six months ended net loss of $98,657,552 and $98,657,552 respectively due to the application of the DLOM.

 

During its quarter-ended June 30, 2024, the Company acquired interests two private investments funds designed to acquire tokens from a bankrupt company.

 

The Company reassessed the application of IFRS on the accounting for Equity Investments, at fair value through profit and loss (“FVTPL”) and determined that the appropriate accounting treatment is to classify the investments in the funds directly as financial assets as defined by IAS 32 and within the scope of IFRS 9. This is because such investments represent an equity interest in another entity rather than a direct interest in the underlying tokens. The tokens owned by the funds are subject to a lock up schedule extending to 2028 and as a result the Company has classified its equity investments as current and non- current reflecting the value of tokens which will unlock in the coming twelve months (current) and those that will unlock between 2026 through 2028 (non-current).

 

June 30, 2023 Restatement

 

The Company reassessed the application of IFRS on the accounting for the valuation of the Company’s holdings in 3iQ and Seba Bank AG as well as the valuation of Valour’s Genesis loan and collateral. As a result of the restatement: (i) digital assets was reduced by $10,822,637 to $106,572,333; and (ii) private investments, at fair value through profit and loss was reduced by $13,489,824 to $30,236,513 as at June 30, 2023, with an retained earnings impact at June 30, 2023 of $24,312,461. For more details, please refer to Note 26 of the condensed consolidated interim financial statements of the Company for three and six months ended June 30, 2024 and 2023. The change in accounting is considered the correction of an error for accounting purposes and, as such, required a restatement of the financial statements for the three and six months ended June 30, 2023. Due to the accounting error, the Company’s management has concluded that there was a material weakness in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements and Management’s Discussion and Analysis will not be prevented or detected on a timely basis.

 

The Company reassessed the application of IFRS on the accounting for its locked digital assets. As a result of the restatement: (i) digital assets staked was reduced by $304,284,766 to $40,516,395 and digital assets were reduced by $4,405,920 to $341,319,331; and (ii) equity investments current and long-term were increased by $87,238,682 and $122,794,452, respectively, as at June 30, 2024. Additionally, unrealized gains on digital assets was reduced by $84,204,083 and an unrealized loss on equity investments of $14,453,469 was recorded. For more details, please refer to Note 27 of the condensed consolidated interim financial statements of the Company for three and six months ended June 30, 2024 and 2023. The change in accounting is considered the correction of an error for accounting purposes and, as such, required a restatement of the financial statements for the three and six months ended June 30, 2024. Due to the accounting error, the Company’s management has concluded that there was a material weakness in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements and Management’s Discussion and Analysis will not be prevented or detected on a timely basis.

 

Due to the accounting errors, the Company’s management has concluded that there was a material weakness in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements and Management’s Discussion and Analysis will not be prevented or detected on a timely basis.

 

3

 

 

Overview of the Company

 

 

The Company is a publicly listed issuer on the CBOE Canada trading under the symbol “DEFI”. The Company is a crypto-native technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance. The Company’s mission is to expand investor access to industry-leading decentralized technologies which it believes lie at the heart of the future of finance. On behalf of its shareholders and investors, it identifies opportunities and areas of innovation, and builds and invests in new technologies and ventures in order to provide trusted, diversified exposure across the decentralized finance ecosystem. The Company does so through five distinct business lines: Valour Asset Management, DeFi Alpha, DeFi Ventures, DeFi Infrastructure and Reflexivity LLC.

 

The Company’s condensed consolidated interim financial statements have been prepared in accordance with IFRS applicable to a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying condensed consolidated interim financial statements.

 

Investment Pillars

 

 

DeFi generates revenue through five core pillars:

 

Valour Asset Management

 

The Company, through its 100% ownership of Valour Inc., is developing Exchange Traded Products (“ETPs”) that synthetically track the value of a single DeFi protocol or a basket of protocols. ETPs simplify the ability for retail and institutional investors to gain exposure to DeFi protocols or basket of protocols as it removes the need to manage a wallet, two-factor authentication, various logins, and other intricacies that are linked to managing a decentralized finance protocol portfolio.

 

DeFi Alpha

 

Defi Alpha, a specialized arbitrage trading desk with the sole focus is to identify low-risk arbitrage opportunities within the crypto ecosystem. The Defi Alpha trading desk is strategically designed to focus on identifying and capitalizing upon arbitrage opportunities within the dynamic digital assets market. Utilizing advanced algorithmic strategies and in-depth market analysis, the trading desk aims to generate alpha by exploiting inefficiencies and discrepancies in digital asset pricing. The primary focus is on arbitrage trading opportunities in both centralized and decentralized markets, ensuring minimal market or protocol exposure to mitigate downside revenue volatility.

 

DeFi Ventures

 

The Company, whether by itself or through its subsidiaries, invests in various companies and leading protocols across the decentralized finance ecosystem to build a diversified portfolio of decentralized finance assets.

 

DeFi Infrastructure

 

The Company’s DeFi Infrastructure line of business offer governance services and products within the DeFi ecosystem. The Company uses its expertise in DeFi to offer node management of decentralized protocols to support governance, security and transaction validation for their networks.

 

4

 

 

Reflexivity LLC

 

The Company’s Reflexivity LLC line of business specializes in producing cutting-edge research reports for the cryptocurrency industry. Reflexivity has also focused on creating a large third-party distribution channel for its research, which has been accomplished by partnering with platforms such as TradingView, eToro and others.

 

HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND SUBSEQUENT EVENTS:

 

 

●On February 7, 2024, the Company completed its acquisition of Reflexivity Research LLC, a premier private research firm that specializes in producing research reports for the cryptocurrency industry. Reflexivity, co-founded by Anthony Pompliano and Will Clemente, offers crypto-native research designed for traditional finance investors. Reflexivity's research is distributed via their homepage, a premium membership portal, and an email list of over 55,000 investors which generates a positive cash flow for Reflexivity.

 

●On February 9, 2024, the Company completed the acquisition of intellectual property (IP) from prominent Solana developer Stefan Jorgensen. The IP acquired encompasses a suite of sophisticated features, including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by both Defi Technologies and Valour Inc.

 

●On February 20, 2024, the Company launched its physical-backed staking exchange-traded product (ETP) for the Internet Computer Protocol (ICP) token. The Valour Internet Computer Protocol ETP (ISIN: GB00BS2BDN04) provides retail and institutional investors with trusted, secure and diversified exposure to the innovative and fast-growing Internet Computer ecosystem. The Internet Computer adds autonomous serverless cloud functionality to the public Internet -- making it possible to build almost any system or service entirely on a decentralized network. Developers and enterprises no longer have to rely on legacy information technology systems that are susceptible to hacks and downtime. The Internet Computer is a tamper-proof and unstoppable network, a new paradigm of computing power.

 

●On March 18, 2024, the Company's subsidiary Valour Inc. partnered with Bitcoin Suisse AG and Stoxx in launching the innovative 1Valour Stoxx Bitcoin Suisse Digital Asset Blue Chip ETP. This pioneering product marks a significant step forward in the digital asset market, providing a diversified investment approach to the top blue-chip digital assets in a simple and secure manner.

 

●On April 8, 2024, the Company opened a new trading desk in the United Arab Emirates (UAE). As part of this strategic initiative, the Company aims to expand its assets under management (AUM) by launching 15 new ETP products in 2024, in addition to the 17 already listed in Europe, followed by another 30 in 2025.

 

●On April 17, 2024, the Company entered into a collaboration with the Core Foundation to develop innovative ETPs (exchange-traded products) that leverage Core Chain's unique blockchain capabilities, introducing a first-of-its-kind yield-bearing BTC ETP and a novel Core ETP. The yield- bearing BTC ETP will offer yield directly from Core Chain's block rewards. This groundbreaking initiative marks a first in the market, as the previously passive BTC asset becomes productive and yield-bearing without moving off the bitcoin network.

 

●On April 18, 2024, the Company launched the first short spot bitcoin (BTC) ETP.

 

●On May 7, 2024, the Company's subsidiary, Valour Inc. successfully repaid US$19.5 million in outstanding loans. As of April 30, 2024, and due to favourable business conditions, Valour has fully repaid balances of US$6 million and US$13.5 million, which were secured by Bitcoin (BTC) and Ethereum (ETH) collateral, respectively. No further equity or debt was raised to repay the loan. The loans, which were structured with open-term tenures allowing for flexible repayment, were fully repaid on April 30, 2024. This strategic financial management will result in substantial savings for the Company.

 

5

 

 

●On May 13, 2024, the Company's subsidiary Valour Inc. launched three new ETPs. Among these offerings are the Valour Internet Computer (ICP) ETP and the Valour Toncoin (TON) ETP, the first of their kind in the Nordics. These are accompanied by the Valour Chainlink (LINK) ETP, providing simplified access to cutting-edge digital assets. Trading of all three ETPs commenced on May 10, 2024, with a 1.9 percent management fee.

 

●On June 4, 2024, the Company’s subsidiary, Valour Inc., announced it has broadened its partnership with justTrade, a leading German on-line brokerage platform. The recently launched 1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip ETP is now available for German savings plans through justTRADE.

 

●On June 10, 2024, the Company announced it has adopted Bitcoin as its primary treasury reserve asset and has purchased 110 Bitcoin to initiate this strategy.

 

●On June 11, 2024, the Company announced it has deployed a Core Chain validator node to act as an independent validator for the network. The launch of the node is part of the Company's Defi Infrastructure business line, contributing to the mission of decentralized finance. The Company will also stake 1,498 Bitcoin on the Core Chain.

 

●On June 19, 2024, the Company’s subsidiary, Valour Inc., launched the Valour Hedera (HBAR) ETP (exchange-traded product). The Valour Hedera (HBAR) ETP (ISIN: CH1213604585) provides secure and straightforward access to Hedera's native cryptocurrency, HBAR. Hedera is renowned for its energy-efficient public distributed ledger technology, which utilizes the leaderless, asynchronous Byzantine Fault Tolerance ("aBFT") hashgraph consensus algorithm.

 

●On June 28, 2024, the Company’s subsidiary Valour Inc. launched two new ETPs, the Valour CORE (CORE) ETP and the Valour Hedera (HBAR) ETP, on the Spotlight Stock Market in Sweden. The Valour CORE (CORE) SEK (ISIN: CH1213604593) offers investors exposure to the native token of the Core blockchain, CORE. Core Chain's Satoshi Plus consensus mechanism uniquely combines the decentralization and security of Bitcoin's Delegated Proof of Work ("DPoW") with the scalability and flexibility of Ethereum's Delegated Proof of Stake ("DPoS").

 

●On July 9, 2024, the Company signed a binding letter of intent to acquire Stillman Digital Inc., a leading OTC desk and liquidity provider offering limitless liquidity solutions and industry-leading trade execution, settlement and technology services.

 

●On July 17, 2024, the Company's subsidiary, Valour Inc., launched an ETP (exchange-traded product) for the Near Protocol token on the Spotlight Stock Market in Sweden. The Valour Near (NEAR) ETP (ISIN: CH1213604577) provides retail and institutional investors with trusted, secure and diversified exposure to the innovative and fast-growing Near ecosystem, enabling participation in a decentralized Web platform that aims to redefine the future of digital finance.

 

●On July 18, 2024, the Company expanded its digital asset treasury strategy purchasing an additional 94.34 Bitcoin, bringing its total Bitcoin holdings to 204.34 Bitcoin. Additionally, the Company has acquired 12,775 Solana tokens and 1,484,148 Core tokens, with plans to actively participate in Core DAO's staking facility.

 

●On July 30, 2024, the Company formed a strategic partnership with Zero Computing, a pioneer in verifiable computation on Ethereum and Solana. This partnership aims to build critical infrastructure to enhance the arbitrage discovery and execution capabilities of Defi Technologies' specialized trading desk, DeFi Alpha, and advance capabilities for capturing zero-knowledge enabled maximal extractable value (MEV).

 

●On July 31, 2024, the Company appointed Andrew Forson to its board of directors. Andrew Forson is an experienced financial and risk engineer, software architect, and trust and estate practitioner. Currently, he serves as the head of ventures and investments for the Hashgraph Group, the commercialization and enablement arm of Hedera, where he has been instrumental in driving strategic investments and fostering innovation in the digital asset sector.

 

●On August 6, 2024, the Company's subsidiary, Valour Inc., signed a memorandum of understanding (MOU) with the Nairobi Securities Exchange (NSE) and SovFi Inc. to facilitate the creation, issuance and trading of digital asset exchange-traded products in the African market.

 

Digital Assets

 

 

As at June 30, 2024, the Company’s digital assets consisted of the below digital currencies, with a fair value of $461,567,285 (December 31, 2023 - $489,865,638). Digital currencies are recorded at their fair value on the date they are acquired and are revalued to their current market value at each reporting date. Fair value is determined by taking the mid-point price at 17:30 CET digital asset exchanges consistent with the final terms for each ETP. The primary digital asset exchanges used to value digital assets are Kraken, Bitfinex, Binance, Coinbase and Bitstamp. Where digital assets held do not have pricing on these exchanges, other exchanges would be used. On all material coins, Kraken, Bitfinex, Coinbase and Bitstamp were used. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Vomex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

6

 

 

The Company’s holdings of digital assets consist of the following:

 

   June 30, 2024   December 31, 2023 
   Quantity   $   Quantity   $ 
Binance Coin   1,833.1116    1,435,764    236.4452    97,710 
Bitcoin   2,544.2313    181,934,285    2,271.3329    108,983,280 
Ethereum   21,425.6087    100,059,573    21,537.4066    65,956,320 
EthereumPoW   -    -    0.2000    1 
Cardano   62,374,745.9926    33,354,333    54,210,783.1700    43,306,306 
Polkadot   2,174,109.2288    18,811,801    1,666,147.7880    18,371,365 
Solana   122,711.82    28,992,123    1,682,112.49    235,733,109 
Shyft   4,879,446.3958    49,806    4,539,407.2792    78,314 
Uniswap   326,938.2981    4,179,467    296,352.0602    2,932,687 
USDC        698         673 
USDT        54,473,100         111,856 
Litecoin   -    -    17.3931    1,719 
Doge   404,126.4335    69,086    220,474.3947    26,652 
Cosmos   21,278.72    202,569.12    11,700.0000    171,497 
Avalanche   481,576.7021    18,607,286    248,151.6644    13,148,105 
Matic   19,504.9463    14,598    0.0003    - 
Ripple   7,323,969.3011    4,771,762    76,029.7317    62,737 
Enjin   66,737.8886    17,556    432,342.3671    223,237 
Tron   128,246.2765    21,064    118,490.5094    16,581 
Terra Luna   203,702.1876    -    202,302.5360    - 
Shiba Inu   2,351,900,000.0000    54,724    -    - 
ICP   1,020,042.1003    11,140,987    -    - 
Core   431,105.7669    791,440           
AAVE   1.5265    201    -    - 
LINK   16,691.6367    327,361    -    - 
TON   135,790.0000    1,404,661    -    - 
HARB   594,000.0000    63,740    -    - 
Current   2,432,650,528    460,777,983    63,728,357    489,222,151 
Blocto   266,780.1712    2,873    264,559.703    10,503 
Boba Network   250,000.0000    -    250,000.00    - 
Clover   480,000.0000    20,764    450,000.00    19,831 
Maps   285,713.0000    -    285,713.000    - 
Mobilecoin   2,855.5045    -    2,855.5045    - 
Oxygen   400,000.0000    -    400,000.000    - 
Pyth   2,500,000.0000    666,446    2,500,000.00    503,669 
Saffron.finance   86.2100    2,612    86.21    2,619 
Sovryn   15,458.9500    13,292    15,458.95    12,863 
Wilder World   148,810.0000    83,316    148,810.00    94,002 
Volmex Labs   2,925,878.0000    -    2,925,878.0000    - 
Long-Term        789,302         643,487 
Total Digital Assets        461,567,285         489,865,638 
Current Digital Assets                    
Digital assets        341,319,331         188,342,579 
Digital assets loaned        78,942,257         270,362,684 
Digital assets staked        40,516,395         30,516,888 
Total Current Digital Assets        460,777,983         489,222,151 
Non-Current Digital assets                    
Digital assets        789,302         643,487 
Total Non-Current Digital Assets        789,302         643,487 
Total Digital Assets        461,567,285         489,865,638 

 

7

 

 

The continuity of digital assets for the six months ended June 30, 2024 and year ended December 31, 2023:

 

   June 30,
2024		   December 31, 2023 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   345,760,641    318,355,007 
Digital assets disposed   (568,751,078)   (244,656,544)
Realized gain (loss) on digital assets   282,549,869    (1,017,247)
Digital assets earned from staking, lending and fees   14,071,024    3,554,587 
Net change in unrealized gains and losses on digital assets   (136,281,626)   324,976,115 
Foreign exchange gain (loss)   34,352,817    (15,548,363)
   $461,567,285   $489,865,638 
Current Digital Assets          

Digital assets

   341,319,331    188,342,579 
Digital assets loaned   78,942,257    270,362,684 
Digital assets staked   40,516,395    30,516,888 
Total Current Digital Assets  $460,777,983   $489,222,151 
Non-Current Digital assets          

Digital assets

   789,302    643,487 
Total Non-Current Digital Assets  $789,302   $643,487 
Total Digital Assets  $461,567,285   $489,865,638 

 

Digital assets held by counterpart for the six months ended June 30, 2024 and year ended December 31, 2023:

 

   June 30,
2024		   December 31, 2023 
Counterparty A  $130,941,393   $421,687,911 
Counterparty B   20,520,801    30,592,947 
Counterparty C   2,558,611    2,775,287 
Counterparty D   59,706    11,785,440 
Counterparty E   9,203,964    8,633,491 
Counterparty F   13,464,318    837,948 
Counterparty G   13,202,820    8,840,988 
Counterparty H   11,978,801    - 
Counterparty I   -    - 
Counterparty J   -    - 
Other   3,083,236    248,294 
Self custody   256,553,635    4,463,332 
Total  $461,567,285   $489,865,638 
Current Digital Assets          
Digital assets   341,319,331    188,342,579 
Digital assets loaned   78,942,257    270,362,684 
Digital assets staked   40,516,395    30,516,888 
Total Current Digital Assets  $460,777,983   $489,222,151 
Non-Current Digital assets          
Digital assets   789,302    643,487 
Total Non-Current Digital Assets  $789,302   $643,487 
Total Digital Assets  $461,567,285   $489,865,638 

 

8

 

 

As of June 30, 2024, digital assets held by lenders as collateral consisted of the following:

 

    Number of coins
on loan		   Fair Value 
Bitcoin    633.2614   $22,406,784 
Ethereum    1,845.0000    8,616,789 
Total    2,478.2614   $31,023,573 

 

As at June 30, 2024, the 475 Bitcoin held by Genesis Global Capital LLC (“Genesis”) as collateral against a loan has been written down to $9,203,964 (US$6,724,603), the fair value of the loan and interest held with Genesis.

 

As of December 31, 2023, digital assets held by lenders as collateral consisted of the following:

 

   Number of coins
on loan		   Fair Value 
Bitcoin   1,158.2614    46,860,266 
Ethereum   9,263.7800    28,369,770 
Total   10,422.0414   $75,230,036 

 

As at December 31, 2023, the 475 Bitcoin held by Genesis as collateral against a loan has been written down to $8,690,623 (US$6,570,862), the fair value of the loan and interest held with Genesis.

 

In the normal course of business, the Company enters into open-ended lending arrangements with certain financial institutions, whereby the Company loans certain fiat and digital assets in exchange for interest income. The Company can demand the repayment of the loans and accrued interest at any time. The digital assets on loan are included in digital assets balances above.

 

Digital Assets loaned

 

As of June 30, 2024, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.3% to 9.2% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.4% to 9.7% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of June 30, 2024, digital assets on loan consisted of the following:

 

   Number of
coins on loan		   Fair Value   Fair Value Share 
Digital assets on loan:               
Ethereum   8,500.0000    39,697,946    50%
Cardano   19,000,000.0000    10,160,271    13%
Polkadot   1,800,000.0000    15,574,766    20%
Uniswap   150,000.0000    1,917,549    2%
Avalanche   300,000.0000    11,591,726    15%
Total   21,258,500.0000   $78,942,257    100%

 

9

 

 

As of December 31, 2023, digital assets on loan consisted of the following:

 

   Number of coins
on loan		   Fair Value   Fair Value Share 
Digital on loan:            
Ethereum   7,000.0000    21,437,084    8%
Cardano   8,500,000.0000    6,790,228    3%
Polkdot   1,373,835.0000    15,148,250    6%
Solana   1,572,441.0000    220,363,625    82%
Avalanche   125,009.0000    6,623,496    2%
Total   11,578,285.0000    270,362,684    100%

 

As of June 30, 2024, the digital assets on loan by significant borrowing counterparty is as follow:

 

  

Interest rates

 

Number of
coins on loan

   Fair Value 
Digital assets on loan:             
Counterparty A  2.3% to 9.2%   21,258,500.0000    78,942,257 
Total      21,258,500.0000   $78,942,257 

  

As of December 31, 2023, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest rates 

Number of coins

on loan

   Fair Value 
Digital on loan:             
Counterparty A  2.4% to 9.7%   11,578,285.0000    270,362,684 
Total      11,578,285.0000   $270,362,684 

 

As of June 30, 2024, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  June 30, 2024 
Digital assets on loan:        
Counterparty A  Cayman Islands   100%
Total      100%

 

As of December 31, 2023, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31, 2023 
Digital on loan:        
Counterparty A  Cayman Islands   100%
Total      100%

 

The Company’s digital assets on loan are exposed to credit risk. The Company limits its credit risk by placing its digital assets on loan with high credit quality financial institutions that have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company's due diligence procedures may include, but are not limited to, review of the financial position of the borrower, review of the internal control practices and procedures of the borrower, review of market information, and monitoring the Company’s risk exposure thresholds. As of June 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets on loan. While the Company intends to only transact with counterparties that it believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

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Digital Assets Staked

 

As of June 30, 2024, the Company has skated select digital assets to borrowers at annual rates ranging from approximately 2.99% to 9.48% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 3.15% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of June 30, 2024, digital assets staked consisted of the following:

  

   Number of coins
staked		   Fair Value   Fair Value Share 
Digital assets on staked:            
Cardano   38,202,110.3050    20,428,620    50%
Bitcoin   1,610.0324    5,589,577    14%
Solana   48,149.8681    14,498,198    36%
Total   38,251,870.2055   $40,516,395    100%
Current Digital Assets Staked               
Digital assets staked        40,516,395      
Total Current Digital Assets Staked       $40,516,395      

 

As of December 31, 2023, digital assets staked consisted of the following:

 

   Number of coins
staked		   Fair Value   Fair Value Share 
Digital on staked:            
Cardano   38,201,004.7950    30,516,888    100%
Total   38,201,004.7950   $30,516,888    100%

 

As of June 30, 2024, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates  

Number of
coins staked

   Fair Value   Fair Value Share 
Digital on staked:                
Counterparty B   2.99%   38,201,004.7950    20,428,029    50%
Self custody   7.57 to 9.48%    50,865.4105    20,088,366    50%
Total        38,251,870.2055   $40,516,395    100%

 

As of December 31, 2023, the digital assets staked by significant borrowing counterparty is as follow:

 

  

Interest rates

 

Number of
coins staked

   Fair Value 
Digital on staked:             
Counterparty B  3.15%   38,201,004.7950    30,516,888 
Total      38,201,004.7950   $30,516,888 

 

As of June 30, 2024, digital assets staked were concentrated with counterparties as follows:

 

   Geography  June 30,
2024		 
Digital on staked:        
Counterparty B  Switzerland   50%
Self custody  Switzerland   50%
Total      100%

 

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As of December 31, 2023, digital assets staked were concentrated with counterparties as follows:

 

   Geography  June 30,
2024		 
Digital on staked:        
Counterparty B  Switzerland   50%
Self custody  Switzerland   50%
Total      100%

 

The Company’s digital assets staked are exposed to market risk, liquidity risk, lockup duration risk, loss or theft of assets and return duration risk. The Company places allocation limits by counterparty and only deals with high credit quality financial institutions that are believed to have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company's due diligence procedures may include, but are not limited to, review of the financial position of the counterparty, review of the internal control practices and procedures of the counterparty, review of market information, and monitoring the Company’s risk exposure thresholds. As of June 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets staked. While the Company intends to only transact with counterparties that it believes to meets the Company staking policy criteria, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

Equity investments in digital assets at fair value through profit and loss (“FVTPL”)

 

   Current   Long Term  Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   206,943.0000   $26,919,767    284,306.0000   $36,983,378    491,249.0000   $63,903,145 
Fund B - Solana (SOL)   463,695.6000   $60,318,916    659,664.0000   $85,811,073    1,123,359.6000   $146,129,989 
Total       $87,238,683        $122,794,451        $210,033,134 

 

Fund A

 

During the six months ended June 30, 2024, the Company through a subsidiary, invested US$51,741,683 in two tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company. The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana.

 

The Solana acquired by the Company is locked and staked, earning striking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

Fund B

 

During the six months ended June 30, 2024, the Company invested through a subsidiary, $153,516,846 (US$112,072,458) in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company.

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning striking rewards during the lock period. Staking rewards will accrue while Soltana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25% of the Soltana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028.

 

12

 

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

Third Party Custodians

 

 

As of June 30, 2024, the Company used the following third-party custodians (each, a “Custodian”) in the ordinary course of business of its DeFi Ventures business line as well as for digital asset underlying Valour ETPs:

 

Custodian   Location
Bitcoin Suisse AG   Switzerand
Anchorage Digital   United States
B2C2 Overseas LTD   Cayman Islands
Copper   Switzerland

 

Each of the Custodians have not appointed a sub-custodian to hold crypto assets owned by the Company. The Custodians hold and safeguard the digital assets deposited by the Company and its subsidiaries. The Custodians also offer lending and staking services. The Custodians are not Canadian financial institutions. None of the Custodians are related parties of the Company.

 

Each Custodian maintains general commercial insurance on its own behalf, but the Corporation and other clients of such Custodians are not named insured under such policies. The Company is not aware of any security breaches or similar incidents at the Custodians. The Company believes that any event of insolvency or bankruptcy of a Custodian would be treated in accordance with the insolvency or bankruptcy laws of the applicable jurisdiction of such Custodian.

 

13

 

 

As of June 30, 2024, the breakdown of digital assets deposited with each Custodian as a percentage of total digital assets custodied by the Company and its subsidiaries is as follows:

 

Custodian   Location   % of digital assets
custodied by
market value (1)		   Regulatory Body
Bitcoin Suisse AG   Switzerland   2.7%   Financial Services Standards Association (VQF). Zug. Switzerland
Anchorage Digital   United States   0.0%   Office of Comptroller of Currency
B2C2 Overseas LTD   Cayman Islands   17.0%   Cayman Islands Monetary Authority (CIMA)
Copper       1.6%   Financial Services Standards Association (VQF). Zug. Switzerland

 

Note 1: As at June 30, 2024; Residual digital assets served as collateral for loans with Equities First (approx. 1.7%;, regulated by FCA UK), Laser Digital (approx.. 1.7%, regulated by Dubai Virtual Assets Regulatory Authority) and Genesis Global Capital LLC (1.2%; subject to bankruptcy proceeding/filing as of 19 January 2023).

 

Valour diligences and reviews counterparty risk in accordance with the following principles:

 

●Valour shall strive to spread counterparty risk between several counterparties, where relevant and practical.
   
●In relevant situations and as far as possible, counterparty (and settlement) risk shall be mitigated by conducting transactions in well-established settlement systems based on the principles of delivery versus payment or payment versus payment.
   
●The below methodology is to be applied when proposing and selecting counterparties and when granting limits on counterparty risk score.
   
●The counterparties are reviewed in regular intervals and re-evaluated.
   
●In case of significant events such as negative news or credit events, Valour can decide to close the business relationship with a counterparty irrespective of the review cycle.
   
●Valour manages a counterparty scorecard and captures, assesses and monitors the below information.

 

1.Contact information

 

The name, the website and contact person at the exchange/counterparty, as well as the responsible onboarding owner on Valour side.

 

2.Current status

 

The current status of the relationship, the connection type, as well as the services, products and currency pairs used on the respective exchange/counterparty have to be documented and kept up to date

 

3.Country of registration and regulation

 

The country in which the exchange/counterparty is registered must be documented. In addition all countries in which the exchange/counterparty holds a regulatory licence have to be assessed and documented by stating the licence number (if applicable).

 

4.Country risk

 

The country of registration as well as the country/-ies of regulation are evaluated by using the country risk matrix. The country risk matrix considers the FATF (and equivalent) country evaluation, the Transparency.org Corruption Perception Index (CPI) as well as the VQF SRO country risk recommendations.

 

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5.Adverse media search

 

An adverse media search is being conducted. For example, information about an exchange having been hacked in the past or any news about a negative reputation, regulatory breaches etc. are documented.

 

6.Public exchange scores

 

Publicly available information and risk scores from data sources such as Coinmarketcap and Coingecko are being collected and documented.

 

7.Information security certification

 

The exchange/counterparty information security certification status is assessed. Information about the possession of certifications such as AICPA SOC 1, SOC 2 Type I and SOC 2 Type II as well as ISO 27001 are documented.

 

8.Insurance coverage

 

Information about insurance protection and regulatory status in terms of investor protection are assessed and documented.

 

9.Proof of reserves

 

It is being checked if the exchange/counterparty has made the public wallet addresses of its cold and hot storage publicly available or if any other cryptographic means of verification of the reserves held in custody are either publicly available or have been audited.

 

10.Risk evaluation

 

The risk score is evaluated on a scale of 1 to 5, with 1 being the lowest risk and 5 being the highest risk. Based on the information collected in the scorecard, with a focus on regulatory licences, a risk score is calculated and documented for each exchange or counterparty. By carefully evaluating the risk score, we can ensure that we are making responsible business decisions and protecting our customers and stakeholders.

 

11.Business justification and restrictions

 

In cases where an exchange or counterparty presents increased risks, a business justification must be provided. We must carefully consider the potential exposure and take appropriate measures to limit it through restrictions, thresholds, or other means. Any decision to establish a business relationship with an exchange or counterparty with increased risks must be approved by the board.

 

12.Recurring review schedule

 

The review date and review frequency of all exchanges/counterparties are documented and tracked in the scorecard. A review once a year is set as the default standard, however, an ad-hoc review has to be considered in case of any event that may result in any of the assessment criteria being changed.

 

13.Account closure

 

If the exchange or counterparty has been identified with an increased risk, such as a risk score of 4 or 5, Valour will determine if it is necessary to close the business relationship. This decision is based on the potential exposure and the potential impact on the business and stakeholders.

 

If it is determined that the business relationship should be terminated, a plan for closing the relationship is developed in a controlled and orderly manner. This may include transferring outstanding transactions, closing accounts, and ensuring that all necessary documents and records are properly transferred or retained. The decision to close the business relationship is communicated to the exchange or counterparty and a timeline for the closure is provided. Once the business relationship has been successfully terminated, the counterparty scorecard is updated in order to reflect the closure.

 

15

 

 

By following this process, we can ensure that we are taking a responsible and proactive approach to closing business relationships with risky counterparties. This can help protect our customers and stakeholders and maintain the integrity of our business operations.

 

Self-Custody of Digital Assets

 

 

At June 30, 2024, the Company’s had self-custody of digital assets totaling $255,820,202 (December 31, 2023 - $4,463,332).

 

The Company maintains controls around the meta mask and other hot and cold wallets includes only senior management having access to the accounts, passwords, seed phases, etc. All copies of passwords and seed phases are secured with senior management. Duplicate copies of the passwords and seeds phases are held by two members of the senior management in different locations.

 

Staking and Lending Policy

 

 

As part of Valour’s policy to hedge 100% of the market risk, Valour purchases and sells the digital assets which its ETPs track. Valour may lend or stake such digital assets on its balance sheet to generate revenue in accordance with the policies in the Base Prospectus and VDSL Base Prospectus. Lending or staking transactions are only conducted with institutional-grade counterparties and only up to a certain percentage for risk management purposes in accordance with Valour’s lending and staking policy (the “Lending and Staking Policy”), which is reviewed and approved by the board of Valour.

 

When deciding whether to lend or stake a particular asset, the Lending and Staking Policy provides that the decision will initially be made based on the risk profile of the potential counterparties, then the highest yield available, then prioritizing staking over lending.

 

As of the date of this MD&A, the Lending and Staking Policy provides the following limits for lending and staking of digital assets:

 

Digital Asset   Lending and staking limits
Bitcoin, Ethereum, Solana, Avalanche   Up to 75% of unrestricted tokens may be lent on open terms to eligible counterparties, 50% of tokens may be lent on terms up to six months.
     
    100% of tokens may be staked
All other Digital Assets   Up to 75% of unrestricted tokens may be lent on open terms to eligible counterparties, 50% of tokens may be lent on terms up to six months.
     
    If total AUM is greater than US$5 million, up to 95% may be staked, else 75% may be staked

 

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The Company’s lending arrangements policy is as follows:

 

(a)which party has legal title

 

The lender authorizes the counterparty e.g., Anchorage to draw down lent assets. Typically, the counterparty / borrower is then permitted to use Client’s Designated Assets for any lawful purpose.

 

(b)the status of the assets in the event of insolvency of the borrower

 

The lender shall have full recourse to Counterparty for any obligations hereunder in equity and at law. Upon any event of default, the lender shall be entitled to seek all remedies available at law or in equity for the full amount or any unpaid principal of any advance, accrued but unpaid fees or other amounts or property payable hereunder against Lender in addition to enforcing its security interest.

 

(c)contractual limitation on use and transfer of lent items by borrower

 

Typically, the Counterparty is then permitted to use client’s designated assets for any lawful purpose.

 

(d)borrower's ability to initiate transactions with the borrowed assets, including but not limited to: sell, lend, pledge, and/or hypothecate

 

Typically, the Counterparty is then permitted to use Client’s Designated Assets for any lawful purpose, including selling, lending, pledging and/or hypothecating. Certain lending agreements require Counterparties to grant a security interest to the Company on any assets that are further lent out.

 

(e)borrowers’ rights regarding “co-mingling”

 

There is no specific language in the lending agreement but given the Counterparties can use for any lawful purpose, the Company’s believes that comingling can occur.

 

(f)callability terms and conditions (including “notice period”, if any).

 

Termination. Client may terminate any Advance of its Designated Assets upon three (3) business days’ prior notice (the date of such termination, the “Termination Date”), from time to time at its sole discretion through an Electronic Notice.

 

17

 

 

Investments, At Fair Value, Through Profit and Loss, As At June 30, 2024

 

 

At June 30, 2024, the Company’s investment portfolio consisted of nine private investments for a total estimated fair value of $40,994,025 (December 31, 2023 – nine private investments for a total estimated fair value of $43,540,534).

 

Private Investments

 

At June 30, 2024, the Company’s nine private investments had a total fair value of $40,994,025.

 

Private Issuer  Note   Security description  Cost   Estimated Fair Value  

%

of FV

 
3iQ Corp.       61,712 common shares  $86,319   $415,569    1.0%
Amina Bank AG       3,906,250 non-voting shares   34,498,750    38,067,500    92.9%
Brazil Potash Corp.   (i)   404,200 common shares   1,998,668    1,697,640    4.1%
Earnity Inc.       85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation       201,633 preferred shares   630,505    684,418    1.7%
Neuronomics AG       724 common shares   128,898    128,898    0.3%
SDK:meta, LLC       1,000,000 units   3,420,000    -    0.0%
Skolem Technologies Ltd.       16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation       Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments          $41,109,383   $40,994,025    100.0%

 

(i) Investments in related party entities

 

At December 31, 2023, the Company’s nine private investments had a total fair value of $43,540,534.

 

Private Issuer  Note  Security description  Cost   Estimated Fair Value  

%

of FV

 
3iQ Corp.     187,007 common shares  $261,605   $1,216,890    2.8%
Brazil Potash Corp.  (i)  404,200 common shares   1,998,668    2,138,380    4.9%
Earnity Inc.     85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation     201,633 preferred shares   630,505    661,366    1.5%
Neuronomics AG     724 common shares   128,898    128,898    0.3%
SDK:meta, LLC     1,000,000 units   3,420,000    -    0.0%
Amina Bank AG (formerly SEBA
Bank AG)		  (i)  3,906,250 non-voting shares   34,498,750    39,395,000    90.5%
Skolem Technologies Ltd.     16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation     Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments        $41,284,669   $43,540,534    100.0%

 

(i) Investments in related party entities

 

18

 

 

3iQ Corp (“3iQ”)

 

On September 31, 2020, the Company acquired 187,007 shares of 3iQ through its acquisition of DeFi. 3iQ is a leading bitcoin and digital asset fund manager. During the six months ended June 30, 2024, the Company sold 125,295 shares. As at June 30, 2024, 3iQ was valued at $415,569. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of 3iQ would result in an estimated increase in loss to DeFi of $41,557.

 

Amina Bank AG (“Amina”)

 

During Q1, 2022, the Company acquired 3,906,250 non-voting shares for $34,498,750. Amina is a pioneer in the financial industry and is the only global smart bank providing a fully universal suite of regulated banking services in the emerging digital economy. As at June 30, 2024, Amina was valued at $38,067,500 which was based on a market approach. The investment represented 4.3% of the total assets of the Company. A 10% decline in the fair market value of Amina would result in an estimated increase in loss to DeFi of $3,806,750.

 

Brazil Potash Corp. (“BPC’)

 

On September 11, 2020, the Company acquired 404,200 common shares of BPC through the sale of its royalty interest. BPC is a Canadian private company which engaged in the extraction and processing of potash ore, an essential input for agriculture in Brazil. As at June 30, 2024, BPC was valued at $1,697,640 which was based on BPC weighted average of comparable public market stock prices of $4.20 per share. The investment represented 0.2% of the total assets of the Company. A 10% decline in the fair market value of BPC would result in an estimated increase in loss to DeFi of $169,764.

 

Earnity Inc. (“Earnity”)

 

On December 3, 2021, the Company acquired 85,142 series A preferred shares of Earnity. Earnity is a group of dedicated fintech veterans who believe managing cryptocurrency should be a lot easier. As at June 30, 2024, Earnity was valued at $nil which was based on Earnity’s ceasing operations. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of Earnity would result in an estimated increase in loss to DeFi of $0.

 

Luxor Technology Corporation (“LTC”)

 

During the year ended December 31, 2021, the Company subscribed US$162,500 ($203,874) in LTC for the rights to certain preferred shares of LTC. During Q3, 2021, these rights were converted into 25,204 series A preferred shares and 76,429 of series A-1 preferred shares. LTC is building infrastructure to support the next generation of digital assets. As at June 30, 2024, LTC was valued at $684,418 which was based on LTC December 2021 financing prices. The investment represented 0.1% of the total assets of the Company. A 10% decline in the fair market value of LTC would result in an estimated increase in loss to DeFi of $68,442.

 

SDK: meta, LLC (“SDK”)

 

During Q2, 2021, the Company signed a share exchange agreement with SDK and traded 3 million shares of the Company with 1 million membership units of SDK at a fair value of $3,42,000. SDK is a privately held Web3 blockchain technology company driving mass adoption of user-centric platforms and mobile consumption of decentralized finance and related offerings. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at June 30, 2024, SDK was valued at $nil. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of SDK would result in an estimated increase in loss to DeFi of $0.

 

19

 

 

Skolem Technologies Ltd. (“STL”)

 

During Q4, 2021, these rights were converted into 16,354 series A preferred shares. STL is an Institutional DeFi trade execution platform. As at June 30, 2024, STL was valued at $nil which was based on STL ceasing operations. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of STL would result in an estimated increase in loss to DeFi of $0.

 

VolMEX Labs Corporation (“VLC”)

 

During Q1, 2021, the Company invested US$30,000 ($37,809) in VLC for the rights to certain preferred shares of VLC. VLC is a protocol for volatility indices and non-custodial trading build on Ethereum. As at June 30, 2024, VLC was valued at $0. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of VLC would result in an estimated increase in loss to DeFi of $0.

 

Financial Results

 

 

The following is a discussion of the results of operations of the Company for the three and six months ended June 30, 2024, and 2023. They should be read in conjunction with the Company’s condensed consolidated interim financial statements for the three and six months ended June 30, 2024 and 2023 and related notes.

 

Three and six months ended June 30, 2024 and 2023:

 

   Three months ended June 30,   Six months ended June 30 
   2024$   2023$   2024$   2023$ 
Revenues                
Realized and net change in unrealized gains and (losses) on digital assets   (170,854,812)   (12,555,609)   146,268,243    50,462,924 
Realized and net change in unrealized gains and (losses) on ETP payables   209,094,995    18,984,061    (119,158,890)   (56,529,430)
Staking and lending income   8,263,022    764,662    14,071,024    1,336,475 
Management fees   2,145,432    244,016    3,877,314    459,693 
Research revenue   338,583    -    840,451    - 
Node revenue   35    (845)   4,709    4,976 
Realized gain (loss) on investments   634,271    (3,438)   634,271    (4,025)
Unrealized loss on investments   (659,386)   (42,491)   (2,498,418)   314,862 
Unrealized loss on equity investments   (14,453,469)   -    (14,453,469)   - 
Interest income   644    (572)   1,512    257 
Total revenues   34,509,314    7,389,784    29,586,747    (3,954,267)
Expenses                    
Operating, general and administration   30,511,981    1,755,467    33,480,118    3,871,936 
Share based payments   3,433,990    501,594    5,051,505    1,442,880 
Depreciation - property, plant and equipment   2,092    3,236    5,328    6,472 
Depreciation - right of use assets   -    (34,034)   -    - 
Amortization - intangibles   514,154    509,575    1,031,379    1,019,150 
Finance costs   929,255    275,063    2,666,769    1,561,529 
Transaction costs   1,089,807    86,944    1,580,204    319,719 
Foreign exchange loss   6,318,062    4,743,568    7,141,206    4,754,029 
Impairment loss   -    -    4,962,021    - 
Total expenses   42,799,341    7,841,413    55,918,530    12,975,715 
Loss before other item   (8,290,026)   (451,629)   (26,331,783)   (16,929,983)
Loss on settlement of debt   -    (198,482)   -    (198,482)
Net loss for the period   (8,290,026)   (650,111)   (26,331,783)   (17,128,465)
Other comprehensive income (loss)                    
Foreign currency translation gain (loss)   110,463    1,692,615    (1,158,589)   1,726,504 
Net income (loss) and comprehensive income (loss) for the period   (8,179,564)   1,042,504    (27,490,372)   (15,401,961)

 

20

 

 

For the three and six months ended June 30, 2024, the Company recorded a net loss of $8,290,026 and $26,331,783 on total revenues of $34,509,314 and $29,586,747 compared to net loss of $650,111 and $17,128,465 on total revenues of $7,389,784 and total loss of $(3,954,267) for the three and six months ended June 30, 2023, respectively.

 

For the three and six months ended June 30, 2024, realized and net change in unrealized gains and loss on digital assets was $(170,854,812) and $146,268,243 and realized and net change in unrealized gains and loss on ETP payables was $209,094,995 and $(119,158,890). For the three and six months ended June 30, 2024, unrealized loss on equity instruments was $14,453,469. DeFi Alpha trading returns and higher digital asset prices in 2024 resulted in gains on our digital assets that were offset by losses on ETP payables due to the increased share price of the ETPs.

 

The Company earned staking and lending income of $8,263,022 and $14,071,024 for the three and six months ended June 30, 2024 compared to $764,662 and $1,336,475 for the same periods in 2023. The Company actively stakes and lends its digital assets to earn additional revenue. The staking and lending income was significantly higher for the three and six months ended June 30, 2024 due to the increased digital asset prices as well as the Company staking and lending more digital assets compared to 2023.

 

The Company had management fee revenue of $2,145,432 and $3,877,314 for the three and six months ended June 30, 2024 compared to $244,016 and $459,693 for the same periods in 2023. In 2024, the Company’s had higher AUM and additional ETP products resulting in higher management fees.

 

The Company had node revenue of $35 and $4,709 for the three and six months ended June 30, 2024 compared to $(845) and $4,976 for the same period in 2023. During the six months ended June 30, 2024, the Company earned 340,039.11663 (June 30, 2023 – 345,905.024993) Shyft tokens for its services.

 

The Company had realized gain (loss) on investments of $634,271 for the three and six months ended June 30, 2024 compared to $(3,438) and $(4,025) for the same periods in 2023. The Company had unrealized gain (loss) on investments of $(659,386) and $(2,498,418) compared to $(42,491) and $314,862 in the prior period. The unrealized loss for the six months ended June 30, 2024 primarily consisted of unrealized losses on Amina and Brazil Potash.

 

Management and consulting fees were $28,831,959 and $30,285,078 during the three and six months ended June 30, 2024 compared to $1,195,609 and $2,285,224 during the same periods in 2023. Management and consulting fees increased due to accrued DeFi Alpha trading bonuses in Q2 2024.

 

Share based payments were $3,433,990 and $5,051,505 during the three six months ended June 30, 2024 compared to $501,594 and $1,442,880 in the same periods in 2023. The Company granted 4,825,000 options and 2,700,000 DSUs to consultants of the Company during 2024 compared to the 1,000,000 DSUs to directors, officers and consultants of the Company during 2023.

 

Travel and promotion was $1,029,962 and $1,604,496 during the three and six months ended June 30, 2024 compared to $122,323 and $239,615 during the same period in 2023. Corporate activities and business development increased in 2024 compared to 2023.

 

Office and rent was $(134,658) and $460,906 during the three and six months ended June 30, 2024 compared to $224,026 and $852,654 during the same periods in 2023.

 

Accounting and legal was $754,137 and $1,007,043 during the three and six months ended June 30, 2024 compared to $157,068 and $370,594 during the same periods in 2023. The 2024 increase is due to higher audit and legal fees in 2024.

 

Total depreciation and amortization was $516,246 and $1,036,707 for the three and six months ended June 30, 2024 compared to $478,777 and $1,025,622 during the prior periods in 2023. This relates to the equipment, right of use assets and intangible assets acquired as part of the acquisitions of Reflexivity LLC, DeFi Capital and Valour.

 

21

 

 

Finance costs were $929,255 and $2,666,769 for the three and six months ended June 30, 2024 compared to $275,063 and $1,561,529 during the prior periods in 2023. The increase in financing costs relates to the interest expense on the digital asset provider loans and other loans of the Company. The interest rates on these loans were higher in 2024 compared to 2023.

 

Transaction costs were $1,089,807 and $1,580,204 for the three and six months ended June 30, 2024 compared to $86,944 and $319,719 in the prior period. The increase in transaction costs relates to the trading of digital assets as brokerage commission and ETP issuance costs as well as transaction costs related to DeFi Alpha trading activity.

 

Foreign loss was $6,318,062 and $7,141,206 for the three and six months ended June 30, 2024 compared to $4,753,568 and $4,754,029 in the prior period. The loss reflects the currency fluctuations primarily in Company’s digital asset and ETPs which are denominated in US dollars, Swedish Krona, Euro and Swiss Franc.

 

Impairment loss was $4,962,021 for the six months ended June 30, 2024 compared to $nil in the prior period. The Company impaired the costs related to the Solana IP acquisition in Q1 2024.

 

During the six months ended June 30, 2024, the Company used $36,021,512 in operations of which $9,357,899 was provided by changes in working capital, $345,760,641 was used to purchase digital assets offset by $568,751,078 was provided from the disposal of digital assets, and $238,090,603 was used to purchase equity investments. During the comparative six months ended June 30, 2023, the Company used $14,801,499 in operations of which $1,168,623 was used by the changes in working capital, $40,495,137 was used to purchase digital assets offset by $34,356,040 was provided from the disposal of digital assets. The cash used from operations was higher in 2024 compared to 2023 due to higher adjustments to net income in 2024 compared to 2023 and higher net purchase of digital assets and equity investments in 2024 of $(15,100,166) compared in 2023 the net purchase of digital assets was $(6,139,097) reflecting increased activity in digital asset and equity investment markets.

 

During the six months ended June 30, 2024, $48,330,450 was provided by financing activities compared to $13,680,402 in the prior period. The Company received proceeds of $406,189,410 from ETP holders, proceeds of $752,230 from sale of investments, proceeds of $455,450 from option exercises and $1,379,414 provided from warrant exercises offset by $318,755,385 used for payments to ETP holders and $40,376,650 from loan repayments. During the six months ended June 30, 2023, the Company received proceeds of $56,747,554 from ETP holders and proceeds of $4,319,901 from loans offset by $47,387,053 used for payments to ETP holders. The cash provided from financing was higher in 2024 compared to 2023 due to higher net ETP sales in 2024 offset by loan repayment.

 

Liquidity and Capital Resources

 

 

In management’s view, given the nature of the Company’s operations, the most relevant financial information relates primarily to current liquidity, solvency and planned expenditures. The Company’s financial success will be dependent upon the execution and development of its new investment strategy and business operations. Such execution and development may take years to complete and the amount of resulting income, if any, is difficult to determine.

 

22

 

 

To date, the Company has not had any negative impacts to the Company’s digital assets holdings with the bankruptcies of Celsius, Voyager and Blockfi, with the exception for a small exposure to FTX as it held some of its own digital assets on the exchange. The Company has pay down loans from cash flow generated and rolled over its outstanding loans payable with the digital asset providers on similar terms throughout the year.

 

The Company loaned and staked more digital assets in 2024 compared to 2023 and as a result the Company earned more revenue via staking and lending. Higher AUM in the Company’s fee earning ETPs in H1 2024 compared to the same period 2023 resulted in higher management fees. Overall, the Company’s total revenues improved in 2024 as a result of improving digital asset markets and from profitable trades from DeFi Alpha.

 

The Company plans on funding its current working capital deficiency through a number of ways such as raising funds via private placement financings and debt financings, looking to monetizing its private investments, launching new products to increase the Company’s revenues and reducing costs.

 

DeFi relies upon various sources of funds for its ongoing operating activities. These resources include proceeds from dispositions of investments, interest and dividend income from investments and private placement financing.

 

Loans Payable

 

On January 14, 2022 and January 17, 2022, the Company entered into various loans with a digital asset liquidity provider totaling $46,235,200 (US$37,000,000). On April 4, 2022, the Company entered into a loan with a second digital asset provider for US$5,500,000. In April 2022, the Company partially repaid of one of the loans of US$3,500,000, while the remainder of these loans have since been renewed and continue to be outstanding. The Company has spread the loans among three different digital asset liquidity providers to reduce single entity concentration and be able to obtain more competitive rates. During the six months ended June 30, 2024, the Company repaid loans of US$29,500,000. As of June 30, 2024, the loan principal of $13,687,000 (US$10,000,000) (December 31, 2023 - $52,242,700 (US$39,500,000)) was outstanding. The loans terms are 90 days have interest rates ranging from 7.25% and 10.5% The extended loans are secured with 475 BTC and 1845 ETH.

 

One of Company’s digital asset liquidity provider loans payable is held with Genesis. On January 20, 2023, Genesis declared bankruptcy and currently is not allowing withdrawals and not extending new loans. On March 15, 2023, the Court ruled that the Genesis debtors may not sell, buy or trade in crypto assets without prior consent by the creditors. The Court also allowed for the payment of some service providers required for upholding the operations but nothing beyond that. The Company’s loan with Genesis is an open term loan. The Genesis loan and interest payable is US$6,724,603 and secured with 475 BTC.

 

On March 23, 2023, the Company entered into a loan agreement with an institutional investment firm that specializes in long-term asset backed financing for secured loan of $4,101,300 (US$3,000,001). The loan is secured by 158.2614 BTC. The Company paid a 1% origination fee to the lender. The principal is due eighteen months from the closing date. Interest payments of US$24,375 are due quarterly with the first payment due on June 23, 2023. As of June 30, 2024, the loan principal of $4,106,100 (US$3,000,001) (December 31, 2023 - $3,967,801 (US$3,000,001)) was outstanding.

 

DeFi used cash of $36,021,512 in its operating activities during the six months ended June 30, 2024. Included in cash used in operations are $583,851,244 used in the purchase of digital assets, $24,458,065 provided by changes of working capital and $568,751,078 generated from the disposal of digital assets. DeFi also provided $48,330,450 in financing activities. Included in cash provided in financing activities are $406,189,410 from ETP holders, proceeds of $752,230 from sale of investments, proceeds of $455,440 from option exercises and $1,379,414 provided from warrant exercises offset by $318,755,385 used for payments to ETP holders and $40,376,650 from loan repayments.

 

23

 

 

As at June 30 2024, the Company’s sources of funds include the estimated fair value of its cash of $19,529,425, equity investments of $40,994,025 and digital assets of $770,257,971 offset by total liabilities of $784,499,053.

 

Currency Risk

 

Currency risk is the risk to the Company’s earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates.

 

As at June 30, 2024 and December 31, 2023, the Company had the following financial and non-financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:

 

June 30, 2024
    United States     British     Swiss     Euro     SEK  
Cash   $ (4,638,863 )   $ 8,058     $ 3,634,977     $ 1,909,325     $ 2,486,173  
Receivables     98,443       -       24,022       -       -  
Private investments     2,510,956       -       38,067,500       -       -  
Prepaid expenses     1,800       -       166,897       -       -  
Digital assets     461,567,285       -       -       -       -  
Equity iinvestment     210,033,134       -       -       -       -  
Accounts payable and accrued liabilities     (1,059,415 )     (153,037 )     (411,456 )     21,989       -  
Loan payable     (17,793,100 )     -       -       -       -  
ETP holders payable     (730,068,689 )     -       -       -       -  
Net assets (liabilities)   $ (79,348,449 )   $ (144,979 )   $ 41,481,940     $ 1,887,336     $ 2,486,173  

 

December 31, 2023
    United States
Dollars		    British Pound    Swiss Franc    European Euro 
Cash  $6,668,518   $-   $-   $- 
Receivables   47,159    -    -    - 
Private investments   4,016,636    -    39,395,000    - 
Prepaid investment   1,509,824    -    -    - 
Digital assets   489,865,637    -    -    - 
Accounts payable and accrued liabilities   (3,080,229)   (74,466)   (101,828)   (21,939)
Loan payable   (56,210,709)               
ETP holders payable   (508,130,490)   -    -    - 
Net assets (liabilities)  $(65,313,654)  $(74,466)  $39,293,172   $(21,939)

 

As at June 30, 2024, United States Dollar was converted at a rate of $1.3687 (December 31, 2023 - $1.3226) Canadian Dollars to $1.00 US Dollar. British Pounds was converted at a rate of $1.7301 (December 31, 2023 - $1.6837) Canadian Dollars to 1.00 British Pound. Euro was converted at a rate of $1.4659 (December 31, 2023 - $1.4626) Canadian Dollars to 1.00 Euro. Swiss Franc was converted at a rate of $1.5227 (December 31, 2023 - $1.5758).

 

Capital Management

 

The Company considers its capital to consist of share capital, equity reserve and deficit. The Company’s objectives when managing capital are:

 

●to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments;

 

●to give shareholders sustained growth in value by increasing shareholders’ equity; while

 

●taking a conservative approach towards financial leverage and management of financial risks.

 

24

 

 

The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:

 

●raising capital through equity financings; and
   
●realizing proceeds from the disposition of its investments

 

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders’ equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million. There were no changes to the Company’s capital management during the six months ended June 30, 2024.

 

Commitments

 

Management Contract Commitments

 

The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $2,312,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these consolidated financial statements. Minimum commitments remaining under these contracts were approximately $974,000, all due within one year.

 

Legal Commitments

 

The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

 

Summary of Quarterly Results

 

 

The following is a summary of the Company’s financial results for the eight most recently completed quarters:

 

   30-Jun   31-Mar   31-Dec   30-Sep   30-Jun   31-Mar   31-Dec   30-Sep   30-Jun 
   2024   2024   2023   2023   2023   2023   2022   2022   2022 
Revenue  $34,509,314   ($4,922,567)  $8,548,779   $6,003,995   $7,147,292   ($11,344,052)  ($11,123,848)  $295,605   ($5,219,545)
Net (loss) income and comprehensive (loss) income  ($8,179,564)  ($19,310,808)  $1,415,946   ($4,719,786)  $800,012   ($16,444,465)  ($254,464,521)  ($9,011,375)  ($18,870,125)
(Loss) income per Share - basic   (0.03)   (0.06)   -    (0.01)   -    (0.08)   (0.13)   (0.04)   (0.09)
(Loss) income per Share - diluted   (0.02)   (0.06)   -    (0.01)   -    (0.08)   (0.13)   (0.04)   (0.09)
Total Assets  $789,087,114   $983,940,422   $591,960,107   $253,585,558   $259,787,932   $267,666,904   $194,003,779   $263,678,822   $241,666,497 
Total Long Term Liabilities  $0   $0   $0   $0   $0   $0   $1,709,911   $1,681,358   $0 

 

 

25

 

 

Selected Annual Information

 

 

The highlights of financial data for the Company for the three most recently completed financial years are as follows:

 

   31-Dec-23   31-Dec-22   31-Dec-21 
(a) Net Revenue   10,356,014    (14,226,780)  $15,081,078 
(b) Net Income (Loss) and Comprehensive Income (Loss)               
(i) Total income (loss)   (18,948,293)   (69,135,318)  ($71,254,155)
(ii) Income (loss) per share – basic   (0.09)   (0.32)   (0.37)
(iii) Income (loss) per share – diluted   (0.09)   (0.32)   (0.37)
(c) Total Assets   591,960,108    194,003,779   $459,690,575 
(d) Total Liabilities   573,516,045    166,094,517   $367,909,179 

 

Off Balance Sheet Arrangements

 

 

There are no off-balance sheet arrangements to which the Company is committed.

 

Compensation of Directors and Officers

 

 

During the six months ended June 30, 2024, the Company paid or accrued $660,012 (six months ended June 30, 2023 - $523,568) to directors and officers of the Company and $1,905,741 (six months ended June 30, 2023 - $197,331) to directors and officers of the Company in share-based compensation.

 

As June 30,2024, the Company had $83,435 (December 31, 2023 - $147,485) owing to its current key management, and $314,136 (December 31, 2023 - $314,136) owing to its former key management. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment or “due on demand”.

 

More detailed information regarding the compensation of officers and directors of the Company is disclosed in the management information circular and such information is incorporated by reference herein. The management information circular is available under profile of the Company on SEDAR at www.sedar.com

 

26

 

 

Related Party Transactions

 

 

The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of June 30, 2024 and December 31, 2023.

 

Investment  Nature of relationship to invesment  Estimated
Fair value		 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $1,697,640 
Aminna Bank AG *  Former Director (Olivier Roussy Newton) of investee   38,067,500 
Total investment - June 30, 2024     $39,765,140 

 

Investment  Nature of relationship to invesment  Estimated
Fair value		 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $2,138,380 
Aminna Bank AG (formerlt SEBA Bank AG)*  Former Director (Olivier Roussy Newton) of investee   39,395,000 
Total investment - December 31, 2023     $41,533,380 

 

*Private companies

 

Valour Inc. holds 4,000,000 common shares of the Company.

 

The Company has a diversified base of investors. To the Company’s knowledge, no one holds more than 10% of the Company’s shares on a basic share and partially diluted share basis as at June 30, 2024.

 

During the six months ended June 30, 2024, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

 

●The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at June 30, 2024 the Company had a payable balance of $293,800 (December 31, 2023 - $226,000) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former director and former officer of the Company, is also a director of 2227929 Ontario Inc.

 

●The Company incurred $14,917 (June 30, 2023 - $92,447) in legal fees to a firm in which a director of the Company is a partner. Included in accounts payable and accrued liabilities were legal expenses of $10,959 (December 31, 2023 – $165,868) incurred in the ordinary course of business at a law firm where a director of the company is a Partner.

 

●Included in accounts payable and accrued liabilities were expenses of GBP 44,228 ($76,519) (December 31, 2023 - $74,466) expenses owed to Vik Pathak, a former director and officer of the Company.

 

All of the above noted transactions have been in the normal course of operations and are recorded at their exchange amounts, which is the consideration agreed upon by the related parties.

 

27

 

 

Financial Instruments and Other Instruments

 

 

Fair value

 

IFRS requires that the Company disclose information about the fair value of its financial assets and liabilities. Fair value estimates are made at the statements of financial position date, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

 

The Company has determined the carrying values of its financial instruments as follows:

 

●The carrying values of cash, amounts receivable, accounts payable and accrual liabilities approximate their fair values due to the short-term nature of these instruments.

 

●Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 of the Company’s audited consolidated financial statements for the years ended December 31, 2023 and 2022.

 

●Digital assets classified as financial assets relate to USDC which is measured at fair value

 

The following table illustrates the classification and hierarchy of the Company's financial instruments, measured at fair value in the statements of financial position as at June 30, 2024 and December 31, 2023.

 

Investments, fair value 

(Quoted Market

price)

  

(Valuation

technique -observable

market Inputs)

  

(Valuation

technique –

non-observable

market inputs)

   Total 
Publicly traded investments  $-   $-   $-   $- 
Privately traded invesments   -    -    40,994,025    40,994,025 
Digital assets   -    698    -    698 
Equity investments   -    -    210,033,134    210,033,134 
June 30, 2024  $-   $698   $251,027,159   $251,027,857 
Publicly traded investments  $-   $ -   $-   $- 
Privately traded invesments   -    -    43,540,534    43,540,534 
Digital assets   -    673    -    673 
December 31, 2023  $-   $673  $43,540,534   $43,541,207 

 

Level 2 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 2 during the period ended June 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

  

Investments, fair value for the period ended  June 30,
2024		   December 31,
2023		 
Balance, beginning of period  $673   $1,586 
Acquired (disposal)   25    (913)
Balance, end of period  $698   $673 

 

28

 

 

Level 3 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the period ended June 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

Investments, fair value for the period ended  June 30,
2024		   December 31,
2023		 
Balance, beginning of period  $43,540,534   $30,015,445 
Purchases   224,486,603    128,898 
Unrealized gain/(loss) net   (16,999,978)   13,396,191 
Balance, end of period  $251,027,159   $43,540,534 

 

Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly traded companies.

 

As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results.

 

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The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at June 30, 2024 and December 31, 2023.

 

Description  Fair Vaue  

Valuation

technique

 

Significant

unobservable

input(s)

 

Range of

Significant

Unobservable

Input(s)

3iQ Corp.  $415,569   Recent financing  Marketability of shares  0% discount
Brazil Potash Corp.   1,697,640   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   684,418   Recent financing  Marketability of shares  0% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Amina Bank   38,067,500   Recent financing  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VoIMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
Equity investments in digital assets   210,033,134   Recent financing  Discount for lack of marketability  30.4% discount
June 30, 2024  $251,027,159          

 

3iQ Corp.  $1,216,890   Recent financing   Marketability of shares    0% discount  
                   
Brazil Potash Corp.   2,138,380   Recent financing   Marketability of shares    0% discount  
Earnity   -   Recent financing   Marketability of shares    0% discount  
Luxor Technology Corporation   661,366   Recent financing   Marketability of shares    0% discount 
SEBA Bank AG   39,395,000   Recent financing   Marketability of shares    0% discount  
Neuronomics AG   128,898   Recent financing   Marketability of shares    0% discount  
SDK:meta, LLG   -   Recent financing   Marketability of shares    0% discount  
Skolem Technologies Ltd.   -   Recent financing   Marketability of shares    0% discount  
                   
VoIMEX Labs Corporation   -   Recent financing   Marketability of shares    0% discount  
December 31, 2023  $43,540,534              

 

3iQ Corp. (“3iQ”)

 

On March 31, 2020, the Company acquired 187,007 common shares of 3iQ as part of the Company’s acquisition of Valour. As at June 30, 2024, the valuation of 3iQ was based on the recent transaction which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of 3iQ will result in a corresponding +/- $41,557 (December 31, 2023 - $121,689) change in the carrying amount.

 

Amina Bank AG (“Amina”) 

 

On January 14, 2022, the Company invested $34,498,750 to acquire 3,906,250 non-votes shares of Amina. As at June 30, 2024, the valuation of Amina was based on a market approach which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of Amina will result in a corresponding +/- $3,806,750 (December 31, 2023 +/- $3,939,500) change in the carrying amount.

 

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Brazil Potash Corp. (“BPC”)

 

On September 11, 2020, the Company received 404,200 common shares of BPC as consideration of selling the Company’s Royalties to a non-arms length party of the Company. As at June 30, 2024, the valuation of BPC was based on BPC weighted average of comparable public market stock prices of $4.20 per share, which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of BPC will result in a corresponding +/- $169,764 (December 31, 2023 - $213,828) change in the carrying amount.

 

Earnity Inc. (“Earnity”)

 

On April 13, 2021, the Company subscribed US$40,000 ($50,076) to acquire certain rights to certain future equity of Earnity. As at June 30, 2024, the valuation of Earnity was determined to be nil based on Earnity ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at June 30, 2024, a +/- 10% change in the fair value of Earnity will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Luxor Technology Corporation (“LTC”)

 

On December 29, 2020, the Company subscribed US$100,000 ($128,060) to acquire certain rights to the preferred shares of LTC. The transaction was closed on February 15, 2021. On May 11, 2021, the Company subscribed additional rights of US$62,500 ($75,787). As at June 30, 2024, the valuation of LTC was based on the December 2021 financing which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024. a +/- 10% change in the fair value of LTC will result in a corresponding +/- $68,442 (December 31, 2023 - $66,137) change in the carrying amount.

 

SDK:Meta LLC

 

On June 3, 2021, the Company entered into a share exchange agreement with SDK exchanging 1,000,000 membership units of SDK with 3,000,000 shares of the Company valuing the investment at $3,420,000. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at June 30, 2024, the valuation of SDK:Meta LLC was $nil (December 31, 2023 - $nil). Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at June 30, 2024, a +/- 10% change in the fair value of SDK:Meta LLC will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Skolem Technologies Ltd. (“STL”)

 

On December 29, 2020, the Company invested US$20,000 ($25,612) to acquire certain rights to the preferred shares of STL. On October 29, 2021, the Company rights were converted into 16,354 series A preferred shares. As at June 30, 2024, the valuation of STL was determined to be nil based on STL ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of STL will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

VolMEX Labs Corporation (“VLC”)

 

On February 23, 2021, the Company invested US$30,000 ($37,809) to acquire certain rights to the preferred shares of VLC. As at June 30, 2024, the valuation of VLC was nil. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at June 30, 2024. As at June 30, 2024, a +/- 10% change in the fair value of VLC will result in a corresponding +/- nil (December 31, 2023 - $nil) change in the carrying amount.

 

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Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at June 30, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $21,003,313 change in the carrying amount.

 

Outstanding Share Data

 

 

Authorized unlimited common shares without par value – 298,030,368 are issued and outstanding as at August 14, 2024.

 

Authorized 20,000,000 preferred shares, at 9% cumulative dividends, non-voting, non-participating, non- redeemable, non-retractable, and non-convertible – 4,500,000 are issued and outstanding as at August 14, 2024.

 

Stock options and convertible securities outstanding as at August 14, 2024 are as follows:

 

Stock Options:

29,742,187 with an exercise price ranging from $0.09 to $3.92 expiring between November 16, 2025 and July 29, 2029.

 

Warrants:

39,771,769 with an exercise price ranging from $0.20 to $0.30 expiring between November 14, 2024 and November 6, 2028.

 

Deferred shares units:

13,676,012 with vesting terms ranging from six months to two years.

 

Risks and Uncertainties

 

 

The Company is exposed to a number of risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. The following outlines certain risk factors specific to the Company. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward–looking information relating to the Company. Please also refer to the Company’s AIF for the year ended December 31, 2023 filed on SEDAR for a full description of the Company’s risks in addition to those highlighted below.

 

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Risks Relating to the Business and Industry of the Company

 

Staking and Lending of Cryptocurrencies, DeFi Protocol Tokens or other Digital Assets

 

The Company may stake or lend crypto assets to third parties, including affiliates. On termination of the staking arrangement or loan, the counterparty is required to return the crypto assets to the Company; any gains or loss in the market price during the period would inure to the Company. In the event of the bankruptcy of the counterparty, the Company could experience delays in recovering its crypto assets. In addition, to the extent that the value of the crypto assets increases during the term of the loan, the value of the crypto assets may exceed the value of collateral provided to the Company, exposing the Company to credit risks with respect to the counterparty and potentially exposing the Company to a loss of the difference between the value of the crypto assets and the value of the collateral. If a counterparty defaults under its obligations with respect to a loan of crypto assets, including by failing to deliver additional collateral when required or by failing to return the crypto assets upon the termination of the loan, the Company may expend significant resources and incur significant expenses in connection with efforts to enforce the staking or loan agreement, which may ultimately be unsuccessful.

 

Furthermore, the Company and its affiliates may also pledge and grant security over its crypto assets to secure loans. In the event that the Company or its affiliates defaults under its obligations with respect to the loan, including failure to repay the principal amount of the loan or accrued interest, lenders may realize upon its security and take possession to such pledged crypto assets.

 

The crypto assets that are staked, loaned or pledged to third parties by the Company include crypto assets held by Valour for the purposes of hedging its ETPs. The Company is exposed to a potentially significant liquidity risk if, for example, the aggregate sale of ETPs exceed the quantum of uncommitted cryptocurrency available to the Company to satisfy such sale requests. A similar risk applies with respect to individual reserves of each type of cryptocurrency should the sale of ETPs, and correspondingly, the underlying cryptocurrency, exceed the Company’s available reserves.

 

Custody Risk

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line as well as for digital assets underlying Valour ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third- party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

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Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Momentum Pricing Risk

 

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Cryptocurrency and DeFi protocol token market prices are determined primarily using data from various exchanges, over- the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and DeFi Protocol tokens inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of the Company’s cryptocurrency and DeFi protocol token inventory and thereby affect the Company’s shareholders.

 

The profitability of our operations will be significantly affected by changes in prices of cryptocurrencies, DeFi protocol tokens and other digital assets. Cryptocurrencies, DeFi protocol tokens and other digital assets prices are highly volatile, can fluctuate substantially and are affected by numerous factors beyond our control, including use of such cryptocurrencies, DeFi protocol tokens and other digital assets in the DeFi industry, demand, inflation and expectations with respect to the rate of inflation, global or regional political or economic events. If cryptocurrencies, DeFi protocol tokens and other digital assets prices should decline and remain at low market levels for a sustained period, we could determine that it is not economically feasible to continue activities.

 

The price and trading volume of any crypto asset is subject to significant uncertainty and volatility, depending on several factors, including, but not limited to:

 

●changes in liquidity, market-making volume, and trading activities;

 

●investment and trading activities of highly active retail and institutional users, speculators, miners, and investors;

 

●decreased user and investor confidence in crypto assets and crypto platforms;

 

●negative publicity or events and unpredictable social media coverage or “trending” of crypto assets;

 

●the ability for crypto assets to meet user and investor demands;

 

●the functionality and utility of crypto assets and their associated ecosystems and networks;

 

●consumer preferences and perceived value of crypto assets and crypto asset markets;

 

●regulatory or legislative changes and updates affecting the cryptoeconomy;

 

●the characterization of crypto assets under the laws of various jurisdictions around the world;

 

●the maintenance, troubleshooting, and development of the blockchain networks;

 

●the ability for crypto networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently;

 

●interruptions in service from or failures of major crypto platforms;

 

●availability of an active derivatives market for various crypto assets;

 

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●availability of banking and payment services to support crypto-related projects;

 

●level of interest rates and inflation;

 

●national and international economic and political conditions;

 

●global cryptocurrency supply;

 

●changes in the software, software requirements or hardware requirements underlying a blockchain network;

 

●competition for and among various cryptocurrencies; and

 

●actual or perceived manipulation of the markets for cryptocurrencies.

 

Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Volatility Risk

 

As Valour’s ETPs track the market price of cryptocurrencies and DeFi protocol tokens, the value of the Common Shares relates partially to the value of such cryptocurrencies and DeFi protocol tokens, and fluctuations in the price of cryptocurrencies, DeFi protocol tokens and other digital assets could materially and adversely affect an investment in the Common Shares. Several factors may affect the price of cryptocurrencies, DeFi protocol tokens and other digital assets, including: the total number of cryptocurrencies, DeFi protocol tokens and other digital assets in existence; global cryptocurrency, DeFi protocol tokens and other digital assets demand; global cryptocurrencies, DeFi protocol tokens and other digital assets supply; investors’ expectations with respect to the rate of inflation of fiat currencies; investors’ expectations with respect to the rate of deflation of cryptocurrencies, DeFi protocol tokens and other digital assets; interest rates; currency exchange rates, including the rates at which cryptocurrencies, DeFi protocol tokens and other digital assets may be exchanged for fiat currencies; fiat currency withdrawal and deposit policies of cryptocurrency exchanges and liquidity of such cryptocurrency exchanges; interruptions in service from or failures of major cryptocurrency exchanges; Cyber theft of cryptocurrencies, DeFi protocol tokens and other digital assets from online wallet providers, or news of such theft from such providers or from individuals’ wallets; investment and trading activities of large investors; monetary policies of governments, trade restrictions, currency devaluations and revaluations; regulatory measures, if any, that restrict the use of cryptocurrencies, DeFi protocol tokens and other digital assets as a form of payment or the purchase of cryptocurrencies, DeFi protocol tokens and other digital assets; the availability and popularity of businesses that provide cryptocurrencies, DeFi protocol tokens and other digital assets and blockchain-related services; the maintenance and development of the open-source software protocol of various cryptocurrency or DeFi protocol networks; increased competition from other forms of cryptocurrency or payments services; global or regional political, economic or financial events and situations; expectations among cryptocurrencies, DeFi protocol tokens and other digital assets economy participants that the value of cryptocurrencies, DeFi protocol tokens and other digital assets will soon change; and fees associated with processing a cryptocurrency, DeFi protocol token or other digital asset transaction.

 

Cryptocurrencies, DeFi protocol tokens and other digital assets have historically experienced significant intraday and long-term price volatility. If cryptocurrency, DeFi protocol token and other digital asset markets continue to be subject to sharp fluctuations, shareholders may experience losses if they need to sell their Common Shares at a time when the price of cryptocurrencies, DeFi protocol tokens and other digital assets is lower than it was when they purchased their Common Shares. In addition, investors should be aware that there is no assurance that cryptocurrencies, DeFi protocol tokens and other digital assets will maintain their long-term value in terms of future purchasing power or that the acceptance of cryptocurrencies, DeFi protocol tokens and other digital assets payments by mainstream retail merchants and commercial businesses will continue to grow.

 

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Cybersecurity Threats, Security Breaches and Hacks

 

As with any other computer code, flaws in cryptocurrency and DeFi protocol source code have been exposed by certain malicious actors. Several errors and defects have been found and corrected, including those that disabled some functionality for users and exposed users’ information. Discovery of flaws in or exploitations of the source code that allow malicious actors to take or create cryptocurrencies and / or DeFi protocol tokens can occur.

 

Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin and other cryptocurrency exchange market since the launch of the Bitcoin Network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm the Company’s business operations or result in loss of the Company’s assets. Any breach of the Company’s infrastructure could result in damage to the Company’s reputation and reduce demand for the Common Shares, resulting in a reduction in the price of the Common Shares. Furthermore, the Company believes that if its assets grow, it may become a more appealing target for security threats, such as hackers and malware.

 

Any security procedures implemented cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by the Company. The security procedures and operational infrastructure of the Company may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s cryptocurrency account, private keys, data or cryptocurrencies. Additionally, outside parties may attempt to fraudulently induce employees of the Company to disclose sensitive information in order to gain access to the Company’s infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of one of the Company’s accounts occurs, the market perception of the effectiveness of the Company could be harmed.

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack

 

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Cryptocurrency Exchanges and other Trading Venues are Relatively New

 

The Company and its affiliates manages its holdings of cryptocurrency, DeFi protocol tokens and other digital assets through cryptocurrency exchanges. In particular, DeFi relies on cryptocurrency exchanges to be able to buy and sell the digital assets which its ETPs track. To the extent that cryptocurrency exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, this could result in a reduction in cryptocurrency prices. Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, derivatives and other currencies. For example, in the past, a number of cryptocurrency exchanges have been closed due to fraud, business failure or security breaches. In many of these instances, the customers of these exchanges were not compensated or made whole for the partial or complete losses of their account balances in such exchanges. While smaller exchanges are less likely to have the infrastructure and capitalization that provide larger exchanges with additional stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information, or gain access to private computer systems) and may be more likely to be targets of regulatory enforcement action.

 

Regulatory Risks

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company.

 

Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation. On August 24, 2017 and June 11, 2018, the Canadian Securities Administrators published CSA Staff Notice 46-307 – Cryptocurrency Offerings and CSA Staff Notice 46- 308 – Securities Law Implications for Offerings of Tokens, respectively, each providing guidance on whether token offerings are subject to Canadian securities laws.

 

While the Company does not have operations in the United States, the Company reviews development of the cryptocurrency regulatory environment in the United States on an ongoing basis due to the proximity of United States to Canada. In comparison to traditional securities or commodities markets, U.S. law and regulation remains thinly developed with respect to financial services provided to the cryptocurrency and crypto asset markets. Although recent years have seen some guidance emerge with respect to the question of whether a crypto asset constitutes a security for certain purposes under U.S. law, there remains little or no clear legal authority or established practice with respect to the application to crypto assets of concepts like staking and lending of cryptocurrency, fungibility, settlement, trade execution and reporting, collateralization rehypothecation, custody, repo, margin, restricted securities, short sales, bankruptcy and insolvency and many others. Some or all of these concepts may be needed for crypto-related marketplaces to continue to grow, mature and attract institutional participants; there can be no assurances that rules and practices for such concepts will develop in the United States in a manner that is timely, clear, favorable to the Company or compatible with other jurisdictions’ regimes in which the Company operates. Furthermore, to the extent the Company offers any of these financial services, emerging regulation or enforcement activity may have a material impact on the Company’s ability to continue providing such service thereby affecting the Company’s revenues and profitability as well as its reputation and resources.

 

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Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. By extension, similar actions by other governments may result in the restriction of the acquisition, ownership, holding, selling, use or trading in the common shares of the Company’s common shares. Such a restriction could result in the Company liquidating its cryptocurrency investments at unfavorable prices and may adversely affect the Company’s shareholders.

 

DeFi Venture Portfolio Exposure

 

Given the nature of the Company’s DeFi Venture activities, the results of operations and financial condition of the Company are dependent upon the market value of the securities, tokens and cryptocurrencies that comprise DeFi Venture’s portfolio assets. Market value can be reflective of the actual or anticipated operating results of companies or projects in the portfolio and/or the general market conditions that affect the technology, crypto and DeFi sectors. Various factors affecting these sectors could have a negative impact on the Company’s portfolio of investments and thereby have an adverse effect on its business. Additionally, the Company’s investments are mostly in early stage ventures that may never mature or generate adequate returns or may require a number of years to do so. Junior companies may never achieve commercial success. This may create an irregular pattern in the Company’s investment gains and revenues (if any) and an investment in the Company’s securities may only be suitable for investors who are prepared to hold their investment for a long period of time. Macro factors such as commodity prices, the growth and decline of disruptive technologies, including DeFi technologies, and global political and economic conditions could have an adverse effect on the mining, technological and Defi sectors, thereby negatively affecting the Company’s portfolio of investments. Company and project-specific risks, such as the risks associated with emerging companies and project in the technology, crypto and DeFi sectors generally, could have an adverse effect on one or more of the investments in the portfolio at any point in time. Company, project and industry-specific risks that materially adversely affect the Company’s investment portfolio may have a materially adverse impact on operating results.

 

Banks May Cut off Banking Services to Businesses that Provide Cryptocurrency-related Services

 

A number of companies that provide cryptocurrency-related services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, a number of such companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to cryptocurrency related companies or companies that accept cryptocurrencies for a number of reasons, such as perceived compliance risks or costs. The difficulty that many businesses that provide cryptocurrency-related services have and may continue to have in finding banks willing to provide them with bank accounts and other banking services may be currently decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies or could decrease its usefulness and harm its public perception in the future. Similarly, the usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks were to close the accounts of many or of a few key businesses providing cryptocurrency-related services. This could decrease the market prices of cryptocurrencies and adversely affect the value of the Company’s cryptocurrency inventory.

 

Impact of Geopolitical Events

 

Crises may motivate large-scale purchases of cryptocurrencies which could increase the price of cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of the Company’s cryptocurrency holdings. The possibility of large-scale purchases of cryptocurrencies in times of crisis may have a short-term positive impact on the prices of same. Future geopolitical crises may erode investors’ confidence in the stability of cryptocurrencies and may impair their price performance which would, in turn, adversely affect the Company’s cryptocurrency holdings.

 

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As an alternative to fiat currencies that are backed by central governments, cryptocurrencies are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally. Large-scale sales of cryptocurrencies would result in a reduction in their market prices and adversely affect the Company’s operations and profitability.

 

Further Development and Acceptance of Cryptocurrency and DeFi Networks

 

The further development and acceptance of cryptocurrency and other cryptographic and algorithmic protocols governing the issuance of transactions in cryptocurrencies and DeFi Protocols, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of such networks may adversely affect the value of the corresponding cryptocurrencies and DeFi Protocol tokens, and thus may adversely affect the Company’s operations. The factors affecting the further development of the industry, include, but are not limited to the following:

 

●continued worldwide growth in the adoption and use of cryptocurrencies and DeFi;

 

●governmental and quasi-governmental regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency and DeFi systems;

 

●changes in consumer demographics and public tastes and preferences;

 

●the maintenance and development of the open-source software protocol of relevant networks;

 

●the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

●general economic conditions and the regulatory environment relating to digital assets and decentralized finance; and

 

●negative consumer sentiment and perception of cryptocurrencies.

 

Currently, there is relatively small use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect the Company’s operations, investment strategies, and profitability.

 

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As relatively new products and technologies, cryptocurrencies have not been widely adopted, for example as a means of payment for goods and services, by major retail and commercial outlets. Conversely, a significant portion of cryptocurrency demand is generated by speculators and investors seeking to profit from the short-term or long-term holding of cryptocurrencies. The relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services or other direct use cases that may arise. A lack of expansion by cryptocurrencies into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in their market prices, either of which could adversely impact the Company’s operations, investment strategies, and profitability. Further, if fees increase for recording transactions in the applicable Blockchain, demand for cryptocurrencies may be reduced and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the price of cryptocurrencies.

 

There are material risks and uncertainties associated with custodians of digital assets

 

We multiple custodians (or third-party “wallet providers”) to hold digital assets for our DeFi Ventures business line as well as for digital assets underlying Valour ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self- regulatory organizations. We could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. We may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the our execution of hedging ETPs, the value of our assets and the value of any investment in our common shares.

 

Risk of Loss, Theft or Destruction of Cryptocurrencies

 

There is a risk that some or all of the Company’s cryptocurrencies could be lost, stolen or destroyed. If the Company’s cryptocurrencies are lost, stolen or destroyed under circumstances rendering a party liable to the Company, the responsible party may not have the financial resources sufficient to satisfy the Company’s claim.

 

Irrevocability of Transactions

 

Bitcoin and most other cryptocurrency and DeFi protocol token transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies or DeFi protocol tokens may be irretrievable. Such transactions are not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of cryptocurrencies or a theft of cryptocurrencies generally will not be reversible and the Company may not be capable of seeking compensation for any such transfer or theft. To the extent that the Company is unable to seek a corrective transaction with the third party or is incapable of identifying the third party that has received the Company’s cryptocurrencies through error or theft, the Company will be unable to revert or otherwise recover incorrectly transferred cryptocurrencies. The Company will also be unable to convert or recover cryptocurrencies transferred to uncontrolled accounts.

 

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Potential Failure to Maintain the Cryptocurrency Networks

 

Many cryptocurrency networks, including the Bitcoin Network, operates based on an open-source protocol maintained by the core developers of such networks and other contributors. As such protocols are not sold and their uses do not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating such network protocols. Consequently, there is a lack of financial incentive for developers to maintain or develop such networks and the core developers may lack the resources to adequately address emerging issues with such network protocol. Although the many networks, including the Bitcoin Network, is currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. To the extent that material issues arise with the such network protocol and the core developers and opensource contributors are unable to address the issues adequately or in a timely manner, such networks and an investment in the Common Shares may be adversely affected.

 

Potential Manipulation of Blockchain

 

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains control of more than 50% of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter or manipulate the Blockchain on which the Bitcoin Network and most Bitcoin transactions rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new Bitcoins or transactions using such control. The malicious actor could “double-spend” its own Bitcoins (i.e., spend the same Bitcoins in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the processing power on the Bitcoin Network or the Bitcoin community did not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible. To the extent that the Bitcoin ecosystem, including the core developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin Network will increase.

 

Miners May Cease Operations

 

If the award of Bitcoins or other cryptocurrencies for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners in relevant networks, miners may cease expending processing power to solve blocks and confirmations of transactions on the Bitcoin Blockchain or other networks could be slowed. A reduction in the processing power expended by miners on the applicable blockchain network could increase the likelihood of a malicious actor or botnet obtaining control.

 

Risks Related to Insurance

 

The Company intends to insure its operations in accordance with technology industry practice. However, given the novelty of cryptocurrency mining and associated businesses, such insurance may not be available, may be uneconomical for the Company, or the nature or level may be insufficient to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the Company.

 

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Concentration of Investments

 

Other than as described herein, there are no restrictions on the proportion of the Company’s funds and no limit on the amount of funds that may be allocated to any particular investment. The Company may participate in a limited number of investments and, as a consequence, its financial results may be substantially adversely affected by the unfavorable performance of a single investment. Completion of one or more investments may result in a highly concentrated investment in a particular company, commodity or geographic area resulting in the performance of the Company depending significantly on the performance of such company, commodity or geographic area. As at June 30, 2024, the Company’s investments through its Defi Venture business arm comprise of $41,783,327 represented approximately 4.7% of the Company’s total assets.

 

We operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively. The cryptoeconomy is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. Our DeFi ETPs and DeFi Governance business line compete against several companies and expect that we will face even more competition in the future. These competitors could have various competitive advantages over us, including but not limited to:

 

●greater name recognition, longer operating histories, and larger market shares;

 

●larger sales and marketing budgets and organizations;

 

●more established marketing, banking, and compliance relationships;

 

●greater resources to make acquisitions;

 

●lower labor, compliance, risk mitigation, and research and development costs;

 

●operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and

 

●substantially greater financial, technical, and other resources.

 

If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results, and financial condition could be adversely affected.

 

Harm to our brand and reputation could adversely affect our business.

 

Our reputation and brand may be adversely affected by complaints and negative publicity about us, even if factually incorrect or based on isolated incidents. Damage to our brand and reputation may be caused by:

 

●cybersecurity attacks, privacy or data security breaches, or other security incidents;

 

●complaints or negative publicity about us, our ETPs, our management team, our other employees or contractors or third-party service providers;

 

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●actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by our management team, our other employees or contractors or third-party service providers;

 

●unfavorable media coverage;

 

●litigation involving, or regulatory actions or investigations into our business;

 

●a failure to comply with legal, tax and regulatory requirements;

 

●any perceived or actual weakness in our financial strength or liquidity;

 

●any regulatory action that results in changes to or prohibits certain lines of our business;

 

●a failure to operate our business in a way that is consistent with our values and mission;

 

●a sustained downturn in general economic conditions; and

 

●any of the foregoing with respect to our competitors, to the extent the resulting negative perception affects the public’s perception of us or our industry as a whole.

 

Private Issuers and Illiquid Securities

 

Through its DeFi Ventures business line, the Company invests in securities and / or digital assets of private issuers or projects. These may be subject to trading restrictions, including hold periods, and there may not be any market for such securities or digital assets. These limitations may impair the Company’s ability to react quickly to market conditions or negotiate the most favourable terms for exiting such investments. Investments in private issuers or projects are subject to a relatively high degree of risk. There can be no assurance that a public market will develop for any of the Company’s private investments, or that the Company will otherwise be able to realize a return on such investments.

 

The value attributed to securities and / or digital assets of private issuers or projects will be the cost thereof, subject to adjustment in limited circumstances, and therefore may not reflect the amount for which they can actually be sold. Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a ready market had existed for the investments.

 

The Company may also invest in illiquid securities of public issuers. A considerable period of time may elapse between the time a decision is made to sell such securities and the time the Company is able to do so, and the value of such securities could decline during such period. Illiquid investments are subject to various risks, particularly the risk that the Company will be unable to realize its investment objectives by sale or other disposition at attractive prices or otherwise be unable to complete any exit strategy. In some cases, the Company may be prohibited by contract or by law from selling such securities for a period of time or otherwise be restricted from disposing of such securities. Furthermore, the types of investments made may require a substantial length of time to liquidate.

 

The Company may also make direct investments in publicly traded securities that have low trading volumes. Accordingly, it may be difficult to make trades in these securities without adversely affecting the price of such securities.

 

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Cash Flow, Revenue and Liquidity

 

The Company’s revenue and cash flow is generated primarily from financing activities, proceeds from the disposition of investments, management fees of ETPs and staking and lending activities of cryptocurrencies and DeFi protocol tokens. The availability of these sources of income and the amounts generated from these sources depend upon various factors, many of which are outside of the Company’s direct control. The Company’s liquidity and operating results may be adversely affected if its access to the capital markets is hindered, whether as a result of a downturn in the market conditions generally or to matters specific to us, if the value of our investments decline, resulting in losses upon disposition, if there is low demand for our ETPs, resulting in lack of management fees received, and if rates provided by counterparties for staking and lending decrease.

 

Dependence on Management Personnel

 

The Company is dependent upon the efforts, skill and business contacts of key members of management, the Board and the Advisory Board, for among other things, the information and deal flow they generate during the normal course of their activities and the synergies that exist amongst their various fields of expertise and knowledge. Accordingly, the Company’s success may depend upon the continued service of these individuals who are not obligated to remain consultants to the Company. The loss of the services of any of these individuals could have a material adverse effect on the Company’s revenues, net income and cash flows and could harm its ability to maintain or grow existing assets and raise additional funds in the future.

 

Sensitivity to Macro-Economic Conditions

 

Due to the Company’s focus on decentralized finance industry, the success of the Company’s investments is interconnected to the growth of disruptive technologies. The Company may be adversely affected by the falling share prices of the securities of investee companies, cryptocurrencies, DeFi Protocol tokens and other crypto assets, as the trading price for the Common Shares may reflect the estimated aggregate value of the Company’s portfolio of investments and assets under management. The factors affecting current macro-economic conditions are beyond the control of the Company.

 

Available Opportunities and Competition for Investments

 

The success of the Company’s DeFi Ventures line of business will depend upon: (i) the availability of appropriate investment opportunities; (ii) the Company’s ability to identify, select, acquire, grow and exit those investments; and (iii) the Company’s ability to generate funds for future investments. The Company can expect to encounter competition from other entities having similar investment objectives, including institutional investors and strategic investors. These groups may compete for the same investments as the Company, may be better capitalized, have more personnel, have a longer operating history and have different return targets. As a result, the Company may not be able to compete successfully for investments. In addition, competition for investments may lead to the price of such investments increasing which may further limit the Company’s ability to generate desired returns. There can be no assurance that there will be a sufficient number of suitable investment opportunities available to invest in or that such investments can be made within a reasonable period of time. There can be no assurance that the Company will be able to identify suitable investment opportunities, acquire them at a reasonable cost or achieve an appropriate rate of return. Identifying attractive opportunities is difficult, highly competitive and involves a high degree of uncertainty. Potential returns from investments will be diminished to the extent that the Company is unable to find and make a sufficient number of attractive investments.

 

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Share Prices of Investments

 

Investments in securities of public companies are subject to volatility in the share prices of the companies. There can be no assurance that an active trading market for any of the subject shares is sustainable. The trading prices of the subject shares could be subject to wide fluctuations in response to various factors beyond the Company’s control, including quarterly variations in the subject companies’ results of operations, changes in earnings, results of exploration and development activities, estimates by analysts, conditions in the mining, technological and cryptocurrency industries and general market or economic conditions. In recent years equity markets have experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on market prices, often unrelated to the operating performance of the specific companies. Such market fluctuations could adversely affect the market price of the Company’s investments.

 

Additional Financing Requirements

 

The Company anticipates ongoing requirements for funds to support its growth and may seek to obtain additional funds for these purposes through public or private equity, or debt financing. There are no assurances that additional funding will be available on acceptable terms, at an acceptable level or at all. Any additional equity financing may cause shareholders to experience dilution, and any debt financing would result in interest expense and possible restrictions on the Company’s operations or ability to incur additional debt. Any limitations on the Company’s ability to access the capital markets for additional funds could have a material adverse effect on its ability to grow its investment portfolio.

 

No Guaranteed Return

 

There is no guarantee that an investment in the Company’s securities will earn any positive return in the short term or long term. The task of identifying investment opportunities, monitoring such investments and realizing a significant return is difficult. Many organizations operated by persons of competence and integrity have been unable to make, manage and realize a return on such investments. In addition, past performance provides no assurance of future success.

 

Management of the Company’s Growth

 

Significant growth in the business, as a result of acquisitions or otherwise, could place a strain on the Company’s managerial, operational and financial resources and information systems. Future operating results will depend on the ability of senior management to manage rapidly changing business conditions, and to implement and improve the Company’s technical, administrative and financial controls and reporting systems. No assurance can be given that the Company will succeed in these efforts. The failure to effectively manage and improve these systems could increase costs, which could have a materially adverse effect on the Company’s operating results and overall performance.

 

Due Diligence

 

The due diligence process undertaken by the Company in connection with investment opportunities may not reveal all facts that may be relevant in connection with the investments. Before making investments, the Company conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, the Company may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, the Company relies on resources available including information provided by the target of the investment and, in some circumstances, third- party investigations. The due diligence process that is carried out with respect to investment opportunities may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful.

 

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Exchange Rate Fluctuations

 

A significant portion of the Company’s cryptocurrency, DeFi protocol tokens and digital asset holdings could be invested in United States dollar denominated investments or other foreign currencies. Changes in the value of the foreign currencies in which the Company’s investments are denominated could have a negative impact on the ultimate return on its investments and overall financial performance.

 

Non-controlling Interests

 

The Company’s investments include debt instruments and equity securities of companies that it does not control. Such instruments and securities may be acquired through trading activities or through purchases of securities directly from the issuer. These investments are subject to the risk that the company in which the investment is made may make business, financial or management decisions with which the Company does not agree or that the majority stakeholders or the management of the investee company may take risks or otherwise act in a manner that does not serve the Company’s interests. If any of the foregoing was to occur, the value of the Company’s investments could decrease and its financial condition, results of operations and cash flow could suffer as a result.

 

Changes in Legislation and Regulatory Risk

 

There can be no assurance that laws applicable to the Company or the businesses in which the Company invests, including securities legislation, will not be changed in a manner which adversely affects the Company. If such laws change, such changes could have a negative effect upon the value of the Company and upon investment opportunities available to the Company.

 

Risks Relating to the Financial Condition of the Company

 

Limited Operating History as a DeFi Company

 

The Company announced its focus in the DeFi industry on January 19, 2021. The Company’s limited operating history and the lack of meaningful historical financial data makes it difficult to fully evaluate the Company’s prospects. To the extent that the Company is able to execute its business plan, its business will be subject to all of the problems that typically affect a business with a limited operating history, such as unanticipated expenses, capital shortfalls, delays in program development and possible cost overruns. Investment in the securities of the Company is highly speculative given the nature of the Company’s business.

 

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The Company’s success will depend on many factors, including some which may be beyond its control or which cannot be accounted for at this time, such as the market’s acceptance of the products of its investee companies, the emergence of potential competitors, and changes in economic conditions. For the reasons discussed in this section and elsewhere in this AIF, it is possible that the Company may not generate revenues or profits in the foreseeable future or at all.

 

No History of Operating Revenue and Cash Flow

 

The Company is dependent on financings and future cash flows to meet its obligations. The future performance of the business and the ability of the Company’s subsidiaries to provide the Company with payments may be constrained by factors such as, among others: success of the Company’s corporate strategy, economic downturns; technological and regulatory changes; the cash flows generated by operations, investment activities and financing activities; and the level of taxation, particularly corporate profits and withholding taxes. If the Company is unable to generate sufficient cash from operations, the Company may be required to incur indebtedness, raise funds in a public or private equity or debt offering, or sell some or all of its assets. There can be no assurance that any such financing will be available on satisfactory terms or that it will be sufficient.

 

The Company may be subject to limitations on the repatriation of earnings in each of the countries where the Company, including its investee companies, do business. In particular, there may be significant withholding taxes applicable to the repatriation of funds from foreign countries to Canada. There can be no assurance that changes in regulations, including tax treaties, in and among the relevant countries where the Company or its investee companies do business will not take place, and if such changes occur, they may adversely impact the Company’s ability to receive sufficient cash payments from its subsidiaries.

 

Insufficient Cash Flow and Funds in Reserve

 

The Company’s cash flow and funds in reserve may not be sufficient to fund its ongoing activities at all times and from time to time and it may require additional financing in order to carry out its activities. In addition, the Company may incur major unanticipated liabilities or expenses. Although the Company has been successful in the past in financing its activities, there can be no assurance that the Company will be able to obtain additional financing on commercially acceptable terms. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of Company. There is risk that if the economy and banking industry experienced unexpected and/or prolonged deterioration, the Company’s access to additional financing may be affected. This may be further complicated by the limited market liquidity for shares of smaller companies such as the Company, restricting access to some institutional investors. Due to uncertainty in the capital markets, the Company may from time to time have restricted access to capital and increased borrowing costs. To the extent that external sources of capital become limited, unavailable, or available on onerous terms, the Company’s ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition, results of operations and prospects may be affected materially and adversely as a result.

 

The Company, along with all other companies, may face reduced cash flow and restricted access to capital if the global economic situation deteriorates. A prolonged period of adverse market conditions may impede the Company’s ability to grow and complete additional acquisitions, if desired. In addition, a prolonged period of adverse market conditions may impede the Company’s ability to service any of its loans or arrange alternative financing when the existing loans become due. In each case, the Company’s business, financial condition, results of operations and prospects would be adversely affected.

 

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Conflicts of Interest may Arise

 

Certain current or future directors and officers of the Company and its subsidiaries may be shareholders, directors and officers of other companies that may operate in the same sectors as the Company. Such associations may give rise to conflicts of interest from time to time. The directors and officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in such conflict is required under the applicable corporate laws to disclose his or her interest and to abstain from voting on such matter.

 

Risks Relating to the Common Shares

 

Market Price of Common Shares may Experience Volatility

 

The market price of the Common Shares has been volatile in the past and may continue to be volatile. The market price is, and could be, subject to wide fluctuations due to a number of factors, including actual or anticipated fluctuations in the Company’s results of operations, changes in estimates of its future results of operations by management or securities analysts, market rumours, investments or divestments by the Company or its competitors and general industry changes.

 

Many of the factors that could affect the market price of the Common Shares are outside of the Company’s control. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of the Common Shares. The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of the Common Shares.

 

Shareholders’ Interest in the Company may be Diluted in the Future

 

If the Company raises additional funding by issuing additional equity securities, or securities convertible into equity, such financing may substantially dilute the interests of shareholders.

 

The Company has Never Paid Dividends and may not do so in the Foreseeable Future

 

The Company has never paid cash dividends on its Common Shares. Currently, the Company intends to retain its future earnings, if any, to fund the development and growth of its business, and does not anticipate paying any cash dividends on its Common Shares in the near future. As a result, shareholders will have to rely on capital appreciation, if any, to earn a return on investment in any Common Shares in the foreseeable future.

 

Multilateral Instrument 52-109 Disclosure

 

 

In accordance with National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, management is responsible for the establishment and maintenance of DC&P and ICFR. The Company’s management, including the CEO and CFO, has designed the DC&P and ICFR based on the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO 2013 Framework”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.

 

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Regardless of how well the DC&P and ICFR are designed, internal controls have inherent limitations and can only provide reasonable assurance that the controls are meeting the Corporation’s objectives in providing reliable financial reporting information in accordance with IFRS. These inherent limitations include, but are not limited to, human error and circumvention of controls and as such, there can be no assurance that the controls will prevent or detect all misstatements due to errors or fraud, if any.

 

The CEO and the CFO have concluded that the Corporation’s ICFR were not effective as of June 30, 2024 because of the material weakness identified above under the headings “Change in Valuation and Classification of Equity Investments in Digital Assets, at FVTPL” and “June 2023 restatement.”

 

Remediation of Material Weakness in ICFR

 

We continue to work to fully remediate the material weakness and are taking steps to strengthen our internal control over financial reporting. We are taking appropriate and reasonable steps to remediate this material weakness through the planned implementation of a new ERP system and hiring of additional staff for our finance department.

 

Management expects to continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of our internal control over financial reporting. We believe these measures, and others that may be implemented, will remediate the material weakness in ICFR described above.

 

The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Material Accounting Policies

 

 

The Company’s material accounting policies can be found in Note 2 of its annual audited financial statements for the years ended December 31, 2023 and 2022.

 

Critical Accounting Estimates and Assumptions

 

 

The preparation of the Company’s Consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods.

 

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Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the Consolidated financial statements are as follows:

 

Accounting for digital assets

 

The IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2 - Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss. Digital currencies consist of cryptocurrency denominated assets (see Note 7) and are included in current and long-term assets. Digital currencies are carried at their fair value determined by the spot rate less costs to sell. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase other exchanges consistent with the final terms for each ETP. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Vomex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

Fair value of financial derivatives

 

Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. Valuation technique such as Black Scholes model is used to value these instruments.

 

Fair value of investment in securities not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values.

 

Share-based payments

 

The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share- based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk-free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense.

 

Business combinations and goodwill

 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Goodwill is assessed for impairment annually.

 

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Contingencies

 

Estimated useful lives and impairment considerations

 

Amortization of intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

 

Impairment of non-financial assets

 

The Company’s non-financial assets include prepaid expenses, digital assets excluding USDC, equipment and right of use assets, intangibles and goodwill. Impairment of these non-financial assets exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. See Note 8 for the discussion regarding impairment of the Company’s non-financial assets.

 

Functional currency

 

The functional currency of the Company has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and the currencies in which expenses are settled, by each entity, as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency.

 

Assessment of transaction as an asset purchase or business combination

 

Significant acquisitions require judgements and estimates to be made at the date of acquisition in relation to determining the relative fair value of the allocation of the purchase consideration over the fair value of the assets. The information necessary to measure the fair values as at the acquisition date of assets acquired requires management to make certain judgements and estimates about future performance of these assets.

 

Control

 

Significant judgment is involved in the determination whether the Company controls under IFRS 10. The Company is deemed to control an investee when it demonstrates: power over the investee, exposure, or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. There is judgement required to determine whether these criterions are met. The Company determined it controlled Valour Digital Securities Limited through its role as arranger.

 

Fair value of equity investment not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values.

 

51

Exhibit 99.136

 

NOTICE TO READER

 

During our audit of the Fiscal 2024 Financial Statements, we determined that locked tokens held by the Company were incorrectly accounted for in the Company’s September 30, 2024 financial statements.

 

The Company has re-filed is September 30, 2024 interim condensed consolidated financial statements (the “Refiled Q3 2024 FS”) to apply a discount for lack of marketability (“DLOM”) and adjust the current/non-current classification of its investments in equity investments in digital assets at fair value through profit and loss. The re-filed financial statements include the following adjustments: a) application of a DLOM to reduce total assets and equity by $102,549,835 b) reclassification of $155,051,353 of current assets to non-current assets c) increase in the three and nine months ended September 30, 2024 net loss of $3,892,283 and $102,549,835 due to the application of the DLOM.

 

These revised financial statements replace and supersede the original financial statements previously filed on SEDAR+.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMENDED AND RESTATED CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

 

 

 

For the three and nine months ended September 30, 2024 and 2023

 

(expressed in Canadian dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

 

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

 

The Company’s independent auditor has not performed a review of these condensed consolidated interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada (CPA Canada) for a review of interim financial statements by an entity’s auditor.

 

 

 

 

DeFi Technologies Inc.

 

Table of Contents

 

Condensed consolidated interim statements of financial position 1
   
Condensed consolidated interim statements of operations and comprehensive income (loss) 2
   
Condensed consolidated interim statements of cash flows 3
   
Condensed consolidated interim statements of changes in equity 4
   
Notes to the condensed consolidated interim financial statements 5-47

 

i

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Financial Position

(Expressed in Canadian dollars)

 

 

      September 30,
2024		   December 31,
2023		 
   Note  $   $ 
      (Restated -
see note 27)		     
Assets           
Current           
Cash and cash equivalents  3,18   20,702,196    6,727,482 
Amounts receivable  5,18   1,081,075    54,036 
Prepaid expenses  6   4,066,680    1,509,824 
Digital assets  7,18   226,655,398    188,342,579 
Digital assets loaned  7   38,660,569    270,362,684 
Digital assets staked  7   164,256,864    30,516,888 
Equity investments in digital assets, at FVTPL  25,28   119,046,980    - 
Total current assets      574,469,762    497,513,493 
Private investments, at fair value through profit and loss  4,18,21   44,351,316    43,540,534 
Digital assets  7   754,857    643,487 
Equity investments in digital assets, at FVTPL  25,28   155,051,353    - 
Equipment      748    7,679 
Intangible assets  8,9   2,432,963    3,542,888 
Goodwill  8,9   49,348,414    46,712,027 
Total assets      826,409,413    591,960,108 
Liabilities and shareholders’ equity             
Current liabilities             
Accounts payable and accrued liabilities  10,18,21   5,228,686    9,174,846 
Loans payable  11,18   13,499,000    56,210,709 
ETP holders payable  12,18   770,485,178    508,130,490 
Deferred revenue      548,262    - 
Total current liabilities      789,761,126    573,516,045 
Shareholders’ equity             
Common shares  16(b)   182,702,414    170,687,476 
Preferred shares      4,321,350    4,321,350 
Share-based payments reserves  17   41,699,333    28,631,887 
Accumulated other comprehensive income      (3,743,605)   (1,652,547)
Non-controlling interest      (380)   (4,871)
Deficit      (188,330,825)   (183,539,232)
Total equity      36,648,287    18,444,063 
Total liabilities and equity      826,409,413    591,960,108 
Nature of operations and going concern  1          
Commitments and contingencies  22          

 

Approved on behalf of the Board of Directors:

 

“Olivier Roussy Newton”   “Stefan Hascoet”
Director   Director

 

See accompanying notes to these condensed consolidated interim financial statements

 

1

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)

(Expressed in Canadian dollars)

 

 

      Three months ended September 30,   Nine months ended September 30 
      2024   2023   2024   2023 
   Note  $   $   $   $ 
      (Restated - see note 27)   (Restated - see Note 26)   (Restated - see note 27)   (Restated - see Note 26) 
Revenues                   
Realized and net change in unrealized gains and (losses) on digital assets  13   33,955,436    (11,096,160)   180,223,680    39,319,425 
Realized and net change in unrealized gains and (losses) on ETP payables  14   (56,506,455)   16,105,048    (175,665,345)   (40,424,382)
Staking and lending income      8,794,327    746,871    22,865,351    2,083,346 
Management fees      2,069,013    243,845    5,946,327    703,538 
Research revenue      261,741    -    1,102,192    - 
Node revenue      182    3,280    4,891    8,256 
Realized gain (loss) on investments  4   -    (658)   634,271    (4,683)
Unrealized gain (loss) on investments  4   2,144,9401,217         (353,478)   316,080 
Unrealized gain on equity investments  8   29,191,921    -    14,738,452    - 
Interest income      2,756    552    4,268    809 
Total revenues      19,913,861    6,003,995    49,500,609    2,002,389 
                        
Expenses                       
Operating, general and administration  15,2   6,270,895    3,246,755    39,751,013    7,118,691 
Share based payments  1   11,962,871    387,329    17,014,376    1,830,209 
Depreciation - equipment  17   1,601    3,236    6,929    9,709 
Amortization - intangibles  9   537,546    509,575    1,568,925    1,528,725 
Finance costs      783,865    1,082,576    3,450,634    2,644,105 
Transaction costs      1,989,609    164,900    3,569,813    484,619 
Foreign exchange (gain) loss      (22,650,847)   3,526,454    (15,509,641)   8,280,483 
Impairment loss  9   -    -    4,962,021    - 
Total expenses      (1,104,460)   8,920,825    54,814,070    21,896,541 
Income (loss) before other item      21,018,321    (2,916,830)   (5,313,461)   (19,894,152)
Loss on settlement of debt      -    26,389    -    (172,093)
Net income (loss) for the period      21,018,321    (2,890,441)   (5,313,461)   (20,066,245)
Other comprehensive (loss)                       
Foreign currency translation (loss)      (932,468)   (1,829,345)   (2,091,058)   (102,841)
Net income (loss) and comprehensive income (loss) for the period      20,085,853    (4,719,786)   (7,404,519)   (20,169,086)
                        
Net income (loss) attributed to:                       
Owners of the parent      21,018,244    (2,891,620)   (5,317,952)   (20,067,424)
Non-controlling interests      77    1,179    4,491    1,179 
       21,018,321    (2,890,441)   (5,313,461)   (20,066,245)
                        
Net income (loss) and comprehensive income (loss) attributed to:                       
Owners of the parent      20,085,776    (4,720,965)   (7,409,010)   (20,170,265)
Non-controlling interests      77    1,179    4,491    1,179 
       20,085,853    (4,719,786)   (7,404,519)   (20,169,086)
                        
Income (loss) per share                       
Basic      0.07    (0.01)   (0.02)   (0.09)
Diluted  24   0.06    (0.01)   (0.02)   (0.09)
                        
                        
Weighted average number of shares outstanding:                       
Basic      298,101,066    224,661,137    291,401,579    223,084,360 
Diluted  24   355,303,374    224,661,137    291,401,579    223,084,360 

 

See accompanying notes to these condensed consolidated interim financial statements

  

2

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in Canadian dollars)

 

 

      Nine months ended September 30, 
      2024   2023 
   Note  $   $ 
      (Restated - see note 27)   (Restated - See Note 25) 
Cash (used in) provided by operations:           
Net Income (loss) for the period     $(5,313,461)  $(20,066,245)
Adjustments to reconcile net (loss) income to cash (used in) operating activities:             
Share-based payments  17   17,014,376    1,830,209 
Loss on debt for shares      -    172,093 
Impairment loss  9   4,962,021    - 
Interest expense      -    2,644,105 
Interest income      -    (2,644,104)
Depreciation - equipment      6,929    9,709 
Amortization - Intangible asset  9   1,568,925    1,528,725 
Realized loss on investments, net      (634,271)   4,683 
Unrealized (gain) loss on investments, net      353,478    (316,080)
Realized and net change in unrealized (gains) and loss on digital assets  13   (180,223,680)   (39,319,425)
Realized and net change in unrealized (gains) and loss on ETP  14   175,665,345    40,424,382 
Unrealized gain on equity investments  26,28   (14,738,452)   - 
Staking and lending income      (22,865,351)   (2,083,346)
Management fees      (5,946,327)   (703,538)
Node revenue      (4,891)   (8,256)
Digital asset transaction costs      (2,725,932)   - 
Unrealized loss on foreign exchange      (987,614)   (342,028)
       (33,868,906)   (18,869,116)
Adjustment for:             
Purchase of digital assets      (347,279,352)   (88,193,590)
Disposal of digital assets      603,388,535    64,269,115 
Purchase of equity investments      (238,090,603)   - 
Purchase of investments      (1,360,400)   - 
Disposal of investments      752,230    12,407 
Change in amounts receivable      (923,514)   60,977 
Change in prepaid expenses and deposits      (2,535,408)   147,418 
Change in accounts payable and accrued liabilities      (3,948,356)   2,533,457 
Change in deferred revenue      195,036    - 
Net cash (used in) operating activities      (23,670,738)   (40,039,332)
Investing activities             
Cash received from acquisition of subsidiary      319,643    - 
Net cash provided by investing activities      319,643    - 
Financing activities             
Proceeds from ETP holders      489,877,373    150,736,395 
Payments to ETP holders      (409,290,734)   (117,547,052)
Loan Payable      -    4,260,870 
Loan repaid  11   (43,871,750)   - 
Proceeds from option exercises  17   1,051,950    - 
Proceeds from exercise of warrants  17   1,505,712    - 
NCIB  16   (2,025,315)   - 
Net cash provided by financing activities      37,247,236    37,450,213 
              
Effect of exchange rate changes on cash and cash equivalents      78,573    (172,567)
Change in cash and cash equivalents      13,974,714    (2,761,686)
Cash, beginning of year      6,727,482    4,906,165 
Cash and cash equivalents, end of period     $20,702,196   $2,144,479 

 

See accompanying notes to these condensed consolidated interim financial statements

 

3

 

 

DeFi Technologies Inc.

Condensed Consolidated Interim Statements of Changes in Equity

(Expressed in Canadian dollars)

 

 

                   Share-based payments       Accumulated             
   Number of Common Shares   Common Shares   Number of Preferred Shares   Preferred Shares   Options   Deferred Shares Unit (DSU)   Treasury  shares   Warrants   Share-based Payments Reserve   other comprehensive income   Non-controlling  interest   Deficit   Total 
Balance, December 31, 2023   276,658,208   $170,687,476    4,500,000   $4,321,350   $17,968,263   $8,040,660   $27,453   $2,595,513   $28,631,889    (1,652,548)   (4,871)   (183,539,232)   18,444,063 
Acquisition of Reflxivity   5,000,000    3,100,000    -    -    -    -    -    -    -    -    -    -    3,100,000 
Acquisition of Solana IP   7,297,090    4,962,021    -    -    -    -    -    -    -    -    -    -    4,962,021 
Warrants exercised   6,112,789    1,956,068    -    -    -    -    -    (450,356)   (450,356)   -    -    -    1,505,713 
Option exercised   2,692,500    1,907,569    -    -    (798,211)   -    -    -    (798,211)   -    -    -    1,109,359 
DSU exercised   2,107,281    1,753,984    -    -    -    (1,712,377)   -    -    (1,712,377)   -    -    (57,412)   (15,805)
Option expiry   -    -    -    -    (874,004)   -    -    -    (874,004)   -    -    874,004    - 
DSU surrendered                            (111,983)             (111,983)             70,376    (41,608)
NCIB   (1,020,000)   (1,664,704)   -    -    -    -    -    -    -    -    -    (360,609)   (2,025,313)
Share-based payments   -    -    -    -    9,158,892    7,855,483    -    -    17,014,376    -    -    -    17,014,376 
Net inome (loss) and comprehensive income (loss) for the period   -    -    -    -    -    -    -    -    -    (2,091,058)   4,491    (5,317,952)   (7,404,519)
Balance, September 30, 2024   298,847,868   $182,702,414    4,500,000   $4,321,350   $25,454,941   $14,071,783   $27,453   $2,145,157   $41,699,333   $(3,743,605)  $(380)  $(188,330,825)  $36,648,287 
                                                                  
Balance, December 31, 2022   219,010,501   $166,151,401    4,500,000   $4,321,350   $20,317,312   $6,977,106   $27,453   $588,113   $27,909,984    (2,996,218)   -    (167,477,256)   27,909,261 
Shares issued for debt settlement   13,697,095    1,449,102    -    -    -    -    -    -    -    -    -    -    1,449,102 
Warrants expired   -    -    -    -    -    -    -    (423,261)   (423,261)   -    -    423,261    - 
Options cancelled   -    -    -    -    (4,050,502)   -    -    -    (4,050,502)   -    -    4,050,502    - 
DSUs exercised   500,000    107,500    -    -    -    (107,500)   -    -    (107,500)   -    -    -    - 
Share-based payments   -    -    -    -    321,543    1,508,667    -    -    1,830,210    -    -    -    1,830,210 
Net (loss) and comprehensive (loss) for the period   -    -    -    -    -    -    -    -    -    (102,841)   1,179    (20,067,424)   (20,169,086)
Balance, September 30, 2023   233,207,596   $167,708,003    4,500,000   $4,321,350   $16,588,353   $8,378,273   $27,453   $164,852   $25,158,931   $(3,099,059)  $1,179   $(183,070,917)  $11,019,487 

 

See accompanying notes to these condensed consolidated interim financial statements

 

4

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

1.Nature of operations and going concern

 

DeFi Technologies Inc. (the “Company” or “DeFi”), is a publicly listed company incorporated in the Province of British

 

Columbia and continued under the laws of the Province of Ontario. On January 21, 2021, the Company up listed its shares to NEO Exchange (“NEO”) under the symbol of “DEFI”. DeFi is a Canadian technology company bridging the gap between traditional capital markets and decentralized finance. The Company generates revenues through the issuance of exchange traded products that synthetically track the value of a single DeFi protocol, investments in various companies and leading protocols across the decentralized finance ecosystem to build a diversified portfolio of decentralized finance assets, providing premium membership for research reports to investors and offering node management of decentralized protocols to support governance, security and transaction validation. The Company’s head office is located at 198 Davenport Road, Toronto, Ontario, Canada, M5R 1J2.

 

These condensed consolidated interim financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. As at September 30, 2024, the Company has a working capital deficiency of $215,291,364 (December 31, 2023 - working capital (deficiency) of $(76,002,552)), including cash of $20,702,196 (December 31, 2023 - $6,727,482) and for the nine months ended September 30, 2024 had a net income and comprehensive income of $95,145,316 (for the nine months ended September 30, 2023 – net loss and comprehensive loss of $20,169,086). The Company’s current source of operating cash flow is dependent on the success of its business model and operations and there can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. Management believes its working capital will be sufficient to support activities for the next twelve months and expects to raise additional funds when required and available. There can be no assurance that funds will be available to the Company with acceptable terms or at all. These matters constitute material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.

 

These condensed consolidated interim financial statements do not reflect adjustments in the carrying value of the assets and liabilities, the reported revenues and expenses and the balance sheet classifications that would be necessary if the going concern assumption were not appropriate. These adjustments could be material.

 

International conflict and other geopolitical tensions and events, including war, military action, terrorism, trade disputes, and international responses thereto have historically led to, and may in the future lead to, uncertainty or volatility in global commodity and financial markets and supply chains. Russia’s invasion of Ukraine has led to sanctions being levied against Russia by the international community and may result in additional sanctions or other international action and the escalation of war between Israel and Hamas in Gaza, any of which may have a destabilizing effect on commodity prices, supply chains, and global economies more broadly. Volatility in digital asset prices and supply chain disruptions may adversely affect the Corporation’s business, financial condition, financing options, and results of operations. The extent and duration of the current Russia-Ukraine conflict or the Israel and Hamas conflict in Gaza and related international action cannot be accurately predicted at this time and the effects of such conflict may magnify the impact of the other risks, including those relating to digital asset price volatility and global financial conditions. The situation is rapidly changing and unforeseeable impacts, including on shareholders of the Corporation, and third parties with which the Corporation relies on or transacts, may materialize and may have an adverse effect on the Corporation’s business, results of operation, and financial condition.

 

5

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information

 

(a)Statement of compliance

 

These condensed consolidated interim financial statements of the Company were prepared in accordance with

 

International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB) applicable to the preparation of interim financial statements, including IAS 34 – Interim Financial Reporting. These condensed consolidated interim financial statements should be read in conjunction with the annual audited consolidated financial statements for the years ended December 31, 2023 and 2022, which was prepared in accordance with IFRS as issued by the IASB. These condensed consolidated interim financial statements of the Company were approved for issue by the Board of Directors on April 14, 2025.

 

(b)Basis of consolidation

 

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases. The condensed consolidated interim financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiary after eliminating inter-entity balances and transactions.

 

These condensed consolidated interim financial statements comprise the financial statements of the Company and its wholly owned subsidiaries Electrum Streaming Inc. (“ESI”), DeFi Capital Inc. (“DeFi Capital”), DeFi Holdings (Bermuda) Ltd. (“DeFi Bermuda”), Reflexivity LLC, Valour Inc., DeFi Europe AG, and Valour Digital Securities Limited. All material intercompany transactions and balances between the Company and its subsidiary have been eliminated on consolidation.

 

Intercompany balances and any unrealized gains and losses or income and expenses arising from intercompany transactions are eliminated in preparing the condensed consolidated interim financial statements.

 

(c)Basis of preparation and functional currency

 

These condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments and investments that have been measured at fair value. In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting except for cash flow information.

 

Foreign currency transactions are recorded at the exchange rate as at the date of the transaction. At each statement of financial position date, monetary assets and liabilities in foreign currencies other than the functional currency are translated using the year end foreign exchange rate. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities in foreign currencies other than the functional currency are translated using the historical rate. All gains and losses on translation of these foreign currency transactions and balances are included in the profit and loss. The functional currency for DeFi, DeFi Capital, and ESI is the Canadian dollar, and the functional currency for DeFi Bermuda, Reflexivity LLC, Valour Inc., DeFi Europe AG, and Valour Digital Securities Limited is US Dollars.

 

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

●assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet,

 

●income and expenses for each statement of loss and comprehensive loss are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

 

●all resulting exchange differences are recognized in other comprehensive loss.

 

6

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(c)Basis of preparation and functional currency (continued)

 

On consolidation, exchange differences arising from the translation of any net investment in foreign entities and of borrowings are recognized in other comprehensive loss. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

 

(d)Change in accounting policy

 

During the year ended December 31, 2023, the Company changed its accounting policy regarding the treatment for when the Company sells a portion of its digital asset holdings or when there’s redemptions of its ETP payables. The Company has adopted first in, first out (“FIFO”) to identify the units sold and determine the cost basis to use. As a result, for nine months ended September 30, 2023, realized gains (loss) on digital assets (decreased) increased by $(22,209,592) and unrealized gains (loss) increased (decreased) by $22,209,592. As a result, for the nine months ended September 30, 2023, realized gains (loss) on ETP payables (decreased) increased by $(39,544,917) and unrealized gains (loss) increased (decreased) by $39,544,917.

 

There were no changes to the condensed consolidated interim statements of financial position, condensed consolidated interim statements of operations and comprehensive (loss) or condensed consolidated interim statements of cash flow.

 

(e)Equity investments in digital assets at fair value through profit and loss (“FVTPL”)

 

Investments in equity instruments at fair value through profit or loss - Included in investments in equity instruments at fair value through profit or loss are investments in a US private company (LLC), and a U.S. Limited Liability Partnership via a Cayman Island domiciled feeder Limited Liability Partnership.

 

Management accounted for such investments at fair value to profit or loss under IFRS 9, because the Company does not exercise significant influence over the investee. The Company does not have any contractual right to appoint any representative to the investee’s board of directors. In addition, the Company does not have any participation in policymaking processes and does not have any material transactions with the investee. The fair value of investments in investment funds which are not quoted in an active market is determined by using net asset value as determined by the investment fund’s administrator and include a discount for lack of marketability (“DLOM”). Management deems the net asset value to be the fair value after considering key factors such as the liquidity of the investment fund or its underlying investments, any restrictions on redemptions and basis of accounting.

 

The Company classifies equity investments it intends to sell within twelve months as current and those where the expectation is to hold for periods longer than a year as non-current. These are included in Level 3 disclosed in Note 18.

 

(f)Significant accounting judgements, estimates and assumptions

 

The preparation of these condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the condensed consolidated interim financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.

 

7

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Significant accounting judgements, estimates and assumptions (continued)

 

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the condensed consolidated interim financial statements are as follows:

 

(i)Accounting for digital assets

 

Among its digital asset holdings, only USDC was classified by the Company as a financial asset. The rest of its digital assets were classified following the IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2 - Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss. Digital currencies consist of cryptocurrency denominated assets (see Note 7) and are included in current and long-term assets. Digital currencies are carried at their fair value determined by the spot rate less costs to sell. The cost to sell digital assets is nominal. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value is determined by taking the mid-point price at 17:30 CET digital asset exchanges consistent with the final terms for each exchange traded product

 

(“ETP”). The primary digital asset exchanges used to value digital assets are Kraken, Bitfinex, Binance, Coinbase and Bitstamp. Where digital assets held do not have pricing on these exchanges, other exchanges would be used. On all material coins, Kraken, Bitfinex, Coinbase and Bitstamp were used. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Volmex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com. The Company revalues its digital assets quarterly.

 

(ii)Accounting for ETP holder payables

 

Financial liabilities at fair value through profit or loss held includes ETP holders payable. Liabilities arising in connection with ETPs issued by the Company referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company elected not to designate this as a hedging instrument. The ETPS are actively traded on the Nordic Growth Market (“NGM”) and Germany Borse Frankfurt Zertifikate AG.

 

(iii)Fair value of financial derivatives

 

Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. Valuation technique such as Black Scholes model is used to value these instruments. Refer to Notes 4 and 18 for further details.

 

(iv)Fair value of investment in securities not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Refer to Notes 18, 24, and 25 for further details .

 

8

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Significant accounting judgements, estimates and assumptions (continued)

 

(v)Share-based payments

 

The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk-free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense.

 

(vi)Business combinations and goodwill

 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Goodwill is assessed for impairment annually.

 

(vii)Estimated useful lives and impairment considerations

 

Amortization of intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

 

(viii)Impairment of non-financial assets

 

The Company’s non-financial assets include prepaid expenses, digital assets excluding USDC, equipment and right of use assets, intangibles and goodwill. Impairment of these non-financial assets exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. See Note 9 for the discussion regarding impairment of the Company’s non-financial assets.

 

(ix)Functional currency

 

The functional currency of the Company has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and the currencies in which expenses are settled, by each entity, as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency.

 

(x)Assessment of transaction as an asset purchase or business combination

 

Assessment of a transaction as an asset purchase or a business combination requires judgements to be made at the date of acquisition in relation to determining whether the acquiree meets the definition of a business. The three elements of a business include inputs, processes and outputs. When the acquiree does not have outputs, it may still meet the definition of a business if its processes are substantive which includes assessment of whether the process is critical and whether the inputs acquired include both an organized workforce and inputs that the organized workforce could convert into outputs.

 

9

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

2.Material accounting policy information (continued)

 

(f)Significant accounting judgements, estimates and assumptions (continued)

 

(xi)Control

 

Significant judgment is involved in the determination whether the Company controls under IFRS 10. The Company is deemed to control an investee when it demonstrates: power over the investee, exposure, or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. There is judgement required to determine whether these criterions are met. The Company determined it controlled Valour Digital Securities Limited through its role as arranger.

 

(xii)Accounting for digital assets held as collateral

 

The Company has provided digital assets as collateral for loans provided by digital asset liquidity provider. These digital assets held as collateral are included with digital assets and valued at fair value consistent with the Company’s accounting policy for its digital assets. See note 2(e)(i).

 

(xiii)Valuation of Equity investments at FVTPL

 

Significant judgement is required in the determination of the fair value of the Company’s investments in Equity investments (collectively the “Funds”) in digital asset at FVTPL given the lock up periods applied to the digital cryptocurrencies owned by the Funds. The Company assesses the discount for lack of marketability applied by the Fund managers for reasonableness in their calculated net asset values. The Fund managers calculate the discount for lack of marketability (“DLOM”) using an option pricing model.

 

3.Cash and cash equivalents

 

   30-Sep-24   31-Dec-23 
Cash at banks  $5,905,973   $306,920 
Cash at brokers   13,348,952    6,417,725 
Cash at digital currency exchanges   1,447,271    2,837 
   $20,702,196   $6,727,482 

 

4.Investments, at fair value through profit and loss

 

At September 30, 2024, the Company’s investment portfolio consisted of ten private investments for a total estimated fair value of $44,351,316 (December 31, 2023 – nine private investments for a total estimated fair value of 43,540,534).

 

During the three and nine months ended September 30, 2024, the Company had a realized gain of $Nil and $634,271 and an unrealized gain/ (loss) of $2,144,940 and $(353,478) (September 30, 2023 – realized (loss) of ($658) and $(4,683) and an unrealized gain of $1,217 and $316,080) on private and public investments.

 

10

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

4.Investments, at fair value through profit and loss (continued)

 

Private Investments

 

At September 30, 2024, the Company’s ten private investments had a total fair value of $44,351,316.

 

Private Issuer  Note  Security description  Cost   Estimated Fair Value   %
of FV		 
3iQ Corp.     61,712 common shares  $86,319   $409,861         1.0%
Amina Bank AG  (i)  3,906,250 non-voting shares   34,498,750    40,090,000    90.4%
Brazil Potash Corp.  (i)  404,200 common shares   1,998,668    1,697,640    3.8%
Earnity Inc.     85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation     201,633 preferred shares   630,505    675,017    1.5%
Neuronomics AG     724 common shares   128,898    128,898    0.3%
SDK:meta, LLC     1,000,000 units   3,420,000    -    0.0%
Skolem Technologies Ltd.     16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation     Rights to certain preferred shares and warrants   37,809    -    0.0%
ZKP Corporation  (i)  370,370 common shares   1,385,800    1,349,900    3.0%
Total private investments        $42,495,183   $44,351,316    100.0%

 

(i) Investments in related party entities  

 

At December 31, 2023, the Company’s nine private investments had a total fair value of $43,540,534.

 

Private Issuer  Note  Security description  Cost   Estimated Fair Value   %
of FV		 
3iQ Corp.     187,007 common shares  $261,605   $1,216,890    2.8%
Brazil Potash Corp.  (i)  404,200 common shares   1,998,668    2,138,380    4.9%
Earnity Inc.     85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation     201,633 preferred shares   630,505    661,366    1.5%
Neuronomics AG     724 common shares   128,898    128,898    0.3%
SDK:meta, LLC     1,000,000 units   3,420,000    -    0.0%
Amina Bank AG (formerly SEBA Bank AG)  (i)  3,906,250 non-voting shares   34,498,750    39,395,000    90.5%
Skolem Technologies Ltd.     16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation     Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments        $41,284,669   $43,540,534    100.0%

 

5.Amounts receivable

 

   30-Sep-24   31-Dec-23 
Other receivables  $1,081,075   $54,036 

 

6. Prepaid expenses            

 

   30-Sep-24   31-Dec-23 
Prepaid insurance  $65,498   $42,335 
Prepaid expenses   4,001,182    1,467,489 
   $4,066,680   $1,509,824 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked

 

As at September 30, 2024, the Company’s digital assets consisted of the below digital currencies, with a fair value of $430,327,688 (December 31, 2023 - $489,865,638). Digital currencies are recorded at their fair value on the date they are acquired and are revalued to their current market value at each reporting date. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase and other exchanges consistent with the final terms for each ETP. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Volmex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

11

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The Company’s holdings of digital assets consist of the following:

 

   September 30,
2024		       December 31, 2023     
   Quantity   $   Quantity   $ 
Binance Coin   1,948.6266    1,514,391    236.4452    97,710 
Bitcoin   2,721.5599    211,173,493    2,271.3329    108,983,280 
Ethereum   21,914.1061    77,140,001    21,537.4066    65,956,320 
EthereumPoW   0.2000    1    0.2000    1 
Cardano   64,517,806.7026    33,286,706    54,210,783.1700    43,306,306 
Polkadot   2,282,295.1010    14,074,031    1,666,147.7880    18,371,365 
Solana   193,805.63    48,236,887    1,682,112.49    235,733,109 
Shyft   4,879,446.3958    49,122    4,539,407.2792    78,314 
Uniswap   378,293.1647    3,918,585    296,352.0602    2,932,687 
USDC        688         673 
USDT        4,714,736         111,856 
Litecoin   -    -    17.3931    1,719 
Doge   413,726.4335    66,795    220,474.3947    26,652 
Cosmos   32,429.79    212,649.90    11,700.0000    171,497 
Avalanche   63,420.9992    2,420,600    248,151.6644    13,148,105 
Matic   15,724.8867    8,544    0.0003    - 
Ripple   9,316,964.1025    7,844,255    76,029.7317    62,737 
Enjin   88,747.8806    20,582    432,342.3671    223,237 
Tron   152,413.2883    32,919    118,490.5094    16,581 
Terra Luna   204,635.1265    -    202,302.5360    - 
Shiba Inu   2,489,300,000.0000    60,486    -    - 
ICP   1,146,727.9192    14,186,408    -    - 
Core   3,163,216.1559    4,498,045           
AAVE   1.5265    323    -    - 
LINK   57,113.7798    932,996    -    - 
TON   209,740.0000    1,652,901    -    - 
NEAR   381,853.2000    2,773,143    -    - 
AVA   1,000.0000    683    -    - 
HARB   9,420,895.2800    752,862    -    - 
Current   2,586,246,842    429,572,831    63,728,357    489,222,151 
Blocto   272,913.4228    1,009    264,559.703    10,503 
Boba Network   250,000.0000    -    250,000.00    - 
Clover   480,000.0000    20,473    450,000.00    19,831 
Maps   285,713.0000    -    285,713.000    - 
Mobilecoin   2,855.5045    -    2,855.5045    - 
Oxygen   400,000.0000    -    400,000.000    - 
Pyth   2,500,000.0000    635,402    2,500,000.00    503,669 
Saffron.finance   86.2100    2,695    86.21    2,619 
Sovryn   15,458.9500    13,107    15,458.95    12,863 
Wilder World   148,810.0000    82,171    148,810.00    94,002 
Volmex Labs   2,925,878.0000    -    2,925,878.0000    - 
Long-Term        754,857         643,487 
Total Digital Assets        430,327,688         489,865,638 
Current Digital Assets                    
Digital assets        226,655,398         188,342,579 
Digital assets loaned        38,660,569         270,362,684 
Digital assets staked        164,256,864         30,516,888 
Total Current Digital Assets        429,572,831         489,222,151 
Non-Current Digital Assets                    
Digital Assets        754,857         643,487 
Total Non-Current Digital Assets        754,857         643,487 
Total Digital Assets        430,327,688         489,865,638 

 

12

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The continuity of digital assets for the nine months ended September 30, 2024 and year ended December 31, 2023:

 

   September 30,
2024		   December 31,
2023		 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   347,279,352    318,355,007 
Digital assets disposed   (603,388,535)   (244,656,544)
Digital assets earned from staking, lending and fees   22,870,243    3,554,587 
Realized gain (loss) on digital assets   295,685,477    (1,017,247)
Net change in unrealized gains and losses on digital assets   (115,461,797)   324,976,115 
Foreign exchange gain (loss)   (6,522,690)   (15,548,363)
   $430,327,688   $489,865,638 
Current Digital Assets          
Digital assets   226,655,398    188,342,579 
Digital assets loaned   38,660,569    270,362,684 
Digital assets staked   164,256,864    30,516,888 
Total Current Digital Assets  $429,572,831   $489,222,151 
Non-Current Digital Assets          
Digital Assets   754,857    643,487 
Total Non-Current Digital Assets  $754,857   $643,487 
Total Digital Assets  $430,327,688   $489,865,638 

 

Digital assets held by counterparty for the nine months ended September 30, 2024 and year ended December 31, 2023 is the following:

  

   September 30,
2024		   December 31,
2023		 
Counterparty A  $74,437,399   $421,687,911 
Counterparty B   16,000    30,592,947 
Counterparty C   2,143,013    2,775,287 
Counterparty D   61,071    11,785,440 
Counterparty E   9,225,537    8,633,491 
Counterparty F   24,670,756    837,948 
Counterparty G   -    8,840,988 
Counterparty H   14,024,130    - 
Counterparty K   27,205,958    - 
Counterparty L   6,757,201    - 
Counterparty M   5,344,060    - 
Other   1,955,208    248,294 
Self custody   264,487,356    4,463,332 
Total  $430,327,688   $489,865,638 
Current Digital Assets          
Digital assets   226,655,398    188,342,579 
Digital assets loaned   38,660,569    270,362,684 
Digital assets staked   164,256,864    30,516,888 
Total Current Digital Assets  $429,572,831   $489,222,151 
Non-Current Digital Assets          
Digital Assets   754,857    643,487 
Total Non-Current Digital Assets  $754,857   $643,487 
Total Digital Assets  $430,327,688   $489,865,638 

 

13

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of September 30, 2024, digital assets held by lenders as collateral consisted of the following:

 

   Number of coins     
   on loan   Fair Value 
Bitcoin   380.0000   $9,225,537 
Ethereum   1,845.0000    6,520,191 
Total   2,225.0000   $15,745,728 

 

As at September 30, 2024, the 380 Bitcoin held by Genesis Global Capital LLC (“Genesis”) as collateral against a loan has been written down to $9,225,537 (US$6,834,237), the fair value of the loan and interest held with Genesis.

 

As of December 31, 2023, digital assets held by lenders as collateral consisted of the following:

 

   Number of coins     
   on loan   Fair Value 
Bitcoin   1,158.2614    46,860,266 
Ethereum   9,263.7800    28,369,770 
Total   10,422.0414   $75,230,036 

 

As at December 31, 2023, the 475 Bitcoin held by Genesis as collateral against a loan has been written down to $8,690,623 (US$6,570,862), the fair value of the loan and interest held with Genesis.

 

In the normal course of business, the Company enters into open-ended lending arrangements with certain financial institutions, whereby the Company loans certain fiat and digital assets in exchange for interest income. The Company can demand the repayment of the loans and accrued interest at any time. The digital assets on loan are included in digital assets balances above.

 

Digital Assets loaned

 

As of September 30, 2024, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.3% to 5.5% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.4% to 9.7% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of September 30, 2024, digital assets on loan consisted of the following:

 

   Number of
coins
on loan		   Fair Value   Fair Value Share 
Digital assets on loan:            
Ethereum   10,500.0000    37,106,780    96%
Uniswap   150,000.0000    1,553,789    4%
Total   160,500.0000   $38,660,569    100%

 

As of December 31, 2023, digital assets on loan consisted of the following:

 

   Number of
coins
on loan		   Fair Value   Fair Value
Share		 
Digital on loan:               
Ethereum   7,000.0000    21,437,084    8%
Cardano   8,500,000.0000    6,790,228    3%
Polkdot   1,373,835.0000    15,148,250    6%
Solana   1,572,441.0000    220,363,625    82%
Avalanche   125,009.0000    6,623,496    2%
Total   11,578,285.0000   $270,362,684    100%

 

14

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of September 30, 2024, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest rates  Number of coins
on loan		   Fair Value 
Digital assets on loan:           
Counterparty A  2.3% to 3.85%   156,500.0000    24,524,653 
Counterparty F  3.25% to 5.50%   4,000.0000    14,135,916 
Total      160,500.0000   $38,660,569 

 

As of December 31, 2023, the digital assets on loan by significant borrowing counterparty is as follow:

 

   Interest rates  Number of
coins
on loan		   Fair Value 
Digital on loan:           
Counterparty A  2.4% to 9.7%   11,578,285.0000    270,362,684 
Total      11,578,285.0000   $270,362,684 

 

As of September 30, 2024, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  September 30,
2024		 
Digital assets on loan:       
Counterparty A  Cayman Islands   63%
Counterparty F  UAE   37%
Total      100%

 

As of December 31, 2023, digital assets on loan were concentrated with counterparties as follows:

 

   Geography  December 31, 2023 
Digital on loan:       
Counterparty A  Cayman Islands   100%
Total      100%

 

The Company’s digital assets on loan are exposed to credit risk. The Company limits its credit risk by placing its digital assets on loan with high credit quality financial institutions that have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company’s due diligence procedures may include, but are not limited to, review of the financial position of the borrower, review of the internal control practices and procedures of the borrower, review of market information, and monitoring the Company’s risk exposure thresholds. As of September 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets on loan. While the Company intends to only transact with counterparties that it believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

Digital Assets Staked

 

As of September 30, 2024, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 2.82% to 9.86% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 3.15% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

  

15

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

As of September 30, 2024, digital assets staked consisted of the following:

 

   Number of coins
staked		   Fair Value   Fair Value
Share		 
Digital assets on staked:            
Bitcoin   1,608.0000    138,661,553    84%
Cardano   30,991.6807    15,990    0%
Core   2,734,997.0010    3,889,124    2%
Polkadot   1,868,880.9000    11,524,666    7%
Solana   48,149.8681    10,165,532    6%
Total   4,684,627.4498   $164,256,864    100%

 

As of December 31, 2023, digital assets staked consisted of the following:

 

   Number of
coins
staked		   Fair Value   Fair Value Share 
Digital on staked:            
Cardano   38,201,004.7950    30,516,888    100%
Total   38,201,004.7950   $30,516,888    100%

 

As of September 30, 2024, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates  Number of coins
staked		   Fair Value   Fair Value Share 
Digital on staked:               
Counterparty B  2.82%   30,991.6807    15,990    0%
Self custody  6.47% to 9.12%   4,653,635.7691    164,240,874    100%
Total      4,684,627.4498   $164,256,864    100%

 

As of December 31, 2023, the digital assets staked by significant borrowing counterparty is as follow:

 

   Interest rates   Number of
coins
staked		   Fair Value 
Digital on staked:            
Counterparty B   3.15%    38,201,004.7950    30,516,888 
Total        38,201,004.7950   $30,516,888 

 

As of September 30, 2024, digital assets staked were concentrated with counterparties as follows:

 

   Geography  September 30,
2024		 
Digital on staked:       
Counterparty B  Switzerland   0%
Self custody  Switzerland   100%
Total      100%

 

As of December 31, 2023, digital assets staked were concentrated with counterparties as follows:

 

   Geography  December 31,
2023		 
Digital on staked:       
Counterparty B  Switzerland   100%
Total      100%

 

16

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

7.Digital Assets, Digital Assets Loaned, and Digital Assets Staked (continued)

 

The Company’s digital assets staked are exposed to market risk, liquidity risk, lockup duration risk, loss or theft of assets and return duration risk. The Company places allocation limits by counterparty and only deals with high credit quality financial institutions that are believed to have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company’s due diligence procedures may include, but are not limited to, review of the financial position of the counterparty, review of the internal control practices and procedures of the counterparty, review of market information, and monitoring the Company’s risk exposure thresholds. As of September 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets staked. While the Company intends to only transact with counterparties that it believes to meets the Company staking policy criteria, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

8.Acquisition of Reflexivity

 

On February 6, 2024, the Company acquired 100% interest in Reflexivity LLC (“Reflexivity”) by issuing 5,000,000 common shares. Reflexivity is a private company incorporated in the United States that operates a premier private research firm that specializes in producing cutting-edge research reports for the cryptocurrency industry.

 

Details of the consideration for acquisition, net assets acquired and goodwill are as follows:

 

Purchase price consider paid:    
Fair value of shares issued  $3,100,000 
Fair value of shares issued  $3,100,000 

 

Fair value of assets and liabilities assumed:

Cash  $319,643 
Amounts receivable   18,131 
Prepaid expenses   21,448 
Client relationships   315,000 
Brand Name   66,000 
Technology   78,000 
Accounts payable   (1,383)
Deferred revenue   (353,226)
   $463,613 
Goodwill   2,636,387 
Total net assets aquired  $3,100,000 

 

The goodwill acquired as part of the Reflexivity acquisition is made up of assembled workforce and implied goodwill related to Reflexivity’s management and staff experiences and Reflexivity’s reputation in the industry. It will not be deductible for tax purposes.

 

17

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

9.Intangibles and goodwill

 

Cost  Client
relationships		   Technology   Brand Name   Total 
                 
Balance, December 31, 2023 and 2022  $-   $-   $42,789,968   $42,789,968 
                     
Acquisition of Reflexivty LLC   315,000    78,000    66,000    459,000 
Acquisition of Solana IP   -    4,962,021    -    4,962,021 
                     
Balance, September 30, 2024  $315,000   $5,040,021   $42,855,968   $48,210,989 

 

Accumulated Amortization          Brand Name   Total 
                 
Balance, December 31, 2022  $-   $-   $(37,208,780)  $(37,208,780)
Amortization   -    -    (2,038,300)   (2,038,300)
Balance, December 31, 2023  $-   $-   $(39,247,080)  $(39,247,080)
Amortization   (21,000)   (10,400)   (1,537,525)   (1,568,925)
Impairment loss   -    (4,962,021)   -    (4,962,021)
Balance, September 30, 2024  $(21,000)  $(4,972,421)  $(40,784,605)  $(45,778,026)
Balance, December 31, 2023  $-   $-   $3,542,888   $3,542,888 
Balance, Septmeber 30, 2024  $294,000   $67,600   $2,071,363   $2,432,963 

 

On February 9, 2024, the Company acquired intellectual property by issuing 7,297,090 common shares of the Company. The intellectual property acquired encompasses a suite of sophisticated features, including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by the Company. At the time of acquisition, the intangible assets were in an early stage of research and development, with significant uncertainties surrounding its future market demand, sales price and production costs, and as such, on February 9, 2024, the Company recognized an impairment loss of $4,962,021.

 

10. Accounts payable and accrued liabilities

 

   30-Sep-24   31-Dec-23 
Corporate payables  $5,145,113   $4,443,937 
Digital asset liquidity provider   -    4,402,557 
Related party payable (Note 21)   83,573    328,352 
   $5,228,686   $9,174,846 

 

18

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

11.Loans payable

 

On January 14, 2022 and January 17, 2022, the Company entered into various loans with a digital asset liquidity provider totaling $46,235,200 (US$37,000,000). On April 4, 2022, the Company entered into a loan with a second digital asset provider for US$5,500,000. In April 2022, the Company partially repaid of one of the loans of US$3,500,000, while the remainder of these loans have since been renewed and continue to be outstanding. The Company has spread the loans among three different digital asset liquidity providers to reduce single entity concentration and be able to obtain more competitive rates. During the nine months ended September 30, 2024, the Company repaid loans of US$29,500,000. As of September 30, 2024, the loan principal of $13,499,000 (US$10,000,000) (December 31, 2023 - $52,242,700 (US$39,500,000)) was outstanding. The loans terms are open to 90 days and have interest rates ranging from 7.25% and 10.5% The extended loans are secured with 380 BTC and 1845 ETH. Subsequent to September 30, 2024, the Company repaid loans of US$4,000,000.

 

One of Company’s digital asset liquidity provider loans payable is held with Genesis. On January 20, 2023, Genesis declared bankruptcy and currently is not allowing withdrawals and not extending new loans. On March 15, 2023, the Court ruled that the Genesis debtors may not sell, buy, trade in crypto assets without prior consent by the creditors. The Court also allowed for the payment of some service providers required for upholding the operations but nothing beyond that. The Company’s loan with Genesis is an open term loan. The Genesis loan and interest payable is US$6,834,237 and secured with 380 BTC. See Note 7.

 

On March 23, 2023, the Company entered into a loan agreement with an institutional investment firm that specializes in long-term asset backed financing for secured loan of $4,101,300 (US$3,000,001). The loan is secured by 158.2614 BTC. The Company paid a 1% origination fee to the lender. The principal is due eighteen months from the closing date. Interest payments of US$24,375 are due quarterly with the first payment due on June 23, 2023. During the nine months ended September 30, 2024, the Company repaid the loan of US$3,000,001. As of September 30, 2024, the loan principal of $Nil (US$Nil) (December 31, 2023 - $3,967,801 (US$3,000,001)) was outstanding.

 

19

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted) 

 

 

12.ETP holders payable

 

The fair market value of the Company’s ETPs as at September 30, 2024 and December 31, 2023 were as follows:

 

   September 30,
2024		  December 31,
2023		 
   $  $ 
Valour Bitcoin Zero EUR  21,953,027   13,325,026 
Valour Bitcoin Zero SEK  188,916,086   113,727,037 
Valour Ethereum Zero EUR  1,983,736   1,426,174 
Valour Ethereum Zero SEK  73,338,141   64,723,237 
Valour Polkadot EUR  99,867   217,017 
Valour Polkadot SEK  13,414,687   18,056,128 
Valour Cardano EUR  151,484   105,209 
Valour Cardano SEK  32,799,516   43,131,123 
Valour Uniswap EUR  169,241   132,960 
Valour Uniswap SEK  3,736,079   2,780,982 
Valour Binance EUR  28,702   1,560 
Valour Binance SEK  1,053,403   - 
Valour Solana EUR  8,589,657   4,215,658 
Valour Solana SEK  368,007,937   232,410,677 
Valour Cosmos EUR  204,252   159,572 
Valour Digital Asset Basket 10 EUR  6,045   301,427 
Valour Digital Asset Basket 10 SEK  446,910   42,770 
Valour Bitcoin Carbon Neutral EUR  15,243   5,288 
Valour Avalanche EUR  394,859   137,447 
Valour Avalanche SEK  21,110,994   13,034,136 
Valour Enjin EUR  20,485   197,061 
Valour Ripple SEK  7,712,016   - 
Valour Toncoin SEK  1,588,793   - 
Valour Chainlink SEK  912,023   - 
Valour ICP SEK  2,264,477   - 
Valour Bitcoin Staking SEK  3,585,114   - 
Valour Hedera SEK  486,979   - 
Valour Hedera EUR  247,273   - 
Valour CORE SEK  574,755   - 
Valour BTC Staking EUR  14,419   - 
Valour Short BTC SEK  46,146   - 
Valour Near SEK  2,591,387   - 
Valour Bitcoin Physical Carbon Neutral USD  724,479   - 
Valour Ethereum Physical Staking USD  347,457   - 
Valour Physcial Carbon Neutral USD  11,901,502   - 
Valour BCIX STOXX USD  1,048,006   - 
   770,485,178   508,130,490 

 

20

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

12.ETP holders payable (continued)

 

The Company’s ETP certificates are unsecured and trade on the Nordic Growth Market “(NGM”) and / or Germany Borse

 

Frankfurt Zertifikate AG. ETPs issued by the Company referencing the performance of digital assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted quoted price of the digital asset underlying the ETP, less any accumulated management fees. The fair value basis is consistent with the measurement of the underlying digital assets which are measured at fair value. The Company’s policy is always to hedge 100% of the market risk by holding the underlying digital asset. Hedging is done continuously and in direct correspondence to the issuance of certificates to investors.

 

13.Realized and net change in unrealized gains and (losses) on digital assets

 

   Three months ended
September 30,		   Nine months ended
September 30,		 
   2024   2023   2024   2023 
Realized gains / (loss) on digital assets  $13,135,608   $(7,785,437)  $295,685,477   $(33,532,327)
Unrealized gains / (loss) on digital assets   20,819,828    (3,310,723)   (115,461,797)   72,851,752 
   $33,955,436   $(11,096,160)  $180,223,680   $39,319,425 

 

14.Realized and net change in unrealized gains and (losses) on ETP payables

 

   Three months ended
September 30,		   Nine months ended
September 30,		 
   2024   2023   2024   2023 
Realized gains / (loss) on ETPs  $(88,901,867)  $(9,467,523)  $(223,139,926)  $27,245,938 
Unrealized gains / (loss) on ETPs   32,395,412    25,572,571    47,474,581    (83,775,368)
   $(56,506,455)  $16,105,048   $(175,665,345)  $(56,529,430)

 

15.Expenses by nature

 

   Three months ended
September 30,		   Nine months ended
September 30		 
   2024   2023   2024   2023 
Management and consulting fees  $724,000   $1,576,590   $31,009,078   $3,861,814 
Travel and promotion   3,694,667    218,322    5,299,163    457,938 
General and administrative   1,604,251    247,180    2,065,157    1,099,834 
Accounting and legal   207,782    1,177,471    1,214,825    1,548,065 
Regulatory and transfer agent   40,195    27,192    162,790    151,040 
   $6,270,895   $3,246,755   $39,751,013   $7,118,691 

 

16.Share Capital

 

a)As at September 30, 2024 and December 31, 2023, the Company is authorized to issue:

 

I.Unlimited number of common shares with no par value;

 

II.20,000,000 preferred shares, 9% cumulative dividends, non-voting, non-participating, non-redeemable, non-retractable, and non-convertible by the holder. The preferred shares are redeemable by the Company in certain circumstances.

 

21

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

16.Share Capital (continued)

 

b)Issued and outstanding shares

 

   Number of
Common Shares		   Amount 
Balance, December 31, 2022   219,010,501   $166,151,401 
Private placement financings   11,812,500    1,117,145 
Shares issued for debt settlement   13,697,095    1,449,102 
Warrant allocation        (243,330)
Options exercised   575,000    181,585 
DSU exercised   757,500    317,150 
Issued on convertible debt   30,000,000    1,585,524 
Shares issued on acquisition of investment   805,612    128,898 
Balance, December 31, 2023   276,658,208   $170,687,476 
Acquisition of Refelxivty LLC (see Note 8)   5,000,000    3,100,000 
Acquisiton of Solana IP (see Note 9)   7,297,090    4,962,021 
DSU exercised   2,107,281    1,753,984 
Options exercised   2,692,500    1,907,569 
Warrant exercised   6,112,789    1,956,069 
NCIB   (1,020,000)   (1,664,705)
Balance, September 30, 2024   298,847,868   $182,702,414 

 

During the year ended December 31, 2023, the Company issued 13,697,095 common shares at an issue price of $0.11 per share to settle existing debt with consultants and management resulting in a loss on settlement of debt in the amount of $172,093. Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

On October 24, 2023, the Company issued convertible debt in exchange for $3,000,000, the notes mature two years from issuance and accrue interest at 8% per annum. Upon conversion or at the maturity of the note the notes were convertible for an equal number of common shares and share purchase warrants, of the Company with an exercise price of $0.20. An officer of the Company subscribed for $361,250 convertible debt.

 

On November 6, 2023, the conversion option was exercised resulting in the issuance of 30,000,000 common shares of the Company and 30,000,000 warrants, each warrant entitles the holder to acquire one additional common share of the Company at an exercise price of $0.20 for a period of 60 months following the closing date. At the issue date, the fair value of the warrants was estimated at $0.10 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 151.9%; risk-free interest rate of 3.87% and an expected life of 5 years. As a result of the conversion option, an officer of the Company received 3,612,500 common shares and 3,612,500 warrants for his convertible debenture.

 

On November 6, 2023, the Company issued 805,612 common shares of the Company in exchange for a $128,898 investment in Neuronomics AG. The shares were valued based on the closing price of the Company’s stock at the date of the exchange. An officer of the Company received 402,808 common shares in exchange for 362 shares of Neuromomics AG.

 

On November 22, 2023, the Company closed a non-brokered private placement financing and issued 11,812,500 units for gross proceeds of $1,890,000 at a price of $0.16 per unit, each unit consists of one common shares of the company and one warrant, each warrant entitles the holder to acquire one additional common share of the Company at an exercise price of $0.23 for a period of 24 months following the closing date. An officer of the Company subscribed 3,125,000 units for $335,167. At the issue date, the fair value of the warrants was estimated at $0.16 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 139.6%; risk-free interest rate of 4.40% and an expected life of 2 years.

 

22

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

16.Share Capital (continued)

 

b)Issued and outstanding shares (continued)

 

On June 11, 2024, under the terms of the NCIB, the Company may, if considered advisable, purchase its common shares in open market transactions through the facilities of the exchange and/or other Canadian alternative trading platforms, not to exceed up to 10 per cent of the public float for the common shares as of June 3, 2024, or 26,996,392 common shares, purchased in aggregate. The price that the company will pay for the common shares shall be the prevailing market price at the time of purchase and all purchased common shares will be cancelled by the company. In accordance with exchange rules, daily purchases (other than pursuant to a block purchase exception) on the exchange under the NCIB cannot exceed 25 per cent of the average daily trading volume on the exchange, as measured from Dec. 1, 2023, to May 31, 2024. The NCIB shall commence on June 10, 2024, and run through June 9, 2025, or on such earlier date as the NCIB is complete.

 

During the nine months ended September 30, average price of $1.99 (December 31, 2023 –

 

2024, the Company purchased and cancelled 1,020,000 shares at an purchased and cancelled no shares).

 

17.Share-based payments reserves

 

Stock options, DSUs and Warrants

 

   Options   DSU   Warrants     
       Weighted                   Weighted         
       average                   average         
   Number of   exercise   Value of   Number of   Value of   Number of   exercise   Value of     
   Options   prices   options   DSU   DSU   warrants   prices   warrants   Total Value 
December 31, 2022   17,777,500   $1.27    20,344,765    6,370,000   $6,977,106    16,740,486   $0.20   $588,113   $27,909,984 
Granted   8,900,000    0.10    875,928    4,359,286    2,044,291    41,812,500    0.21    2,430,661    5,350,880 
Exercised   (575,000)   0.15    (86,710)   (757,500)   (317,150)   -    -    -    (403,860)
Expired / cancelled   (2,697,500)   1.11    (3,138,269)   (327,500)   (663,587)   (12,684,560)   0.03    (423,261)   (4,225,117)
December 31, 2023   23,405,000   $0.85   $17,995,714    9,644,286   $8,040,660    45,868,426   $0.30   $2,595,513   $28,631,887 
Granted   8,679,687    1.06    9,158,892    8,264,007    7,855,483    -    -    -    17,014,376 
Exercised   (2,692,500)   0.30    (798,211)   (2,107,281)   (1,712,377)   (6,112,789)   0.07    (450,356)   (2,960,944)
Expired / cancelled   (450,000)   1.94    (874,002)   (1,000,000)   (111,983)   -    -         (985,985)
September 30, 2024   28,942,187   $0.85   $25,482,393    14,801,012   $14,071,783    39,755,637   $0.21   $2,145,157   $41,699,333 

 

Stock option plan

 

The Company has an ownership-based compensation scheme for executives and employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, officers, directors and consultants of the Company may be granted options to purchase common shares with the exercise prices determined at the time of grant. The Company has adopted a Floating Stock Option Plan (the “Plan”), whereby the number of common shares reserved for issuance under the Plan is equivalent of up to 10% of the issued and outstanding shares of the Company from time to time.

 

Each employee share option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

 

On March 12, 2024, the Company granted 125,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.69 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $79,575 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 149.1%; risk-free interest rate of 3.71%; and an expected average life of 5 years.

 

23

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Stock option plan (continued)

 

On April 23, 2024, the Company granted 250,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.77 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $163,325 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.79%; and an expected average life of 5 years.

 

On May 1, 2024, the Company granted 250,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.77 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $172,950 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.63%; and an expected average life of 5 years.

 

On May 21, 2024, the Company granted 200,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $1.03 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $190,380 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.79%; and an expected average life of 5 years.

 

On June 4, 2024, the Company granted 4,000,000 stock options to two companies (together “Valour Holdco”) controlled by an employee of Valour to purchase common shares of the Company for the price of $1.26 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $4,658,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.5%; risk-free interest rate of 4.08%; and an expected average life of 5 years.

 

On July 29, 2024, the Company granted 3,667,187 stock options to a company controlled by a Valour Holdco to purchase common shares of the Company for the price of $2.17 for a period of five years from the date of grant. The options shall vest (a) on December 31, 2024 and (b) upon Valour Holdco having entered into a contract with an employee or consultant of the Corporation or its subsidiaries to transfer the underlying shares subject to the option, subject to performance hurdles. These options have an estimated grant date fair value of $8,142,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 156.0%; risk-free interest rate of 3.20%; and an expected average life of 5 years.

 

On July 13, 2023, the Company granted 1,000,000 stock options to a consultant of Company to purchase common shares of the Company for the price of $0.115 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $105,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 154.3%; risk-free interest rate of 3.47%; and an expected average life of 5 years.

 

On November 24, 2023, the Company granted 2,650,000 stock options to a consultant and directors of the Company to purchase common shares of the Company for the price of $0.29 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $731,400 using the Black -Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 151.7%; risk -free interest rate of 3.83%; and an expected average life of 5 years. Directors of the received 2,500,000 options.

 

On December 4, 2023, the Company granted 4,500,000 stock options to an officer of the Company to purchase common shares of the Company for the price of $0.45 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $2,162,700 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 151.9%; risk-free interest rate of 3.54%; and an expected average life of 5 years.

 

24

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Stock option plan (continued)

 

On December 11, 2023, the Company granted 750,000 stock options to a consult and directors of the Company to purchase common shares of the Company for the price of $0.52 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $192,525 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 69.6%; risk-free interest rate of 3.53%; and an expected average life of 5 years. Directors of the received 500,000 options.

 

On December 11, 2023, the Company granted 750,000 stock options to a consult and directors of the Company to purchase common shares of the Company for the price of $0.52 for a period of five years from the date of grant. The options shall vest in four equal instalments every three months such that all options shall fully vests on the date that is 12 months from the date of grant. These options have an estimated grant date fair value of $308,700 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 153.1%; risk-free interest rate of 3.53%; and an expected average life of 5 years. Directors of the received 500,000 options.

 

The Company recorded $9,158,892 of share-based payments during the nine months ended September 30, 2024 (nine months ended September 30, 2023 - $321,541).

 

The following share-based payment arrangements were in existence at September 30, 2024:

 

Number
outstanding		   Number exercisable   Grant
date		  Expiry
date		  Exercise
price		   Fair value at grant date   Grant date share price   Expected volatility   Expected life
(yrs)		   Expected
dividend yield		   Risk-free
interest
rate		 
 480,000    480,000   16-Nov-20  16-Nov-25  $0.09    38,016   $0.09    138.70%   5    0%   0.46%
 1,000,000    1,000,000   22-Mar-21  22-Mar-26  $1.58    1,906,500   $2.12    145.70%   5    0%   0.99%
 2,070,000    2,070,000   09-Apr-21  09-Apr-26  $1.58    3,309,102   $1.78    145.20%   5    0%   0.95%
 2,800,000    2,800,000   18-May-21  18-May-26  $1.22    3,150,560   $1.25    145.60%   5    0%   0.95%
 1,000,000    1,000,000   18-May-21  18-May-26  $1.22    1,125,200   $1.25    145.60%   5    0%   0.95%
 1,950,000    1,950,000   25-May-21  25-May-26  $1.11    1,944,540   $1.11    145.50%   5    0%   0.86%
 1,150,000    1,150,000   13-Aug-21  13-Aug-26  $1.58    1,461,305   $1.43    143.70%   5    0%   0.84%
 250,000    250,000   21-Sep-21  21-Sep-26  $1.70    380,375   $1.70    144.00%   5    0%   0.85%
 250,000    250,000   13-Oct-21  13-Oct-26  $2.10    470,375   $2.10    144.00%   5    0%   1.27%
 500,000    500,000   09-Nov-21  09-Nov-26  $3.92    1,758,050   $3.92    144.30%   5    0%   1.37%
 250,000    250,000   31-Dec-21  31-Dec-26  $3.11    698,525   $3.11    145.00%   5    0%   1.25%
 500,000    500,000   09-May-22  09-May-27  $2.00    591,950   $1.34    146.00%   5    0%   2.76%
 500,000    500,000   20-May-22  20-May-27  $1.00    334,300   $0.75    146.80%   5    0%   2.70%
 500,000    500,000   17-Oct-22  17-Oct-27  $0.17    75,350   $0.17    149.50%   5    0%   3.60%
 1,000,000    500,000   13-Jul-23  13-Jul-28  $0.115    105,000   $0.12    149.10%   5    0%   3.71%
 1,500,000    1,500,000   24-Nov-23  24-Nov-28  $0.29    414,000   $0.29    151.70%   5    0%   3.83%
 4,500,000    3,375,000   04-Dec-23  04-Dec-28  $0.45    2,162,700   $0.45    151.90%   5    0%   3.54%
 250,000    187,500   11-Dec-23  11-Dec-28  $0.52    102,900   $0.52    153.10%   5    0%   3.53%
 125,000    125,000   12-Mar-24  12-Mar-29  $0.69    79,575   $0.69    154.30%   5    0%   3.47%
 250,000    62,500   23-Apr-24  23-Apr-29  $0.77    163,325   $0.77    154.30%   5    0%   3.79%
 250,000    62,500   01-May-24  01-May-29  $0.77    172,950   $0.77    154.30%   5    0%   3.63%
 200,000    50,000   21-May-24  21-May-29  $1.03    190,380   $1.03    154.30%   5    0%   3.79%
 4,000,000    1,000,000   04-Jun-24  04-Jun-29  $1.26    4,658,000   $1.26    154.50%   5    0%   4.08%
 3,667,187    -   29-Jul-24  29-Jul-29  $2.17    8,141,522   $2.39    156.00%   5    0%   3.20%
 28,942,187    20,062,500               33,434,500                          

 

The weighted average remaining contractual life of the options exercisable at September 30, 2024 was 3.24 years (December 31, 2023 – 3.46 years).

  

25

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Warrants

 

As at September 30, 2024, the Company had share purchase warrants outstanding as follows:

 

   Number
outstanding &
exercisable		   Grant date  Expiry
date		  Exercise
price		   Fair value
at grant
date		   Grant date share price   Expected
volatility		   Expected life (yrs)   Expected
dividend
yield		   Risk-free
interest
rate		 
Warrants   2,505,637   14-Nov-22  14-Nov-24  $0.30    259,931   $0.17    152.7%  2    0%   3.87%
Warrants   125,000   14-Nov-22  14-Nov-24  $0.30    13,244   $0.17    152.7%  2    0%   3.87%
Warrants   30,000,000   06-Nov-23  06-Nov-28  $0.20    1,414,476   $0.17    151.9%  5    0%   3.87%
Warrants   7,125,000   22-Nov-23  22-Nov-25  $0.23    466,168   $0.33    139.6%  2    0%   4,40%
Warrant issue costs                   (8,661)                        
    39,755,637               2,145,157                         

 

Deferred Share Units Plan (DSUs)

 

On August 15, 2021, the Company adopted the DSUs plan. Eligible participants of the DSU Plan include any director, officer, employee or consultant of the Company. The Board fixes the vesting terms it deems appropriate when granting DSUs. The number of DSUs that may be granted under the DSU Plan may not exceed 5% of the total issued and outstanding Common Shares at the time of grant.

 

On May 21, 2024, the Company granted 1,000,000 DSUs to an employee of Valour. These DSUs have a grant day fair value of $1,185,000 and vest immediately.

 

On May 21, 2024, the Company granted 1,500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $1,777,500 and vest in six months from the grant day.

 

On May 21, 2024, the Company granted 200,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $237,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On July 29, 2024, the Company granted 4,439,007 DSUs to Valour Holdco. These DSUs have a grant day fair value of $10,609,000 and vest (a) on December 31, 2024 and (b) upon Valour Holdco thereof having entered into a contract with an employee or consultant of the Corporation or its subsidiaries to transfer the underlying shares subject to the option, subject to performance hurdles.

 

On September 24, 2024, the Company granted 1,125,000 DSUs to officers and consultants of the Company. These DSUs have a grant day fair value of $3,319,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is three months from the grant day.

 

On February 1, 2023, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $107,500 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On February 1, 2023, the Company granted 500,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $107,500 and vest immediately.

 

On July 13, 2023, the Company granted 1,000,000 DSUs to a consultant of the Company. These DSUs have a grant day fair value of $145,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day.

 

On November 24, 2023, the Company granted 1,434,286 DSUs to consultants of the Company. These DSUs have a grant day fair value of $277,500 and vest immediately.

 

On November 24, 2023, the Company granted 925,000 DSUs to officers and consultants of the Company. These DSUs have a grant day fair value of $145,000 and vest in four equal installments every six months, with the first instalment vesting on the date that is six months from the grant day. Officers of the Company received 400,000 DSUs.

 

26

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

17.Share-based payments reserves (continued)

 

Deferred Share Units Plan (DSUs) (continued)

 

The Company recorded $7,855,483 in share-based compensation during the nine months ended September 30, 2024 (nine months ended September 30, 2023 - $1,508,668).

 

18.Financial instruments

 

Financial assets and financial liabilities as at September 30, 2024 and December 31, 2023 are as follows:

 

   Asset / (liabilities)   Assets / (liabilities) at fair     
   at amortized cost   value through profit/(loss)   Total 
December 31, 2023            
Cash  $6,727,482   $-   $6,727,482 
Amounts receivable   54,036    -    54,036 
Private investments   -    43,540,534    43,540,534 
USDC   -    673    673 
Accounts payable and accrued liabilities   (9,174,846)   -    (9,174,846)
Loan payable   (56,210,709)   -    (56,210,709)
ETP holders payable   -    (508,130,490)   (508,130,490)
September 30, 2024               
Cash  $20,702,196   $-   $20,702,196 
Amounts receivable   1,081,075    -    1,081,075 
Private investments   -    44,351,316    44,351,316 
USDC   -    688    688 
Equity investments   -    274,098,333    274,098,333 
Accounts payable and  accrued liabilities   (5,228,686)   -    (5,228,686)
Loan payable   (13,499,000)   -    (13,499,000)
ETP holders payable   -    (770,485,178)   (770,485,178)

 

The Company’s financial instruments are exposed to several risks, including market, liquidity, credit and currency risks. There have been no significant changes in the risks, objectives, policies and procedures from the previous year. A discussion of the Company’s use of financial instruments and their associated risks is provided below:

 

Credit risk

 

Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash carries an investment grade rating as assessed by external rating agencies. The Company maintains all or substantially all of its cash with a major financial institution domiciled in Canada, the United States and Europe. Deposits held with this institution may exceed the amount of insurance provided on such deposits.

 

Regulatory Risks

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company. Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation.

 

27

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Custodian Risks

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line as well as for digital assets underlying Valour Cayman ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.-regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investments declines, resulting in losses upon disposition. In addition, some of the investments the Company holds are lightly traded public corporations or not publicly traded and may not be easily liquidated. The Company generates cash flow from proceeds from the disposition of its investments and digital assets. There can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. All of the Company’s assets, liabilities and obligations are due within one to three years.

 

The Company manages liquidity risk by maintaining adequate cash balances and liquid investments and digital assets. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial and non-financial assets and liabilities. As at September 30, 2024, the Company had current assets of $574,469,762 (December 31, 2023 - $497,513,493) to settle current liabilities of $789,761,126 (December 31, 2023 - $573,516,045).

 

28

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Liquidity risk (continued)

 

The following table shows the Company’s source of liquidity by assets / (liabilities) as at September 30, 2024 and December 31, 2023:

 

September 30, 2024
   Total   Less than 1 year   1-3 years 
Cash  $20,702,196   $20,702,196   $- 
Amounts receivable   1,081,075    1,081,075    - 
Prepaid expenses   4,066,680    4,066,680    - 
Digital assets   430,327,688    429,572,831    754,857 
Private investments   44,351,316    -    44,351,316 
Equity investments in digital assets   274,098,333    119,046,980    155,051,353 
Accounts payable and accrued liabilities   (5,228,686)   (5,228,686)   - 
Loans payable   (13,499,000)   (13,499,000)   - 
ETP holders payable   (770,485,178)   (770,485,178)   - 
Total assets / (liabilities) - June 30, 2024  $(14,585,576)  $(214,743,102)  $200,157,526 

 

December 31, 2023
   Total   Less than 1 year   1-3 years 
Cash   6,727,482   $6,727,482   $- 
Amounts receivable   54,036    54,036    - 
Prepaid expenses   1,509,824    1,509,824    - 
Digital assets   489,865,638    489,222,151    643,487 
Private investments   43,540,534    -    43,540,534 
Accounts payable and accrued liabilities   (9,174,846)   (9,174,846)   - 
Loan payable   (56,210,709)   (56,210,709)   - 
ETP holders payable   (508,130,490)   (508,130,490)   - 
Total assets / (liabilities) - December 31, 2023  $(31,818,531)  $(76,002,552)  $44,184,021 

 

Digital assets included in the table above are non-financial assets except USDC. For the purposes of liquidity risk analysis, these non-financial assets were included as they are mainly utilized to pay off any redemptions related to ETP holders payable, a financial liability. The lent and staked digital assets fall under the “less than 1 year” bucket.

 

Market risk

 

Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate because of changes in market prices.

 

(a)Price and concentration risk

 

The Company is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favorable prices. In addition, most of the Company’s investments are in the technology and resource sector. At September 30, 2024, two investments made up approximately 4.5% (December 31, 2023 – two investments of 7.0%) of the total assets of the Company.

 

For the nine months ended September 30, 2024, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $4.2 million, or $0.01 per share.

 

For the year ended December 31, 2023, a 10% decrease (increase) in the closing price of this these two positions would result in an estimated increase (decrease) in net loss of $4.2 million, or $0.02 per share.

 

29

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Market risk (continued)

 

(b)Interest rate risk

 

The Company’s cash is subject to interest rate cash flow risk as it carries variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash balances on hand at September 30, 2024, a 1% change in interest rates could result in approximately $207,000 change in net loss.

 

(c)Currency risk

 

Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctua te because of changes in foreign exchange rates. The Company’s operations are exposed to foreign exchange fluctuations, which could have a significant adverse effect on its results of operations from time to time. The Company’s foreign currency risk arises primarily with respect to United States dollar, Euro, Swiss Franc, Swedish Krona and British Pound. Fluctuations in the exchange rates between this currency and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. The Company reduces its currency risk by maintaining minimal cash balances held in foreign currency.

 

As at September 30, 2024 and December 31, 2023, the Company had the following financial and non-financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:

 

September 30, 2024
   United States   British   Swiss   Euro   SEK 
Cash  $1,884,374   $1,159   $5,410,389   $1,444,020   $11,040,311 
Receivables   148,883    -    8,668    -    - 
Private investments   2,563,676    -    40,090,000    -    - 
Prepaid expenses   40,762    -    63,372    -    - 
Digital assets   430,327,688    -    -    -    - 
Equity investment   274,098,333                     
Accounts payable and accrued liabilities   (1,149,420)   (79,964)   (307,995)   (22,614)   134 
Loan payable   (13,499,000)   -    -    -    - 
ETP holders payable   (770,485,178)   -    -    -    - 
Deferred revenue   (548,262)   -    -    -    - 
Net assets (liabilities)  $(76,618,144)  $(78,805)  $45,264,434   $1,421,406   $11,040,177 

 

December 31, 2023
   United States   British   Swiss   European 
   Dollars   Pound   Franc   Euro 
Cash  $6,668,518   $-   $-   $- 
Receivables   47,159    -    -    - 
Private investments   4,016,636    -    39,395,000    - 
Prepaid investment   1,509,824    -    -    - 
Digital assets   489,865,637    -    -    - 
Accounts payable and accrued liabilities   (3,080,229)   (74,466)   (101,828)   (21,939)
Loan payable   (56,210,709)               
ETP holders payable   (508,130,490)   -    -    - 
Net assets (liabilities)  $(65,313,654)  $(74,466)  $39,293,172   $(21,939)

 

A 10% increase (decrease) in the value of the Canadian dollar against all foreign currencies in which the Company held financial instruments as of September 30, 2024 would result in an estimated increase (decrease) in net income of approximately $8,357,900 (December 31, 2023 - $2,601,500).

 

30

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Market risk (continued)

 

(d)Digital currency risk factors: Perception, Evolution, Validation and Valuation

 

A digital currency does not represent an intrinsic value or a form of credit. Its value is a function of the perspective of the participants within the marketplace for that digital currency. The price of the digital currency fluctuates as a result of supply and demand pressures that accumulate in the market for it.

 

Having a finite supply (in the case of many but not all digital currencies), the more people who want to own that digital currency, the more the market price increases and vice-versa.

 

The most common means of determining the value of a digital currency is through one or more cryptocurrency exchanges where that digital currency is traded. Such exchanges publicly disclose the “times and sales” of the various listed pairs. As the marketplace for digital currencies evolves, the process for assessing value will become increasingly sophisticated.

 

(e)Fair value of financial instruments

 

The Company has determined the carrying values of its financial instruments as follows:

 

i.The carrying values of cash, amounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

 

ii.Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 in the Company’s December 31, 2023 financial statements.

 

iii.Digital assets classified as financial assets relate to USDC which is measured at fair value.

 

The following table illustrates the classification and hierarchy of the Company’s financial instruments, measured at fair value in the statements of financial position as at September 30, 2024 and December 31, 2023.

 

Investments, fair value  (Quoted Market   price)   (Valuation technique -observable   market Inputs)   (Valuation   technique - non-observable   market inputs)   Total 
Privately traded invesments  $            -   $-   $44,351,316   $44,351,316 
Equtiy investments   -    -    274,098,333    274,098,333 
Digital assets   -    688    -    688 
September 30, 2024  $-   $688   $318,449,649   $318,450,337 
Privately traded invesments  $-   $-   $43,540,534   $43,540,534 
Digital assets   -    673    -    673 
December 31, 2023  $-   $673   $43,540,534   $43,541,207 

 

31

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Market risk (continued)

 

(e)Fair value of financial instruments (continued)

 

Level 2 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 2 during the periods ended September 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   September 30,   December 31, 
Investments, fair value for the period ended  2024   2023 
Balance, beginning of period  $      673   $          1,586 
Acquired (disposal)   15    (913)
Balance, end of period  $688   $673 

 

Level 3 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the periods ended September 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   September 30,   December 31, 
Investments, fair value for the period ended  2024   2023 
Balance, beginning of period  $43,540,534   $30,015,445 
Purchases   239,451,003    128,898 
Disposal   (830,411)   - 
Transferred out   (3,698,577)   - 
Realized gain (loss)   634,271    - 
Unrealized gain/(loss)   39,352,829    13,396,191 
Balance, end of period  $318,449,649   $43,540,534 

 

Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly traded companies.

 

As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results.

 

The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at September 30, 2024 and December 31, 2023.

 

32

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Market risk (continued)

 

(e)Fair value of financial instruments (continued)

 

             Range of
          Significant  significant
       Valuation  unobservable  unobservable
Description  Fair vaue   technique  input(s)  input(s)
3iQ Corp.  $409,861   Recent financing  Marketability of shares  0% discount
Brazil Potash Corp.   1,697,640   Recent financing  Marketability of shares  0% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   675,017   Recent financing  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Amina Bank   40,090,000   Market approach  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
ZKP Corporation   1,349,900   Recent financing  Marketability of shares  0% discount
Equity investments in digital   274,098,333   Recent financing  Discount for lack of marketability  27.3% discount
September 30, 2024  $318,449,649          
3iQ Corp.  $1,216,890   Recent financing  Marketability of shares  0% discount
Brazil Potash Corp.   2,138,380   Recent financing  Marketability of shares  0% discount
Earnity   -   Recent financing  Marketability of shares  0% discount
Luxor Technology Corporation   661,366   Recent financing  Marketability of shares  0% discount
SEBA Bank AG   39,395,000   Market approach  Marketability of shares  0% discount
Neuronomics AG   128,898   Recent financing  Marketability of shares  0% discount
SDK:meta, LLC   -   Recent financing  Marketability of shares  0% discount
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares  0% discount
VolMEX Labs Corporation   -   Recent financing  Marketability of shares  0% discount
December 31, 2023  $43,540,534          

 

3iQ Corp. (“3iQ”)

 

On March 31, 2020, the Company acquired 187,007 common shares of 3iQ as part of the Company’s acquisition of Valour. As at September 30, 2024, the valuation of 3iQ was based on the recent transaction which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of 3iQ will result in a corresponding +/- $40,986 (December 31, 2023 - $121,689) change in the carrying amount.

 

Amina Bank AG (“Amina”)

 

On January 14, 2022, the Company invested $34,498,750 to acquire 3,906,250 non-votes shares of Amina. As at September 30, 2024, the valuation of Amina was based on a market approach which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of Amina will result in a corresponding +/- $4,009,000 (December 31, 2023 +/- $3,939,500) change in the carrying amount.

 

Brazil Potash Corp. (“BPC”)

 

On September 11, 2020, the Company received 404,200 common shares of BPC as consideration of selling the Company’s Royalties to a non-arms length party of the Company. As at September 30, 2024, the valuation of BPC was based on BPC weighted average of comparable public market stock prices of $4.20 per share, which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of BPC will result in a corresponding +/- $169,764 (December 31, 2023 - $213,828) change in the carrying amount.

 

33

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

18.Financial instruments (continued)

 

Market risk (continued)

 

(e)Fair value of financial instruments (continued)

 

Earnity Inc. (“Earnity”)

 

On April 13, 2021, the Company subscribed US$40,000 ($50,076) to acquire certain rights to certain future equity of Earnity. As at September 30, 2024, the valuation of Earnity was determined to be nil based on Earnity ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at September 30, 2024, a +/- 10% change in the fair value of Earnity will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Luxor Technology Corporation (“LTC”)

 

On December 29, 2020, the Company subscribed US$100,000 ($128,060) to acquire certain rights to the preferred shares of LTC. The transaction was closed on February 15, 2021. On May 11, 2021, the Company subscribed additional rights of US$62,500 ($75,787). As at September 30, 2024, the valuation of LTC was based on the December 2021 financing which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024. a +/- 10% change in the fair value of LTC will result in a corresponding +/- $67,502 (December 31, 2023 - $66,137) change in the carrying amount.

 

SDK:Meta LLC

 

On June 3, 2021, the Company entered into a share exchange agreement with SDK exchanging 1,000,000 membership units of SDK with 3,000,000 shares of the Company valuing the investment at $3,420,000. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at September 30, 2024, the valuation of SDK:Meta LLC was $nil (December 31, 2023 - $nil). Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at September 30, 2024, a +/- 10% change in the fair value of SDK:Meta LLC will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Skolem Technologies Ltd. (“STL”)

 

On December 29, 2020, the Company invested US$20,000 ($25,612) to acquire certain rights to the preferred shares of STL. On October 29, 2021, the Company rights were converted into 16,354 series A preferred shares. As at September 30, 2024, the valuation of STL was determined to be nil based on STL ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of STL will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

VolMEX Labs Corporation (“VLC”)

 

On February 23, 2021, the Company invested US$30,000 ($37,809) to acquire certain rights to the preferred shares of VLC. As at September 30, 2024, the valuation of VLC was nil. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of VLC will result in a corresponding +/- nil (December 31, 2023 - $nil) change in the carrying amount.

 

ZKP Corporation (“ZKP”)

 

On August 2, 2024, the Company invested US$1,000,000 ($1,385,800) to acquire shares of ZKP. As at September 30, 2024, the valuation of ZKP was based on the recent financing price. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of ZXP will result in a corresponding +/- $134,990 change in the carrying amount.

 

Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at September 30, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $27,409,833 change in the carrying amount.

 

34

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

19.Digital asset risk

 

(a)Digital currency risk factors: Risks due to the technical design of cryptocurrencies

 

The source code of many digital currencies, such as Bitcoin, is public and may be downloaded and viewed by anyone. As with all code, there may be a bug in the respective code which is yet to be found and repaired and can ultimately jeopardize the integrity and security of one or more of these networks.

 

Should miners for reasons yet unknown cease to register completed transactions within blocks which have been detached from the block chain, the confidence in the protocol and network will be reduced, which will reduce the value of the digital currency associated with that protocol, and the ETP payable balances that are valued with reference to the respective digital asset.

 

Protocols for most digital assets or cryptocurrencies are public open-source software, they could be particularly vulnerable to hacker attacks, which could be damaging for the digital currency market and may be the cause for investors to choose other currencies or assets to invest in.

 

(b)Digital currency risk factors: Ownership, Wallets

 

Rather than the actual cryptocurrency (which are “stored” on the blockchain), a cryptocurrency wallet stores the information necessary to transact the cryptocurrency. Those digital credentials are needed so one can access and spend the underlying digital assets. Some use public-key cryptography in which two cryptographic keys, one public and one private, are generated and stored in a wallet. There are several types of wallets:

 

-Hardware wallets are USB-like hardware devices with a small screen built specifically for handling private keys and public keys/addresses.

 

-Paper wallets are simply paper printouts of private and public addresses.

 

-Desktop wallets are installable software programs/apps downloaded from the internet that hold your private and public keys/addresses.

 

-Mobile wallets are wallets installed on a mobile device and are thus always available and connected to the internet.

 

-Web wallets are hot wallets that are always connected to the internet that can be stored in a browser or can be “hosted” by third party providers such as an exchange.

 

(c)Digital currency risk factors: Political, regulatory risk and technology in the market of digital currencies

 

The legal status of digital currencies, inter alia Bitcoin varies between different countries. The lack of consensus concerning the regulation of digital currencies and how such currencies shall be handled tax wise causes insecurity regarding their legal status. As all digital currencies remain largely unregulated assets, there is a risk that politics and future regulations may negatively impact the market of digital currencies and companies operating in such market. It is impossible to estimate how politics and future regulations may affect the market. However, future regulations and changes in the legal status of the digital currencies is a political risk which may affect the price development of the tracked digital currencies.

 

The perception (and the extent to which it is held) that there is significant usage of the digital assets in connection with criminal or other illicit purposes, could materially influence the development and regulation of digital assets (potentially by curtailing the same).

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack.

  

35

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

20.Capital management

 

The Company considers its capital to consist of share capital, share based payments reserves and deficit. The Company’s objectives when managing capital are:

 

a)to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments;

 

b)to give shareholders sustained growth in value by increasing shareholders’ equity; while

 

c)taking a conservative approach towards financial leverage and management of financial risks.

 

The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:

 

a)raising capital through equity financings; and

 

b)realizing proceeds from the disposition of its investments

 

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million. There were no changes to the Company’s capital management during the nine months ended September 30, 2024.

 

21.Related party disclosures

 

a)The condensed consolidated interim financial statements include the financial statements of the Company and its subsidiaries and its respective ownership listed below:

 

   % equity interest 
DeFi Capital Inc.   100 
DeFi Holdings (Bermuda) Ltd.   100 
Electrum Streaming Inc.   100 
Reflexivity LLC   100 
Valour Inc.   100 
DeFi Europe AG   100 
Valour Digital Securities Limited   0 

 

b)Compensation of key management personnel of the Company

 

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. The remuneration of directors and other members of key management personnel during the three and nine months ended September 30, 2024 and 2023 were as follows:

 

   Three months ended
September 30,		   Nine months ended
September 30,		 
   2024   2023   2024   2023 
Short-term benefits  $330,006   $161,664   $990,018   $694,232 
Shared-based payments   904,545    67,498    2,810,286    264,829 
   $1,234,551   $229,162   $3,800,304   $959,061 

  

36

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Related party disclosures (continued)

 

As at September 30, 2024, the Company had $82,655 (December 31, 2023 - $147,485) owing to its current key management, and $394,274 (December 31, 2023 - $314,136) owing to its former key management. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment or “due on demand”.

 

c)During the three and nine months ended September 30, 2024 and 2023, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

 

   Three months ended
September 30,		   Nine months ended
September 30,		 
   2024   2023   2024   2023 
2227929 Ontario Inc.  $30,000   $30,000   $90,000   $90,000 
   $30,000   $30,000   $90,000   $90,000 

 

The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at September 30, 2024, the Company had a payable balance of $327,700 (December 31, 2023 - $226,000) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former director and former officer of the Company, is also a director of 2227929 Ontario Inc.

 

As at September 30, 2024, the Company incurred $24,599 (September 30, 2023 - $102,546) in legal fees to a firm in which a director of the Company is a partner. Included in accounts payable and accrued liabilities were legal expenses of $918 (December 31, 2023 – $165,868) incurred in the ordinary course of business at a law firm where a director of the company is a Partner.

 

During the nine months ended September 30, 2024, Valour purchased 1,320,130 USDT for EUR 1,213,237 from a former director of Valour.

 

During the nine months ended September 30, 2023, the Company paid Valour Holdco US$20,000,000 related to DeFi Alpha trading profits.

 

During the year ended December 31, 2023, Officers of the Company received 4,377,139 common shares to settle $413,868 of outstanding payables.

 

During the year ended December 31, 2023, the Company also issued 2,724,941 common shares of the Company to former key management at an issue price of $0.11 per share to settle existing debt of $231,620 resulting in a loss on settlement of debt in the amount of $68,124.

 

Included in accounts payable and accrued liabilities were expenses of GBP 44,228 ($79,964) (December 31, 2023 - $74,466) expenses owed to Vik Pathak, a former director and officer of the Company.

 

See Note 17.

 

The Company has a diversified base of investors. To the Company’s knowledge, no one holds more than 10% of the Company’s shares on a basic share and partially diluted share basis as at September 30, 2024.

 

Valour Inc. holds 4,000,000 common shares of the Company.

 

37

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

21.Related party disclosures (continued)

 

d)The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of September 30, 2024 and December 31, 2023.

 

      Estimated 
Investment  Nature of relationship to invesment  Fair value 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $1,697,640 
Aminna Bank AG *  Former Director (Olivier Roussy Newton) of investee   40,090,000 
ZKP*  Director (Olivier Roussy Newton) of investee   1,349,900 
Total investment - September 30, 2024     $43,137,540 

 

*Private companies

 

Investment  Nature of relationship to invesment  Estimated
Fair value		 
Brazil Potash Corp.*  Officer (Ryan Ptolemy) of Investee  $2,138,380 
Aminna Bank AG (formerlt SEBA Bank AG)*  Former Director (Olivier Roussy Newton) of investee   39,395,000 
Total investment - December 31, 2023     $41,533,380 

 

*Private companies

 

22.Commitments and contingencies

 

The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $2,312,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these condensed consolidated interim financial statements. Minimum commitments remaining under these contracts were approximately $974,000, all due within one year.

 

The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

 

23.Operating segments

 

Geographical information

 

The Company operates in Canada where its head office is located and in the Untied States, Bermuda and Cayman

 

Islands where its operating business are located. Cayman Islands operates the Company’s ETPs business line which involves issuing ETPs, hedging against the underlying digital asset, lending and staking of digital assets and management fees earned on the ETPs. Bermuda operates the Company’s Venture portfolio and node business lines. The United States operates the Company’s research firm. Information about the Company’s assets by geographical location is detailed below.

 

September 30, 2024  Canada   United States   Bermuda   Cayman Islands   Total 
Cash   188,806    443,358    -    20,070,032    20,702,196 
Amounts receivable   -    131,745    -    949,330    1,081,075 
Prepaid expenses   1,709,592    40,762    -    2,316,326    4,066,680 
Equity investments   -    -    -    274,098,333    274,098,333 
Digital Assets   635,402    -    168,578    429,523,708    430,327,688 
Property, plant and equipment   -    -    -    748    748 
Other non-current assets   94,372,932    -    -    1,759,761    96,132,692 
Total assets   96,906,732    615,865    168,578    728,718,238    826,409,413 

 

38

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

23.Operating segments (continued)

 

December 31, 2023  Canada   Bermuda   Cayman
Islands		   Total 
Cash   59,069    -    6,668,412    6,727,481 
Amounts receivable   6,878    -    47,159    54,037 
Public investments   -    -    -    - 
Prepaid expenses   77,521    -    1,432,303    1,509,824 
Digital Assets   503,669    218,131    489,143,837    489,865,637 
Property, plant and equipment   -    5,073    2,606    7,679 
Other non-current assets   92,578,559    -    1,216,890    93,795,449 
Total assets   93,225,696    223,204    498,511,207    591,960,107 

 

Information about the Company’s revenues and expenses by subsidiary are detailed below:

 

For the nine months ended September 30, 2024  DeFi   Reflexivity   DeFi Bermuda   Defi Alpha   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digital assets   131,733    14,050    (59,430)   132,121,555    48,015,772    180,223,680 
Realized and net change in unrealized gains and (losses) on ETP   -    -    -    -    (175,665,345)   (175,665,345)
Staking and lending income   -    -    61    -    22,865,290    22,865,351 
Management fees   -    -    -    -    5,946,327    5,946,327 
Research revenue   -    1,102,192    -    -    -    1,102,192 
Node revenue   -    -    4,891    -    -    4,891 
Realized (loss) on investments, net   -    -    -    -    634,271    634,271 
Unrealized (loss) on investments, net   267,912    -    -    -    (621,390)   (353,478)
Unrealized gain on equity investments   -    -    -    -    14,738,452    14,738,452 
Interest income   4,268    -    -    -    -    4,268 
Total revenue   403,913    1,116,242    (54,477)   132,121,555    (84,086,623)   49,500,610 
Expenses                              
Operating, general and administration   5,720,821    963,411    12,631    27,172,254    5,881,896    39,751,013 
Share based payments   17,014,376    -    -    -    -    17,014,376 
Depreciation - property, plant and equipment   -    -    5,073    -    1,856    6,929 
Amortization - intangibles   1,568,925    -    -    -    -    1,568,925 
Finance costs   0    -    -    -    3,450,634    3,450,634 
Transaction costs   21,632    -    -    857,048    2,691,133    3,569,813 
Foreign exchange (gain) loss   27,223    -    -    -    (15,151,268)   (15,509,641)
Impairment loss   4,962,021    -    -    -    -    4,962,021 
Total expenses   29,314,998    963,411    17,704    28,029,302    (3,125,749)   54,814,070 
Income (loss) before other item   (28,911,086)   152,831    (72,181)   104,092,253    (80,960,875)   (5,313,461)
Other comprehensive income (loss)                              
Foreign currency translation (loss) gain   -    (1,184)   4,226    -    (2,094,100)   (2,091,058)
Net (loss) income and comprehensive (loss) income for the period   (28,911,086)   151,647    (67,954)   104,092,253    (83,054,975)   (7,404,519)

 

39

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

23.Operating segments (continued)

 

For the nine months ended September 30, 2023  DeFi   DeFi
Bermuda		   Valour Inc.   Total 
Realized and net change in unrealized gains and (losses) on digital assets   -    (19,184)   39,338,609    39,319,425 
Realized and net change in unrealized gains and (losses) on ETP payables   -    -    (40,424,382)   (40,424,382)
Realized (loss) of derivative asset   -    -    -    - 
Staking and lending income   -    162    2,083,184    2,083,346 
Management fees   -    -    703,538    703,538 
Node revenue   -    8,256    -    8,256 
Realized (loss) on investments, net   -    -    (4,683)   (4,683)
Unrealized (loss) on investments, net   292,092    -    23,988    316,080 
Interest income   809    -    -    809 
Total revenue   292,901    (10,766)   1,720,254    2,002,389 
Expenses                    
Operating, general and administration   2,434,496    30,321    4,653,874    7,118,691 
Share based payments   1,830,209    -    -    1,830,209 
Depreciation - property, plant and equipment   -    7,852    1,856    9,709 
Amortization - intangibles   1,528,725    -    -    1,528,725 
Finance costs        -    2,644,105    2,644,105 
Transaction costs   -    -    484,619    484,619 
Foreign exchange (gain) loss   (13,346)   -    8,293,829    8,280,483 
Impairment loss   -    -    -    - 
Income (loss) before other item   (5,487,183)   (48,939)   (14,358,029)   (19,894,152)
Loss on settlement of debt   (172,093)             (172,093)
Income (loss) before other item   (5,659,276)   (48,939)   (14,358,029)   (20,066,245)
Other comprehensive loss                    
Foreign currency translation (loss) gain   -    (399)   (102,442)   (102,841)
Net (loss) income and comprehensive (loss) income for the period   (5,659,276)   (49,338)   (14,460,471)   (20,169,086)

 

24.Earning per share

 

The following table presents the calculation of basic and fully diluted earnings per common share for the three and nine months ended September 30, 2024:

 

   Three months ended
September 30,		   Nine months ended
September 30,		 
   2024   2023   2024   2023 
Numerator:                
Net (loss) income  $21,018,321   $(2,890,441)  $(5,313,461)  $(20,066,245)
Denominator:                    
Weighted average number of common shares - basic   298,101,066    224,661,137    291,401,579    223,084,360 
Weighted average effect of dilutive warrants*   36,195,371    -    -    - 
Weighted average effect of dilutive options*   14,495,186    -    -    - 
Weighted average effect of dilutive DSUs*   6,511,751    -    -    - 
Weighted average number of common shares - diluted   355,303,374    224,661,137    291,401,579    223,084,360 
                     
Basic earnings per share  $0.07   $(0.01)  $(0.02)  $(0.09)
Diluted earnings per share  $0.06   $(0.01)  $(0.02)  $(0.09)

 

*Maximum dilution if all warrants, options and DSUs were exercised would be 83,498,836

 

40

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

25.Investments in equity instruments at fair value through profit and loss

 

   Current   Long Term   Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   207,027.0014   $31,863,721    258,409.1579   $39,771,998    465,436.1593   $71,635,719 
Fund A - Avalance (AVAX)   107,474.4900   $2,990,447    823,971.1100   $22,926,755    931,445.6000   $25,917,202 
    314,501.4914   $34,854,168    1,082,380.2679   $62,698,753    1,396,881.7593   $97,552,921 
Fund B - Solana (SOL)   547,022.9000   $84,192,812    600,039.2000   $92,352,600    1,147,062.1000   $176,545,412 
Total       $119,046,980        $155,051,353        $274,098,333 

 

Fund A

 

During the nine months ended September 30, 2024, the Company through a subsidiary, invested US$61,741,683 in three tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company. The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana and 931,446 Avalanche at US$11 per Avalanche.

 

The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The Avalanche acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Avalanche is locked and will become distributable on the same unlocking schedule as the Avalanche. The Avalanche will be released in weekly increments July 10, 2025 and continuing through July 1, 2027.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

Fund B

 

During the nine months ended September 30, 2024, the Company invested through a subsidiary, US$112,072,458 in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company.

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Soltana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25 % of the Soltana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

26.Unrealized gains on investments in equity instruments at fair value through profit and loss

 
   Three months ended
September 30,		   Nine months ended
September 30,		 
   2024   2023   2024   2023 
Unrealized gain on equity investment   29,191,921                   -    14,738,452                 - 
   $29,191,921   $-   $14,738,452   $- 

 

41

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

27.Restatement of financial results as at and for the three and nine months ended September 30, 2023

 

The Company has restated its September 30, 2023 consolidated statement of financial position, consolidated statement of operations and comprehensive loss and consolidated statement of cash flow to correct material errors and omissions in its prior filing. The following tables present the impact of the restatement adjustments on the Company’s previously issued consolidated financial statements for the three and nine months ended September 30, 2023:

 

a.To impair the digital assets held at Genesis to its recoverable amount of $8,780,131 (US$6,525,067).

 

b.To revalue the fair value of SEBA Bank AG to $25,969,500.

 

Condensed Consolidated Interim Statements of Financial Position

(Expressed in Canadian dollars)

 

      September 30,
2023		       September 30,
2023		 
   Note  $       $ 
      As previousliy reported   Restatement   As restated 
Assets               
Current               
Cash and cash equivalents  16   2,144,478    -    2,144,478 
Amounts receivable  4,16   6,125    -    6,125 
Public investments, at fair value through profit and loss  3,16   -    -    - 
Prepaid expenses  5   417,276    -    417,276 
Digital assets  6,16   104,613,517    (8,780,131)   95,833,386 
Digital assets loaned  6   60,877,229    -    60,877,229 
Digital assets staked  6   13,175,343    -    13,175,343 
Total current assets      181,233,968    (8,780,131)   172,453,837 
                   
Private investments, at fair value through profit and loss  3,16,19   41,307,894    (10,995,500)   30,312,394 
Digital assets  6   43,920    -    43,920 
Equipment      10,917    -    10,917 
Right of use assets      -    -    - 
Intangible assets  7   4,052,463    -    4,052,463 
Goodwill      46,712,027    -    46,712,027 
Total assets      273,361,189    (19,775,631)   253,585,558 
Liabilities and shareholders’ equity                  
Current liabilities                  
Accounts payable and accrued liabilities  8,16,19   6,699,498    -    6,699,498 
Loans payable  9,16   56,718,091    -    56,718,091 
ETP holders payable  10,16   179,148,481    -    179,148,481 
Total current liabilities      242,566,070    -    242,566,070 
Non-current liabilities                  
Lease liabilities      -    -    - 
Total liabilities      242,566,070    -    242,566,070 
Shareholders’ equity                  
Common shares  14(b)(c)   167,708,003    -    167,708,003 
Preferred shares      4,321,350    -    4,321,350 
Share-based payments reserves  15   25,158,931    -    25,158,931 
Accumulated other comprehensive income      (3,099,059)   -    (3,099,059)
Non-controlling interest      1,179    -    1,179 
Deficit      (163,295,286)   (19,775,631)   (183,070,917)
Total equity      30,795,119    (19,775,631)   11,019,488 
Total liabilities and equity      273,361,189    (19,775,631)   253,585,558 

 

42

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

27.Restatement of financial results as at and for the three and nine months ended September 30, 2023 (continued)

 

Condensed Consolidated Interim Statements of Operations and Comprehensive (Loss)

(Expressed in Canadian dollars)

 

      Three months ended September 30,   Nine months ended September 30,     
      2023       2023   2023       2023 
   Note  $   $   $   $   $   $ 
      reported   Restatement   As restated   As previousliy reported   Restatement   As restated 
Revenues                           
Realized and net change in unrealized gains and (losses) on digital assets  11   (13,186,005)   2,089,845    (11,096,160)   45,666,208    (6,346,783)   39,319,425 
Realized and net change in unrealized gains and (losses) on ETP payables  12   16,105,048    -    16,105,048    (40,424,382)   -    (40,424,382)
Realized and unrealized (loss) on derivative assets      -    -    -    -    -    - 
Staking and lending income      746,871    -    746,871    2,083,346    -    2,083,346 
Management fees      243,845    -    243,845    703,538    -    703,538 
Node revenue      3,280    -    3,280    8,256    -    8,256 
Realized (loss) on investments, net  3   (658)   -    (658)   (4,683)   -    (4,683)
Unrealized gain (loss) on investments, net  3   (2,493,106)   2,494,324    1,217    (2,178,244)   2,494,324    316,080 
Interest income      552    -    552    809    -    809 
Total revenues      1,419,826    4,584,169    6,003,995    5,854,848    (3,852,459)   2,002,389 
Expenses                                 
Operating, general and administration  13,19   3,246,755    -    3,246,755    7,118,691    -    7,118,691 
Share based payments  15   387,329    -    387,329    1,830,209    -    1,830,209 
Depreciation - property, plant and equipment      3,236    -    3,236    9,709    -    9,709 
Depreciation - right of use assets      -    -    -    -    -    - 
Amortization - intangibles  7   509,575    -    509,575    1,528,725    -    1,528,725 
Finance costs      1,082,576    -    1,082,576    2,644,105    -    2,644,105 
Transaction costs      164,900    -    164,900    484,619    -    484,619 
Foreign exchange loss      3,526,454    -    3,526,454    8,280,483    -    8,280,483 
Total expenses      8,920,825    -    8,920,825    21,896,541    -    21,896,541 
Income (loss) before other item      (7,500,999)   4,584,169    (2,916,830)   (16,041,693)   (3,852,459)   (19,894,152)
Loss on settlement of debt      26,389    -    26,389    (172,093)   -    (172,093)
Net (loss) for the period      (7,474,610)   4,584,169    (2,890,441)   (16,213,786)   (3,852,459)   (20,066,245)
Other comprehensive loss                                 
Foreign currency translation gain (loss)      (1,829,345)   -    (1,829,345)   (102,841)   -    (102,841)
Net (loss) and comprehensive income (loss) for the period      (9,303,955)   4,584,169    (4,719,786)   (16,316,627)   (3,852,459)   (20,169,086)
Net (loss) attributed to:                                 
Owners of the parent      (7,475,789)   4,584,169    (2,891,620)   (16,214,965)   (3,852,459)   (20,067,424)
Non-controlling interests      1,179         1,179    1,179         1,179 
       (7,474,610)   4,584,169    (2,890,441)   (16,213,786)   (3,852,459)   (20,066,245)
Other comprehensive (loss) attributed to:                                 
Owners of the parent      (9,305,134)   4,584,169    (4,720,965)   (16,317,806)   (3,852,459)   (20,170,265)
Non-controlling interests      1,179         1,179    1,179         1,179 
       (9,303,955)   4,584,169    (4,719,786)   (16,316,627)   (3,852,459)   (20,169,086)
(Loss) per share                                 
Basic      (0.03)        (0.01)   (0.07)        (0.09)
Diluted      (0.03)        (0.01)   (0.07)        (0.09)
                                  
Weighted average number of shares outstanding:                                 
Basic      224,661,137         224,661,137    223,084,360         223,084,360 
Diluted      224,661,137         224,661,137    223,084,360         223,084,360 

 

43

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

27.Restatement of financial results as at and for the three and nine months ended September 30, 2023 (continued)

 

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in Canadian dollars)

 

           Nine months ended
September 30,		 
       2023       2022 
   Note   $   $   $ 
       As previousliy reported   Restatement   As restated 
Cash (used in) provided by operations:                
Net (loss) for the period      $(16,213,786)  $(3,852,459)  $(20,066,245)
Adjustments to reconcile net (loss) income to cash (used in) operating activities:                   
Share-based payments  15    1,830,209    -    1,830,209 
Loss on debt for shares       172,093    -    172,093 
Interest expense  9    2,644,105    -    2,644,105 
Interest paid       (2,644,105)   -    (2,644,105)
Depreciation - Property, plant & equipment       9,709    -    9,709 
Depreciation - right of use assets       -    -    - 
Amortization - Intangible asset  7    1,528,725    -    1,528,725 
Realized loss on investments, net       4,683    -    4,683 
Unrealized loss (gain) on investments, net       2,178,244    (2,494,324)   (316,080)
Realized and net change in unrealized (gains) and loss on digital assets  11    (45,666,208)   6,346,783    (39,319,425)
Realized and net change in unrealized (gains) and loss on ETP  12    40,424,382    -    40,424,382 
Realized and unrealized loss of derivative assets       -    -    - 
Staking and lending income       (2,083,346)   -    (2,083,346)
Node revenue       (8,256)   -    (8,256)
Management fees       (703,538)   -    (703,538)
Unrealized loss (gain) on foreign exchange       (342,028)   -    (342,028)
        (18,869,117)   -    (18,869,117)
Adjustment for:                   
Purchase of digital assets       (88,193,590)   -    (88,193,590)
Disposal of digital assets       64,269,115    -    64,269,115 
Purchase of investments       -    -    - 
Disposal of investments       12,407    -    12,407 
Change in amounts receivable       60,977    -    60,977 
Change in prepaid expenses and deposits       147,418    -    147,418 
Change in accounts payable and accrued liabilities       2,533,457    -    2,533,457 
Net cash (used in) operating activities       (40,039,333)        (40,039,333)
Financing activities                   
Proceeds from ETP holders       150,736,395    -    150,736,395 
Payments to ETP holders       (117,547,052)   -    (117,547,052)
Loan Payable       4,260,870    -    4,260,870 
Proceeds from exercise of warrants  15    -    -    - 
Proceeds from exercise of options  15    -    -    - 
Shares repurchased pursuant to NCIB       -    -    - 
Net cash provided by financing activities       37,450,213         37,450,213 
                    
Effect of exchange rate changes on cash and cash equivalents       (172,567)   -    (172,567)
Change in cash and cash equivalents       (2,761,687)   -    (2,761,687)
Cash, beginning of period       4,906,165    -    4,906,165 
Cash and cash equivalents, end of period      $2,144,478   $-   $2,144,478 

  

44

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

28.Restatement of financial results as at and for the three and nine months ended September 30, 2024

 

The Company has restated its September 30, 2024 condensed consolidated interim statement of financial position, condensed consolidated interim statement of operations and comprehensive loss and condensed consolidated interim statement of cash flow to correct material errors and omissions in its prior filing. The following tables present the impact of the restatement adjustments on the Company’s previously issued condensed consolidated interim financial statements for the three and nine months ended September 30, 2024:

 

a.To reclassify current equity investments of $119,046,980 and long-term locked equity investments of $155,051,353 from current digital assets

 

b.To reclassify $1356,571,616 of unrealized gains from digital assets to unrealized gains from equity investments

 

c.To record DLOM of $102,549,835 for equity investments

 

Condensed Consolidated Interim Statements of Financial

Position (Expressed in Canadian dollars)

 

   September 30,
2024		       September 30,
2024		 
   $       $ 
   As previousliy reported   Restatement   As restated 
Assets            
Current            
Cash and cash equivalents   20,702,196         20,702,196 
Amounts receivable   1,081,075         1,081,075 
Prepaid expenses   4,066,680         4,066,680 
Digital assets   227,317,209    (661,811)   226,655,398 
Digital assets loaned   38,660,569         38,660,569 
Digital assets staked   540,243,221    (375,986,357)   164,256,864 
Equity investments, at fair value through profit and loss, staked   -    119,046,980    119,046,980 
Total current assets   832,070,950    257,601,188    574,469,762 
Private investments, at fair value through profit and loss   44,351,316         44,351,316 
Digital assets   754,857         754,857 
Equity investments, at fair value through profit and loss, staked   -    155,051,353    155,051,353 
Equipment   748         748 
Intangible assets   2,432,963         2,432,963 
Goodwill   49,348,414         49,348,414 
Total assets   928,959,248    102,549,835    826,409,413 
Liabilities and shareholders’ equity               
Current liabilities               
Accounts payable and accrued liabilities   5,228,686         5,228,686 
Loans payable   13,499,000         13,499,000 
ETP holders payable   770,485,178         770,485,178 
Deferred revenue   548,262         548,262 
Total current liabilities   789,761,126    -    789,761,126 
Shareholders’ equity               
Common shares   182,702,414         182,702,414 
Preferred shares   4,321,350         4,321,350 
Share-based payments reserves   41,699,333         41,699,333 
Accumulated other comprehensive income   (3,743,605)        (3,743,605)
Non-controlling interest   (380)        (380)
Deficit   (85,780,990)   (102,549,835)   (188,330,825)
Total equity   139,198,122    102,549,835    36,648,287 
Total liabilities and equity   928,959,248    102,549,835    826,409,413 

 

45

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

28.Restatement of financial results as at and for the three and nine months ended September 30, 2024 (continued)

 

Condensed Consolidated Interim Statements of Operations and Comprehensive (Loss)

(Expressed in Canadian dollars)

 

   Three months ended September 30,   Nine months ended September 30, 
   2024       2024   2024       2024 
   $   $   $   $   $   $ 
   As previousliy reported   Restatement   As restated   As previousliy reported   Restatement   As restated 
Revenues                        
Realized and net change in unrealized gains and (losses) on digital assets   52,301,189    (48,475,250)   3,825,939    282,773,515    (136,571,616)   146,201,899 
Realized and net change in unrealized gains and (losses) on ETP payables   (41,382,409)        (41,382,409)   (160,541,299)        (160,541,299)
Staking and lending income   8,794,328         8,794,328    22,865,352         22,865,352 
Management fees   2,069,013         2,069,013    5,946,327         5,946,327 
Research revenue   261,741         261,741    1,102,192         1,102,192 
Node revenue   182         182    4,891         4,891 
Realized (loss) on investments, net   -         -    634,271         634,271 
Unrealized gain (loss) on investments, net   2,144,940         2,144,940    (353,478)        (353,478)
Unrealized gain on equity investments   -    48,475,250    48,475,250    -    34,021,781    34,021,781 
Interest income   2,756         2,756    4,268         4,268 
Total revenues   24,191,741    -    24,191,741    152,436,040    (102,549,835)   49,886,205 
Expenses                              
Operating, general and administration   6,270,895         6,270,895    39,751,013         39,751,013 
Share based payments   11,962,871         11,962,871    17,014,376         17,014,376 
Depreciation - equipment   1,601         1,601    6,929         6,929 
Depreciation - right of use assets   -         -    -         - 
Amortization - intangibles   537,546         537,546    1,568,925         1,568,925 
Finance costs   783,865         783,865    3,450,634         3,450,634 
Transaction costs   1,989,609         1,989,609    3,569,813         3,569,813 
Foreign exchange (gain) loss   (22,265,251)        (22,265,251)   (15,124,045)        (15,124,045)
Impairment loss   -         -    4,962,021         4,962,021 
Total expenses   (718,864)   --    718,864    55,199,666    -    55,199,666 
Net (loss) for the period   24,910,605    -    24,910,605    97,236,374    (102,549,835)   (5,313,461)
Other comprehensive loss                              
Foreign currency translation gain (loss)   (932,469)        (932,469)   (2,091,058)        (2,091,058)
Net (loss) and comprehensive income (loss) for the period   23,978,136    -    23,978,136    95,145,316    (102,549,835)   (7,404,519)
Net (loss) attributed to:                              
Owners of the parent   24,910,528         24,910,528    97,231,883         97,231,883 
Non-controlling interests   77         77    4,491         4,491 
    24,910,605    -    24,910,605    97,236,374    -    97,236,374 
                               
Net (loss) and comprehensive income (loss) attributed to:                              
Owners of the parent   23,978,059         23,978,059    95,140,825         95,140,825 
Non-controlling interests   77         77    4,491         4,491 
    23,978,136    -    23,978,136    95,145,316    -    95,145,316 
                               
(Loss) per share                              
Basic   0.08         0.08    0.33         (0.02)
Diluted   0.07         0.07    0.33         (0.02)
                               
Weighted average number of shares outstanding:                              
Basic   298,101,066         298,101,066    291,401,579         291,401,579 
Diluted   355,303,374         355,303,374    291,401,579         291,401,579 

 

See accompanying notes to these condensed consolidated interim financial statements

 

46

 

 

DeFi Technologies Inc.

Notes to the condensed consolidated interim financial statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars unless otherwise noted)

 

 

28.Restatement of financial results as at and for the three and nine months ended September 30, 2024 (continued)

 

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in Canadian dollars)

 

   Nine months ended September 30, 
   2024       2024 
   $   $   $ 
   As previousliy reported   Restatement   As restated 
Cash (used in) provided by operations:            
Net (loss) for the period  $97,236,374   $(102,549,835)  $(5,313,461)
Adjustments to reconcile net (loss) income to cash (used in)               
operating activities:               
Share-based payments   17,014,376         17,014,376 
Loss on debt for shares   -         - 
Impairment loss   4,962,021         4,962,021 
Interest expense   -         - 
Interest income   -         - 
Depreciation - equipment   6,929         6,929 
Amortization - Intangible asset   1,568,925         1,568,925 
Realized loss on investments, net   (634,271)        (634,271)
Unrealized (gain) loss on investments, net   353,478         353,478 
Realized and net change in unrealized (gains) and loss on digital assets   (282,773,515)   136,571,616    (146,201,899)
Realized and net change in unrealized (gains) and loss on ETP   160,541,299         160,541,299 
Unrealized gains on equity investments   -    (34,021,781)   (34,021,781)
Staking and lending income   (22,865,352)        (22,865,352)
Management fees   (5,946,327)        (5,946,327)
Node revenue   (4,891)        (4,891)
Digital asset transaction costs   (2,725,932)        (2,725,932)
Unrealized loss (gain) on foreign exchange   (602,018)        (602,018)
    (33,868,906)   -    (33,868,906)
Adjustment for:               
Purchase of digital assets   (585,369,955)   238,090,603    (347,279,352)
Disposal of digital assets   603,388,535         603,388,535 
Purchase of equity investments   -    (238,090,603)   (238,090,603)
Purchase of investments   (1,360,400)        (1,360,400)
Disposal of investments   752,230         752,230 
Change in amounts receivable   (923,514)        (923,514)
Change in prepaid expenses and deposits   (2,535,408)        (2,535,408)
Change in accounts payable and accrued liabilities   (3,948,356)        (3,948,356)
Change in deferred revenue   195,036         195,036 
Net cash (used in) operating activities   (23,670,738)   -    (23,670,738)
Investing activities               
Cash received from acquisition of subsidiary   319,643         319,643 
    319,643    -    319,643 
Financing activities               
Proceeds from ETP holders   489,877,373         489,877,373 
Payments to ETP holders   (409,290,734)        (409,290,734)
Loan payable   -         - 
Loan repayment   (43,871,750)        (43,871,750)
Proceeds from exercise of options   1,051,950         1,051,950 
Proceeds from exercise of warrants   1,505,712         1,505,712 
NCIB   (2,025,315)        (2,025,315)
Net cash provided by financing activities   37,247,236    -    37,247,236 
Effect of exchange rate changes on cash and cash equivalents   78,573    -    78,573 
Change in cash and cash equivalents   13,974,714    -    13,974,714 
Cash, beginning of period   6,727,482    -    6,727,482 
Cash and cash equivalents, end of period  $20,702,196   $-   $20,702,196 

 

47

Exhibit 99.137

 

 

 

 

 

AMENDED AND RESTATED MANAGEMENT’S DISCUSSION AND ANALYSIS

 

 

 

 

 

Nine months ended September 30, 2024

 

 

 

 

 

Background

 

 

This Management’s Discussion and Analysis (“MD&A”) has been prepared based on information available to DeFi Technologies Inc. (“we”, “our”, “us”, “DeFi” or the “Company”) containing information through April 14, 2025, unless otherwise noted. The MD&A provides a detailed analysis of the Company’s operations and compares its financial results for the three and nine months ended September 30, 2024 and 2023. The financial statements and related notes of DeFi have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS”). Please refer to the notes of the December 31, 2023 annual audited consolidated financial statements for disclosure of the Company’s significant accounting policies. The Company’s presentation currency is the Canadian dollar. Unless otherwise noted, all references to currency in this MD&A refer to Canadian dollars.

 

Additional information, including our press releases, have been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) and is available online under the Company’s SEDAR profile at www.sedar.com.

 

Cautionary statement regarding forward looking information

 

 

Except for statements of historical fact relating to DeFi certain information contained herein constitutes forward-looking information under Canadian securities legislation. The use of any of the words “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “goal”, “predict”, “potential”, “should”, “believe”, “intend” or the negative of these terms and similar expressions are intended to identify forward-looking information and statements. The information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information and statements. Such statements reflect the Company’s current views with respect to certain events, and are subject to certain risks, uncertainties and assumptions. Many factors could cause the Company’s actual results, performance, or achievements to vary from those described in this MD&A. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this MD&A as intended, planned, anticipated, believed, estimated, or expected. With respect to the forward-looking statements contained herein, although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the Company’s lack of operating history as an investment company; the volatility of the market price of the common shares of the Company; risks relating to the trading price of the common shares of the Company relative to net asset value; risks relating to available investment opportunities and competition for investments; the volatility of the share prices of investments in public companies; the dependence on management, directors and the investment committee; risks relating to additional funding requirements; potential conflicts of interest and potential transaction and legal risks, conflict of interests and litigation risks, as more particularly described under the heading “Risk Factors” in this MD&A and in the Company’s Annual Information Form (“AIF”) filed with Canadian securities regulators. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.

 

2

 

 

Restatement of previously issued condensed interim consolidated financial statements

 

 

Change in Valuation and classification of Equity Investments in Digital Assets, at FVTPL

 

During our audit of the Fiscal 2024 Financial Statements, we determined that locked tokens held by the Company were incorrectly accounted for in the Company’s September 30, 2024 financial statements.

 

During its quarter-ended June 30, 2024, the Company acquired interests two private investments funds designed to acquire 1,614,608.41 Solana and 931,445.6 Avalanche tokens from a bankrupt company.

 

The Company has re-filed is September 30, 2024 interim condensed consolidated financial statements (the “Refiled Q3 2024 FS”) to apply a discount for lack of marketability (“DLOM”) and adjust the current/non-current classification of its investments in equity investments in digital assets at fair value through profit and loss. The re-filed financial statements include the following adjustments: a) application of a DLOM to reduce total assets and equity by $102,549,835 b) reclassification of $155,051,353 of current assets to non-current assets c) increase in the three and six months ended net loss of $3,892,238 and $102,549,835 respectively due to the application of the DLOM.

 

The Company reassessed the application of IFRS on the accounting for Equity Investments, at fair value through profit and loss (“FVTPL”) and determined that the appropriate accounting treatment is to classify the investments in the funds directly as financial assets as defined by IAS 32 and within the scope of IFRS 9. This is because such investments represent an equity interest in another entity rather than a direct interest in the underlying tokens. The tokens owned by the funds are subject to a lock up schedule extending to 2028 and as a result the Company has classified its equity investments as current and non-current reflecting the value of tokens which will unlock in the coming twelve months (current) and those that will unlock between 2026 through 2028 (non-current).

 

September 30, 2023 Restatement

 

The Company reassessed the application of IFRS on the accounting for the valuation of the Company’s holdings in 3iQ and Seba Bank AG as well as the valuation of Valour’s Genesis loan and collateral. As a result of the restatement: (i) digital assets was reduced by $8,780,131 to $95,833,386; and (ii) private investments, at fair value through profit and loss was reduced by $10,995,500 to $30,312,394 as at September 30, 2023, with an retained earnings impact at September 30, 2023 of $19,775,631. For more details, please refer to Note 25 of the condensed consolidated interim financial statements of the Company for three and nine months ended September 30, 2024 and 2023. The change in accounting is considered the correction of an error for accounting purposes and, as such, required a restatement of the financial statements for the three and nine months ended September 30, 2023. Due to the accounting error, the Company’s management has concluded that there was a material weakness in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements and Management’s Discussion and Analysis will not be prevented or detected on a timely basis.

 

3

 

 

Overview of the company

 

 

The Company is a publicly listed issuer on the CBOE Canada trading under the symbol “DEFI”. The Company is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance. The Company’s mission is to expand investor access to industry- leading decentralized technologies which it believes lie at the heart of the future of finance. On behalf of its shareholders and investors, it identifies opportunities and areas of innovation and builds and invests in new technologies and ventures in order to provide trusted, diversified exposure across the decentralized finance ecosystem. The Company does so through six distinct business lines: Valour Asset Management, DeFi Alpha, Stillman Digital, DeFi Ventures, DeFi Infrastructure and Reflexivity LLC.

 

The Company’s condensed consolidated interim financial statements have been prepared in accordance

 

with IFRS applicable to a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying condensed consolidated interim financial statements.

 

Investment pillars

 

 

DeFi generates revenue through six core pillars:

 

Valour Asset Management

 

The Company, through its 100% ownership of Valour Inc., is developing Exchange Traded Products (“ETPs”) that synthetically track the value of a single DeFi protocol or a basket of protocols. ETPs simplify the ability for retail and institutional investors to gain exposure to DeFi protocols or basket of protocols as it removes the need to manage a wallet, two-factor authentication, various logins, and other intricacies that are linked to managing a decentralized finance protocol portfolio.

 

DeFi Alpha

 

Defi Alpha, a specialized arbitrage trading desk with the sole focus is to identify low-risk arbitrage opportunities within the crypto ecosystem. The Defi Alpha trading desk is strategically designed to focus on identifying and capitalizing upon arbitrage opportunities within the dynamic digital assets market. Utilizing advanced algorithmic strategies and in-depth market analysis, the trading desk aims to generate alpha by exploiting inefficiencies and discrepancies in digital asset pricing. The primary focus is on arbitrage trading opportunities in both centralized and decentralized markets, ensuring minimal market or protocol exposure to mitigate downside revenue volatility.

 

Stillman Digital

 

Stillman Digital is a leading digital asset liquidity provider that offers limitless liquidity solutions for businesses, focusing on industry-leading trade execution, settlement and technology.

 

DeFi Ventures

 

The Company, whether by itself or through its subsidiaries, invests in various companies and leading protocols across the decentralized finance ecosystem to build a diversified portfolio of decentralized finance assets.

 

4

 

 

DeFi Infrastructure

 

The Company’s DeFi Infrastructure line of business offer governance services and products within the DeFi ecosystem. The Company uses its expertise in DeFi to offer node management of decentralized protocols to support governance, security and transaction validation for their networks.

 

Reflexivity LLC

 

The Company’s Reflexivity LLC line of business specializes in producing cutting-edge research reports for the cryptocurrency industry. Reflexivity has also focused on creating a large third-party distribution channel for its research, which has been accomplished by partnering with platforms such as TradingView, eToro and others.

 

Highlights For The Nine Months Ended September 30, 2024 And Subsequent Events:

 

 

●On February 7, 2024, the Company has completed its acquisition of Reflexivity Research LLC, a premier private research firm that specializes in producing research reports for the cryptocurrency industry. Reflexivity, co-founded by Anthony Pompliano and Will Clemente, offers crypto-native research designed for traditional finance investors. Reflexivity's research is distributed via their homepage, a premium membership portal, and an email list of over 55,000 investors which generates a positive cash flow for Reflexivity.

 

●On February 9, 2024, the Company completed the acquisition of intellectual property (IP) from prominent Solana developer Stefan Jorgensen. The IP acquired encompasses a suite of sophisticated features, including advanced liquidity provisioning, innovative trading strategies and technologies, along with the distribution, management and analytics of decentralized financial data. These elements are tailored to support the Solana-focused trading desk operated by both Defi Technologies and Valour Inc.

 

●On February 20, 2024, the Company launched its physical-backed staking exchange-traded product (ETP) for the Internet Computer Protocol (ICP) token. The Valour Internet Computer Protocol ETP (ISIN: GB00BS2BDN04) provides retail and institutional investors with trusted, secure and diversified exposure to the innovative and fast-growing Internet Computer ecosystem. The Internet Computer adds autonomous serverless cloud functionality to the public Internet — making it possible to build almost any system or service entirely on a decentralized network. Developers and enterprises no longer have to rely on legacy information technology systems that are susceptible to hacks and downtime. The Internet Computer is a tamper-proof and unstoppable network, a new paradigm of computing power.

 

●On March 18, 2024, the Company's subsidiary Valour Inc. partnered with Bitcoin Suisse AG and Stoxx in launching the innovative 1Valour Stoxx Bitcoin Suisse Digital Asset Blue Chip ETP. This pioneering product marks a significant step forward in the digital asset market, providing a diversified investment approach to the top blue-chip digital assets in a simple and secure manner.

 

●On April 8, 2024, the Company opened a new trading desk in the United Arab Emirates (UAE). As part of this strategic initiative, the Company aims to expand its assets under management (AUM) by launching 15 new ETP products in 2024, in addition to the 17 already listed in Europe, followed by another 30 in 2025.

 

●On April 17, 2024, the Company entered into a collaboration with the Core Foundation to develop innovative ETPs (exchange-traded products) that leverage Core Chain's unique blockchain capabilities, introducing a first-of-its-kind yield-bearing BTC ETP and a novel Core ETP. The yield-bearing BTC ETP will offer yield directly from Core Chain's block rewards. This groundbreaking initiative marks a first in the market, as the previously passive BTC asset becomes productive and yield-bearing without moving off the bitcoin network.

  

5

 

 

●On April 18, 2024, the Company launched the first short spot bitcoin (BTC) ETP.

 

●On May 7, 2024, the Company's subsidiary, Valour Inc. successfully repaid US$19.5 million in outstanding loans. As of April 30, 2024, and due to favourable business conditions, Valour has fully repaid balances of US$6 million and US $13.5 million, which were secured by Bitcoin (BTC) and Ethereum (ETH) collateral, respectively. No further equity or debt was raised to repay the loan. The loans, which were structured with open-term tenures allowing for flexible repayment, were fully repaid on April 30, 2024. This strategic financial management will result in substantial savings for the Company.

 

●On May 13, 2024, the Company's subsidiary Valour Inc. launched three new ETPs. Among these offerings are the Valour Internet Computer (ICP) ETP and the Valour Toncoin (TON) ETP, the first of their kind in the Nordics. These are accompanied by the Valour Chainlink (LINK) ETP, providing simplified access to cutting-edge digital assets. Trading of all three ETPs commenced on May 10, 2024, with a 1.9 percent management fee.

 

●On June 4, 2024, the Company’s subsidiary, Valour Inc., announced it has broadened its partnership with justTrade, a leading German on- line brokerage platform. The recently launched 1Valour STOXX Bitcoin Suisse Digital Asset Blue Chip ETP is now available for German savings plans through justTRADE.

 

●On June 10, 2024, the Company announced it has adopted Bitcoin as its primary treasury reserve asset and has purchased 110 Bitcoin to initiate this strategy.

 

●On June 11, 2024, the Company announced it has deployed a Core Chain validator node to act as an independent validator for the network. The launch of the node is part of the Company's Defi Infrastructure business line, contributing to the mission of decentralized finance. The Company will also stake 1,498 Bitcoin on the Core Chain.

 

●On June 19, 2024, the Company’s subsidiary, Valour Inc., launched the Valour Hedera (HBAR) ETP (exchange -traded product). The Valour Hedera (HBAR) ETP (ISIN: CH1213604585) provides secure and straightforward access to Hedera's native cryptocurrency, HBAR. Hedera is renowned for its energy-efficient public distributed ledger technology, which utilizes the leaderless, asynchronous Byzantine Fault Tolerance ("aBFT") hashgraph consensus algorithm.

 

●On June 28, 2024, the Company’s subsidiary Valour Inc. launched two new ETPs, the Valour CORE (CORE) ETP and the Valour Hedera (HBAR) ETP, on the Spotlight Stock Market in Sweden. The Valour CORE (CORE) SEK (ISIN: CH1213604593) offers investors exposure to the native token of the Core blockchain, CORE. Core Chain's Satoshi Plus consensus mechanism uniquely combines the decentralization and security of Bitcoin's Delegated Proof of Work ("DPoW") with the scalability and flexibility of Ethereum's Delegated Proof of Stake ("DPoS").

 

●On July 17, 2024, the Company's subsidiary, Valour Inc., launched an ETP (exchange-traded product) for the Near Protocol token on the Spotlight Stock Market in Sweden. The Valour Near (NEAR) ETP (ISIN: CH1213604577) provides retail and institutional investors with trusted, secure and diversified exposure to the innovative and fast-growing Near ecosystem, enabling participation in a decentralized Web platform that aims to redefine the future of digital finance.

 

●On July 18, 2024, the Company expanded its digital asset treasury strategy purchasing an additional 94.34 Bitcoin, bringing its total Bitcoin holdings to 204.34 Bitcoin. Additionally, the Company has acquired 12,775 Solana tokens and 1,484,148 Core tokens, with plans to actively participate in Core DAO's staking facility.

 

6

 

 

●On July 30, 2024, the Company formed a strategic partnership with Zero Computing, a pioneer in verifiable computation on Ethereum and Solana. This partnership aims to build critical infrastructure to enhance the arbitrage discovery and execution capabilities of Defi Technologies' specialized trading desk, DeFi Alpha, and advance capabilities for capturing zero-knowledge enabled maximal extractable value (MEV).

 

●On July 31, 2024, the Company appointed Andrew Forson to its board of directors. Andrew Forson is an experienced financial and risk engineer, software architect, and trust and estate practitioner. Currently, he serves as the head of ventures and investments for the Hashgraph Group, the commercialization and enablement arm of Hedera, where he has been instrumental in driving strategic investments and fostering innovation in the digital asset sector.

 

●On August 6, 2024, the Company's subsidiary, Valour Inc., signed a memorandum of understanding (MOU) with the Nairobi Securities Exchange (NSE) and SovFi Inc. to facilitate the creation, issuance and trading of digital asset exchange-traded products in the African market.

 

●On September 30, 2024, the Company’s subsidiary, Valour Inc., and Valour Digital Securities Ltd., a leading issuer of exchange-traded products (ETPs), have introduced their groundbreaking asset-backed ethereum exchange-traded products, also known as exchange-traded notes (ETNs), on the London Stock Exchange. The Valour ethereum-physical-staking ETP (ticker: 1VET; ISIN: GB00BRBMZ190) is a fully backed, non-leveraged, passive investment product providing direct exposure to ethereum as the underlying crypto asset. The ETP is secured by the respective cryptocurrency held in cold storage by regulated crypto custodians.

  

●On October 4, 2024, the Company’s completed its acquisition of Stillman Digital Inc. and Stillman Digital Bermuda Ltd., a leading global liquidity provider offering industry-leading trade execution, settlement and technology services. Stillman Digital's core products and services include electronic trade execution, OTC (over-the-counter) block trading and market-making.

 

●On October 10, 2024, the Company’s subsidiary, Valour Inc., has listed the Valour Sui (SUI) ETP on the Spotlight Stock Market. The Valour Sui (SUI) ETP provides a secure and straight-forward way for investors to gain exposure to Sui, a rapidly growing Layer 1 blockchain optimized for on-chain use cases through its unique consensus mechanism and object-centric data model. With a market cap of $5.37-billion, Sui ranks among the top 20 digital assets worldwide.

 

●On October 18, 2024, the Company subsidiary, Valour Inc., a leading issuer of exchange -traded products (ETPs) providing simplified access to digital assets, transferred 19 ETPs from the Nordic Growth Market (NGM) to the Spotlight Stock Market in Stockholm, Sweden. This decision represents a significant step in Valour's growth strategy within the Nordic market and strengthens its position in the ETP segment, particularly for digital asset-related instruments.

 

●On October 30, 2024, the Company's subsidiary, Valour Inc., has listed the first-ever Valour Bittensor (TAO) ETP in the Nordics on the Spotlight Stock Market. This launch provides investors with seamless access to TAO, the token that fuels Bittensor's decentralized machine learning protocol. With a market cap of $3.9-billion, TAO ranks No. 25 among digital assets globally.

 

●On November 5, 2024, the Company announced that Valour Digital Securities Limited, a leading issuer of exchange traded products ("ETPs") that provide simplified access to digital assets, has introduced a new physically backed, high-yield Bitcoin ("BTC") ETP for German investors in collaboration with Core Foundation.

 

Digital assets, digital assets loaned and digital assets staked

 

 

As at September 30, 2024, the Company’s digital assets consisted of the below digital currencies, with a fair value of $430,327,688 (December 31, 2023 - $489,865,638). Digital currencies are recorded at their fair value on the date they are acquired and are revalued to their current market value at each reporting date. Fair value is determined by taking the mid-point price at 17:30 CET digital asset exchanges consistent with the final terms for each ETP. The primary digital asset exchanges used to value digital assets are Kraken, Bitfinex, Binance, Coinbase and Bitstamp. Where digital assets held do not have pricing on these exchanges, other exchanges would be used. On all material coins, Kraken, Bitfinex, Coinbase and Bitstamp were used. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Vomex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

7

 

 

The Company’s holdings of digital assets consist of the following:

 

   September 30, 2024   December 31, 2023 
   Quantity   $   Quantity   $ 
Binance Coin   1,948.6266    1,514,391    236.4452    97,710 
Bitcoin   2,721.5599    211,173,493    2,271.3329    108,983,280 
Ethereum   21,914.1061    77,140,001    21,537,4066    65,956,320 
EthereumPoW   0.2000    1    0.2000    1 
Cardano   64,517,806.7026    33,286,706    54,210,783.1700    43,306,306 
Polkadot   2,282,295.1010    14,074,031    1,666,147.7880    18,371,365 
Solana   193,805.63    48,236,887    1,682,112.49    235,733,109 
Shyft   4,879,446.3958    49,122    4,539,407.2792    78,314 
Uniswap   378,293.1647    3,918,585    296,352.0602    2,932,687 
USDC        688         673 
USDT        4,714,736         111,856 
Litecoin   -    -    17.3931    1,719 
Doge   413,726.4335    66,795    220.474.3947    26,652 
Cosmos   32,429.79    212,649.90    11,700.0000    171,497 
Avalanche   63,420.9992    2,420,600    248.151.6644    13,148,105 
Matic   15,724.8867    8,544    0.0003    - 
Ripple   9,316,964.1025    7,844,255    76,029.7317    62,737 
Enjin   88,747.8806    20,582    432,342.3671    223,237 
Tron   152,413.2883    32,919    118,490,5094    16,581 
Terra Luna   204,635.1265    -    202,302.5360    - 
Shiba Inu   2,489,300,000.0000    60,486    -    - 
ICP   1,146,727.9192    14,186,408    -    - 
Core   3,163,216.1559    4,498,045           
AAVE   1.5265    323    -    - 
LINK   57,113.7798    932,996    -    - 
TON   209,740.0000    1,652,901    -    - 
NEAR   381,853,2000    2,773,143    -    - 
AVA   1,000.0000    683    -    - 
HARB   9,420,895.2800    752,862    -    - 
Current   2,586,246,842    429,572,831    63,728,357    489,222,151 
Blocto   272,913.4228    1,009    264,559.703    10,503 
Boba Network   250,000.0000    .    250,000.00    - 
Clover   480,000.0000    20,473    450,000.00    19,831 
Maps   285,713.0000    -    285,713.000    - 
Mobile coin   2,855.5045    -    2.855.5045    - 
Oxygen   400,000.0000    -    400,000.000    - 
Pyth   2,500,000.0000    635,402    2,500,000.00    503,669 
Saffron. finance   86.2100    2,695    86.21    2,619 
Sovryn   15,458.9500    13,107    15,458.95    12,863 
Wilder World   148,810.0000    82,171    148,810.00    94,002 
Volmex Labs   2,925,878.0000    -    2,925,878.0000    - 
Long-Term        754,857         643,487 
Total Digital Assets        430,327,688         489,865,638 
Current Digital Assets                    
Digital assets        226,655,398         188,342,579 
Digital assets loaned        38,660,569         270,362,684 
Digital assets staked        164,256,864         30,516,888 
Total Current Digital Assets        429,572,831         489,222,151 
Non-Current Digital Assets                    
Digital Assets        754,857         643,487 
Total Non-Current Digital Assets        754,857         643,487 
Total Digital Assets        430,327,688         489,865,638 

 

8

 

 

The continuity of digital assets for the nine months ended September 30, 2024 and year ended December 31, 2023:

 

   September 30,
2024		   December 31,
2023		 
Opening balance  $489,865,638   $104,202,085 
Digital assets acquired   347,279,352    318,355,007 
Digital assets disposed   (603,388,535)   (244,656,544)
Digital assets earned from staking lending, and fees   22,870,243    3,554,587 
Realized gain (loss) on digital assets   295,685,477    (1,017,247)
Net change in unrealized gains and losses on digital assets   (115,461,797)   324,976,115 
Foreign exchange gain (loss)   (6,522,690)   (15,548,363)
   $430,327,688   $489,865,638 
Current Digital Assets          
Digital assets   226,655,398    188,342,579 
Digital assets loaned   38,660,569    270,362,684 
Digital assets staked   164,256,864    30,516,888 
Total Current Digital Assets  $429,572,831   $489,222,151 
Non-Current Digital Assets          
Digital Assets   754,857    643,487 
Total Non-Current Digital Assets  $754,857   $643,487 
Total Digital Assets  $430,327,688   $489,865,638 

 

Digital assets held by counterpart for the nine months ended September 30, 2024 and year ended December 31, 2023:

 

   September 30,
2024		   December 31,
2023		 
Counterparty A  $74,437,399   $421,687,911 
Counterparty B   16,000    30,592,947 
Counterparty C   2,143,013    2,775,287 
Counterparty D   61,071    11,785,440 
Counterparty E   9,225,537    8,633,491 
Counterparty F   24,670,756    837,948 
Counterparty G   -    8,840,988 
Counterparty H   14,024,130    - 
Counterparty K   27,205,958    - 
Counterparty L   6,757,201    - 
Counterparty M   5,344,060    - 
Other   1,955,208    248,294 
Self custody   264,487,356    4,463,332 
Total  $430,327,688   $489,865,638 
Current Digital Assets          
Digital assets   226,655,398    188,342,579 
Digital assets loaned   38,660,569    270,362,684 
Digital assets staked   164,256,864    30,516,888 
Total Current Digital Assets  $429,572,831   $489,222,151 
Non-Current Digital Assets          
Digital Assets   754,857    643,487 
Total Non-Current Digital Assets  $754,857   $643,487 
Total Digital Assets  $430,327,688   $489,865,638 

 

9

 

 

As of September 30, 2024, digital assets held as collateral consisted of the following:

 

   Number of coins     
   on loan   Fair Value 
Bitcoin   380.0000   $9,225,537 
Ethereum   1,845.0000    6,520,191 
Total   2,225.0000   $15,745,728 

 

As at September 30, 2024, the 380 Bitcoin held by Genesis Global Capital LLC (“Genesis”) as collateral against a loan has been written down to $9,225,537 (US$6,834,237), the fair value of the loan and interest held with Genesis.

 

As of December 31, 2023, digital assets held as collateral consisted of the following:

 

   Number of coins     
   on loan   Fair Value 
Bitcoin   1,158.2614    46,860,266 
Ethereum   9,263.7800    28,369,770 
Total   10,422.0414   $75,230,036 

 

As at December 31, 2023, the 475 Bitcoin held by Genesis as collateral against a loan has been written down to $8,690,623 (US$6,570,862), the fair value of the loan and interest held with Genesis.

 

In the normal course of business, the Company enters into open-ended lending arrangements with certain financial institutions, whereby the Company loans certain fiat and digital assets in exchange for interest income. The Company can demand the repayment of the loans and accrued interest at any time. The digital assets on loan are included in digital assets balances above.

 

Digital Assets loaned

 

As of September 30, 2024, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.3% to 5.5% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has on loan select digital assets to borrowers at annual rates ranging from approximately 2.4% to 9.7% and accrue interest on a monthly basis. The digital assets on loan are measured at fair value through profit and loss.

 

As of September 30, 2024, digital assets on loan consisted of the following:

 

   Number of
coins		       Fair Value 
   on loan   Fair Value   Share 
Digital assets on loan:            
Ethereum   10,500.0000    37,106,780    96%
Uniswap   150,000.0000    1,553,789    4%
Total   160,500.0000   $38,660,569    100%

 

10

 

 

As of December 31, 2023, digital assets on loan consisted of the following:

 

   Number of
coins		       Fair Value 
   on loan   Fair Value   Share 
Digital on loan:            
Ethereum   7,000.0000    21,437,084    8%
Cardano   8,500,000.0000    6,790,228    3%
Polkdot   1,373,835.0000    15,148,250    6%
Solana   1,572,441.0000    220,363,625    82%
Avalanche   125,009.0000    6,623,496    2%
Total   11,578,285.0000   $270,362,684    100%

 

As of September 30, 2024, the digital assets on loan by significant borrowing counterparty is as follow:

 

      Number of      
   Interest rates  coins
on loan		   Fair
Value		 
Digital assets on loan:           
Counterparty A  2.3% to 3.85%   156,500.0000    24,524,653 
Counterparty F  3.25% to 5.50%   4,000.0000    14,135,916 
Total      160,500.0000   $38,660,569 

 

As of December 31, 2023, the digital assets on loan by significant borrowing counterparty is as follow:

 

      Number of      
   Interest rates  coins
on loan		   Fair Value 
Digital on loan:           
Counterparty A  2.4% to 9.7%   11,578,285.0000    270,362,684 
Total      11,578,285.0000   $270,362,684 

 

11

 

 

As of September 30, 2024, digital assets on loan were concentrated with counterparties as follows:

 

   Geography   September 30,
2024		 
Digital assets on loan:        
Counterparty A   Cayman Islands    63%
Counterparty F   UAE    37%
Total        100%

 

As of December 31, 2023, digital assets on loan were concentrated with counterparties as follows:

 

   Geography   December 31,
2023		 
Digital on loan:        
Counterparty A   Cayman Islands    100%
Total        100%

 

The Company’s digital assets on loan are exposed to credit risk. The Company limits its credit risk by placing its digital assets on loan with high credit quality financial institutions that have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company's due diligence procedures may include, but are not limited to, review of the financial position of the borrower, review of the internal control practices and procedures of the borrower, review of market information, and monitoring the Company’s risk exposure thresholds. As of September 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets on loan. While the Company intends to only transact with counterparties that it believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

12

 

 

The below table presents the ratio of Total AUM Loaned to Total AUM:

 

2024 Quarterly AUM Loaned vs. 2024 Total Quarterly AUM

 

 

Digital Assets Staked

 

As of September 30, 2024, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 2.82% to 9.86% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of December 31, 2023, the Company has staked select digital assets to borrowers at annual rates ranging from approximately 3.15% and accrue rewards as they are earned. The digital assets staked are measured at fair value through profit and loss.

 

As of September 30, 2024, digital assets staked consisted of the following:

 

   Number of
coins		       Fair Value 
   staked   Fair Value   Share 
Digital assets on staked:            
Bitcoin   1,608.0000    138,661,553    84%
Cardano   30,991.6807    15,990    0%
Core   2,734,997.0010    3,889,124    2%
Polkadot   1,868,880.9000    11,524,666    7%
Solana   48,149.8681    10,165,532    6%
Total   4,684,627.4498   $164,256,864    100%

 

As of December 31, 2023, digital assets staked consisted of the following:

 

   Number of
coins		       Fair Value 
   staked   Fair Value   Share 
Digital on staked:            
Cardano   38,201,004.7950    30,516,888    100%
Total   38,201,004.7950   $30,516,888    100%

 

13

 

 

As of September 30, 2024, the digital assets staked by significant borrowing counterparty is as follow:

 

       Number of        
   Interest rates   coins
staked		   Fair Value   Fair Value
Share		 
Digital on staked:                
Counterparty B   2.82%   30,991.6807    15,990    0%
Self custody   6.47% to 9.12%    4,653,635.7691    164,240,874    100%
Total        4,684,627.4498   $164,256,864    100%

 

As of December 31, 2023, the digital assets staked by significant borrowing counterparty is as follow:

  

       Number of      
   Interest rates   coins
staked		   Fair Value 
Digital on staked:            
Counterparty B   3.15%    38,201,004.7950    30,516,888 
Total        38,201,004.7950   $30,516,888 

 

As of September 30, 2024, digital assets staked were concentrated with counterparties as follows:

 

   Geography  September 31,
2023		 
Digital on staked:       
Counterparty B  Switzerland   0%
Self custody  Switzerland   100%
Total      100%

 

As of December 31, 2023, digital assets staked were concentrated with counterparties as follows:

 

   Geography   December 31,
2023		 
Digital on staked:        
Counterparty B   Switzerland    100%
Total        100%

 

The Company’s digital assets staked are exposed to market risk, liquidity risk, lockup duration risk, loss or theft of assets and return duration risk. The Company places allocation limits by counterparty and only deals with high credit quality financial institutions that are believed to have sufficient capital to meet their obligations as they come due and on which the Company has performed internal due diligence procedures. The Company's due diligence procedures may include, but are not limited to, review of the financial position of the counterparty, review of the internal control practices and procedures of the counterparty, review of market information, and monitoring the Company’s risk exposure thresholds. As of September 30, 2024 and December 31, 2023, the Company does not expect a material loss on any of its digital assets staked. While the Company intends to only transact with counterparties that it believes to meets the Company staking policy criteria, there can be no assurance that a counterparty will not default and that the Company will not sustain a material loss on a transaction as a result.

 

14

 

 

Investments in equity instruments at fair value through profit and loss

 

   Current   Long Term   Total 
   Quantity   Amount   Quantity   Amount   Quantity   Amount 
Fund A - Solana (SOL)   207,027.0014   $31,863,721    258,409.1579   $39,771,998    465,436.1593   $71,635,719 
Fund A - Avalance (AVAX)   107,474.4900   $2,990,447    823,971.1100   $22,926,755    931,445.6000   $25,917,202 
    314,501.4914   $34,854,168    1,082,380.2679   $62,698,753    1,396,881.7593   $97,552,921 
Fund B - Solana (SOL)   547,022.9000   $84,192,812    600,039.2000   $92,352,600    1,147,062.1000   $176,545,412 
Total       $119,046,980        $155,051,353        $274,098,333 

 

Fund A

 

During the nine months ended September 30, 2024, the Company through a subsidiary, invested US$61,741,683 in three tranches of a private investment fund designed to acquire Solana and Avalanche tokens from a bankrupt company. The Company’s investment represents the acquisition of 491,249 Solana at US$105 per Solana and 931,446 Avalanche at US$11 per Avalanche.

 

The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Solana is locked and will become distributable on the same unlocking schedule as the Solana. The Solana will be released in monthly increments from January 2025 through January 2028.

 

The Avalanche acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Avalanche is locked and will become distributable on the same unlocking schedule as the Avalanche. The Avalanche will be released in weekly increments July 10, 2025 and continuing through July 1, 2027.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

Fund B

 

During the nine months ended September 30, 2024, the Company invested through a subsidiary, US$112,072,458 in two tranches of a private investment fund designed to acquire Solana tokens from a bankrupt company.

 

The Company’s investment represents the acquisition of 1,123,360 Solana at US$100 per Solana. The Solana acquired by the Company is locked and staked, earning staking rewards during the lock period. Staking rewards will accrue while Soltana is locked and will become distributable on the same unlocking schedule as the Solana. Approximately 25 % of the Soltana will be released in March 2025, while the remaining 75% of the Solana will be released linearly monthly until January 2028.

 

The investments in the investment fund were initially recognized based on the latest available net asset value as determined by the investment fund’s administrator less an applicable DLOM. The values of the investments were remeasured based on quarterly valuation reports provided by the investment fund administrator less an applicable DLOM.

 

15

 

 

The below table presents the ratio of Total AUM Staked to Total AUM:

 

2024 Quarterly AUM Staked vs. 2024 Total Quarterly AUM

 

 

Third party custodians

 

 

As of September 30, 2024, the Company used the following third-party custodians (each, a “Custodian”) in the ordinary course of business of its DeFi Ventures business line as well as for digital asset underlying Valour ETPs:

 

Custodian  Location
Bitcoin Suisse AG  Switzerland
Anchorage Digital  United States
B2C2 Overseas LTD  Cayman Islands
Copper  Switzerland
Bitgo Trust  United States

 

Each of the Custodians have not appointed a sub-custodian to hold crypto assets owned by the Company. The Custodians hold and safeguard the digital assets deposited by the Company and its subsidiaries. The Custodians also offer lending and staking services. The Custodians are not Canadian financial institutions. None of the Custodians are related parties of the Company.

 

Each Custodian maintains general commercial insurance on its own behalf, but the Corporation and other clients of such Custodians are not named insured under such policies. The Company is not aware of any security breaches or similar incidents at the Custodians. The Company believes that any event of insolvency or bankruptcy of a Custodian would be treated in accordance with the insolvency or bankruptcy laws of the applicable jurisdiction of such Custodian.

 

16

 

 

As of September 30, 2024, the breakdown of digital assets deposited with each Custodian as a percentage of total digital assets custodied by the Company and its subsidiaries is as follows:

 

Custodian   Location   % of digital assets
custodied by market value (1)		   Regulatory Body
Bitcoin Suisse AG   Switzerland   0.0%   Financial Services Standards Association (VQF). Zug. Switzerland
Anchorage Digital   United States   0.0%   Office of Comptroller of Currency
B2C2 Overseas LTD   Cayman Islands   9.2%   Cayman Islands Monetary Authority (CIMA)
Copper   Switzerland   1.7%   Financial Services Standards Association (VQF). Zug. Switzerland
Bitgo Trust   United States   0.7%   South Dakota Division of Banking and Money Services Business (MSB) Financial Crimes Enforcement Network (FinCEN)

 

Note 1: As at September 30, 2024; Residual digital assets served as collateral for loans with Laser Digital (approx. 3.1%, regulated by Dubai Virtual Assets Regulatory Authority) and Genesis Global Capital LLC (1.1%; subject to bankruptcy proceeding/filing as of 19 January 2023).

 

Valour diligences and reviews counterparty risk in accordance with the following principles:

 

●Valour shall strive to spread counterparty risk between several counterparties, where relevant and practical.

 

●In relevant situations and as far as possible, counterparty (and settlement) risk shall be mitigated by conducting transactions in well-established settlement systems based on the principles of delivery versus payment or payment versus payment.

 

●The below methodology is to be applied when proposing and selecting counterparties and when granting limits on counterparty risk score.

 

●The counterparties are reviewed in regular intervals and re-evaluated.

 

●In case of significant events such as negative news or credit events, Valour can decide to close the business relationship with a counterparty irrespective of the review cycle.

 

●Valour manages a counterparty scorecard and captures, assesses and monitors the below information.

 

1.Contact information

 

The name, the website and contact person at the exchange/counterparty, as well as the responsible onboarding owner on Valour side.

 

2.Current status

 

The current status of the relationship, the connection type, as well as the services, products and currency pairs used on the respective exchange/counterparty have to be documented and kept up to date

 

3.Country of registration and regulation

 

The country in which the exchange/counterparty is registered must be documented. In addition, all countries in which the exchange/counterparty holds a regulatory licence have to be assessed and documented by stating the licence number (if applicable).

 

17

 

 

4.Country risk

 

The country of registration as well as the country/-ies of regulation are evaluated by using the country risk matrix. The country risk matrix considers the FATF (and equivalent) country evaluation, the Transparency.org Corruption Perception Index (CPI) as well as the VQF SRO country risk recommendations.

 

5.Adverse media search

 

An adverse media search is being conducted. For example, information about an exchange having been hacked in the past or any news about a negative reputation, regulatory breaches etc. are documented.

 

6.Public exchange scores

 

Publicly available information and risk scores from data sources such as Coinmarketcap and Coingecko are being collected and documented.

 

7.Information security certification

 

The exchange/counterparty information security certification status is assessed. Information about the possession of certifications such as AICPA SOC 1, SOC 2 Type I and SOC 2 Type II as well as ISO 27001 are documented.

 

8.Insurance coverage

 

Information about insurance protection and regulatory status in terms of investor protection are assessed and documented.

 

9.Proof of reserves

 

It is being checked if the exchange/counterparty has made the public wallet addresses of its cold and hot storage publicly available or if any other cryptographic means of verification of the reserves held in custody are either publicly available or have been audited.

 

10.Risk evaluation

 

The risk score is evaluated on a scale of 1 to 5, with 1 being the lowest risk and 5 being the highest risk. Based on the information collected in the scorecard, with a focus on regulatory licences, a risk score is calculated and documented for each exchange or counterparty. By carefully evaluating the risk score, we can ensure that we are making responsible business decisions and protecting our customers and stakeholders.

 

11.Business justification and restrictions

 

In cases where an exchange or counterparty presents increased risks, a business justification must be provided. We must carefully consider the potential exposure and take appropriate measures to limit it through restrictions, thresholds, or other means. Any decision to establish a business relationship with an exchange or counterparty with increased risks must be approved by the board.

 

12.Recurring review schedule

 

The review date and review frequency of all exchanges/counterparties are documented and tracked in the scorecard. A review once a year is set as the default standard, however, an ad-hoc review has to be considered in case of any event that may result in any of the assessment criteria being changed.

 

13.Account closure

 

If the exchange or counterparty has been identified with an increased risk, such as a risk score of 4 or 5, Valour will determine if it is necessary to close the business relationship. This decision is based on the potential exposure and the potential impact on the business and stakeholders.

 

18

 

 

If it is determined that the business relationship should be terminated, a plan for closing the relationship is developed in a controlled and orderly manner. This may include transferring outstanding transactions, closing accounts, and ensuring that all necessary documents and records are properly transferred or retained. The decision to close the business relationship is communicated to the exchange or counterparty and a timeline for the closure is provided. Once the business relationship has been successfully terminated, the counterparty scorecard is updated in order to reflect the closure.

 

By following this process, we can ensure that we are taking a responsible and proactive approach to closing business relationships with risky counterparties. This can help protect our customers and stakeholders and maintain the integrity of our business operations.

 

Self-custody of digital assets

 

 

At September 30, 2024, the Company’s had self-custody of digital assets totaling $264,487,356 (December 31, 2023 - $4,463,332).

 

The Company maintains controls around the meta mask and other hot and cold wallets includes only senior management having access to the accounts, passwords and seed phases. All copies of passwords and seed phases are secured with senior management. Duplicate copies of the passwords and seeds phases are held by two members of the senior management in different locations.

 

Staking and lending policy

 

 

As part of Valour’s policy to hedge 100% of the market risk, Valour purchases and sells the digital assets which its ETPs track. Valour may lend or stake such digital assets on its balance sheet to generate revenue in accordance with the policies in the Base Prospectus and VDSL Base Prospectus. Lending or staking transactions are only conducted with institutional-grade counterparties and only up to a certain percentage for risk management purposes in accordance with Valour’s lending and staking policy (the “Lending and Staking Policy”), which is reviewed and approved by the board of Valour.

 

When deciding whether to lend or stake a particular asset, the Lending and Staking Policy provides that the decision will initially be made based on the risk profile of the potential counterparties, then the highest yield available, then prioritizing staking over lending.

 

As of the date of this MD&A, the Lending and Staking Policy provides the following limits for lending and staking of digital assets:

 

Digital Asset   Lending and staking limits
Bitcoin, Ethereum, Solana, Avalanche  

Up to 75% of unrestricted tokens may be lent on open terms to eligible counterparties, 50% of tokens may be lent on terms up to six months.

 

100% of tokens may be staked

All other Digital Assets  

Up to 75% of unrestricted tokens may be lent on open terms to eligible counterparties, 50% of tokens may be lent on terms up to six months.

 

If total AUM is greater than US$5 million, up to 95% may be staked, else 75% may be staked

 

19

 

 

The Company’s lending arrangements policy is as follows:

 

(a) which party has legal title

 

The lender authorizes the counterparty e.g., Anchorage to draw down lent assets. Typically, the counterparty / borrower is then permitted to use Client’s Designated Assets for any lawful purpose.

 

(b) the status of the assets in the event of insolvency of the borrower

 

The lender shall have full recourse to Counterparty for any obligations hereunder in equity and at law. Upon any event of default, the lender shall be entitled to seek all remedies available at law or in equity for the full amount or any unpaid principal of any advance, accrued but unpaid fees or other amounts or property payable hereunder against Lender in addition to enforcing its security interest.

 

(c) contractual limitation on use and transfer of lent items by borrower

 

Typically, the Counterparty is then permitted to use client’s designated assets for any lawful purpose.

 

(d) borrower's ability to initiate transactions with the borrowed assets, including but not limited to: sell, lend, pledge, and/or hypothecate

 

Typically, the Counterparty is then permitted to use Client’s Designated Assets for any lawful purpose, including selling, lending, pledging and/or hypothecating. Certain lending agreements require Counterparties to grant a security interest to the Company on any assets that are further lent out.

 

(e) borrowers’ rights regarding “co-mingling”

 

There is no specific language in the lending agreement but given the Counterparties can use for any lawful purpose, the Company’s believes that comingling can occur.

 

(f) callability terms and conditions (including “notice period”, if any).

 

Termination. Client may terminate any Advance of its Designated Assets upon three (3) business days’ prior notice (the date of such termination, the “Termination Date”), from time to time at its sole discretion through an Electronic Notice.

 

Investments, at fair value, through profit and loss, as at september 30, 2024

 

 

At September 30, 2024, the Company’s investment portfolio consisted of investments for a total estimated fair value of $318,449,649 (December 31, 2023 – nine private investments for a total estimated fair value of $43,540,534).

 

20

 

 

Private Investments

 

At September 30, 2024, the Company’s investments had a total fair value of $318,449,649.

 

              Estimated Fair   % 
Private Issuer  Note   Security description  Cost   Value   of FV 
3iQ Corp.       61,712 common shares  $86,319   $409,861    0.2%
Amina Bank AG   (i)   3,906,250 non-voting shares   34,498,750    40,090,000    12.6%
Brazil Potash Corp.   (i)   404,200 common shares   1,998,668    1,697,640    0.5%
Earnity Inc.       85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation       201,633 preferred shares   630,505    675,017    0.2%
Neuronomics AG       724 common shares   128,898    128,898    0.0%
SDK:meta, LLC       1,000,000 units   3,420,000    -    0.0%
Skolem Technologies Ltd.       16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation       Rights to certain preferred shares and w arrant   37,809    -    0.0%
ZKP Corporation   (i)   370,370 common shares   1,385,800    1,349,900    0.4%
Equity investments in digital assets       LP and LLC units   238,090,603    274,098,333    86.1%
Total private investments          $280,585,786   $318,449,649    100.0%

 

At December 31, 2023, the Company’s nine private investments had a total fair value of $43,540,534.

 

Private Issuer  Note   Security description  Cost   Estimated Fair Value   %
of FV		 
3iQ Corp.       187,007 common shares  $261,605   $1,216,890    2.8%
Brazil Potash Corp.   (i)   404,200 common shares   1,998,668    2,138,380    4.9%
Earnity Inc.       85,142 preferred shares   130,946    -    0.0%
Luxor Technology Corporation       201,633 preferred shares   630,505    661,366    1.5%
Neuronomics AG       724 common shares   128,898    128,898    0.3%
SDK:meta, LLC       1,000,000 units   3,420,000    -    0.0%
Amina Bank AG (formerly SEBA Bank AG)   (i)   3,906,250 non-voting shares   34,498,750    39,395,000    90.5%
Skolem Technologies Ltd.       16,354 preferred shares   177,488    -    0.0%
VolMEX Labs Corporation       Rights to certain preferred shares and warrants   37,809    -    0.0%
Total private investments          $41,284,669   $43,540,534    100.0%

 

(i) Investments in related party entities

 

3iQ Corp (“3iQ”)

 

On September 31, 2020, the Company acquired 187,007 shares of 3iQ through its acquisition of DeFi. 3iQ is a leading bitcoin and digital asset fund manager. In Q2, 2024, the Company sold 125,295 shares. As at September 30, 2024, 3iQ was valued at $409,861. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of 3iQ would result in an estimated increase in loss to DeFi of $40,986.

 

Amina Bank AG (“Amina”)

 

During Q1, 2022, the Company acquired 3,906,250 non-voting shares for $34,498,750. Amina is a pioneer in the financial industry and is the only global smart bank providing a fully universal suite of regulated banking services in the emerging digital economy. As at September 30, 2024, Amina was valued at $40,090,000 which was based on a market approach. The investment represented 4.3% of the total assets of the Company. A 10% decline in the fair market value of Amina would result in an estimated increase in loss to DeFi of $4,009,000.

 

21

 

 

Brazil Potash Corp. (“BPC’)

 

On September 11, 2020, the Company acquired 404,200 common shares of BPC through the sale of its royalty interest. BPC is a Canadian private company which engaged in the extraction and processing of potash ore, an essential input for agriculture in Brazil. As at September 30, 2024, BPC was valued at $1,697,640 which was based on BPC weighted average of comparable public market stock prices of $4.20 per share. The investment represented 0.2% of the total assets of the Company. A 10% decline in the fair market value of BPC would result in an estimated increase in loss to DeFi of $169,764.

 

Earnity Inc. (“Earnity”)

 

On December 3, 2021, the Company acquired 85,142 series A preferred shares of Earnity. Earnity is a group of dedicated fintech veterans who believe managing cryptocurrency should be a lot easier. As at September 30, 2024, Earnity was valued at $nil which was based on Earnity’s ceasing operations. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of Earnity would result in an estimated increase in loss to DeFi of $0.

 

Luxor Technology Corporation (“LTC”)

 

During the year ended December 31, 2021, the Company subscribed US$162,500 ($203,874) in LTC for the rights to certain preferred shares of LTC. During Q3, 2021, these rights were converted into 25,204 series A preferred shares and 176,429 of series A-1 preferred shares. LTC is building infrastructure to support the next generation of digital assets. As at September 30, 2024, LTC was valued at $675,017 which was based on LTC December 2021 financing prices. The investment represented 0.1% of the total assets of the Company. A 10% decline in the fair market value of LTC would result in an estimated increase in loss to DeFi of $67,502.

 

SDK: meta, LLC (“SDK”)

 

During Q2, 2021, the Company signed a share exchange agreement with SDK and traded 3 million shares of the Company with 1 million membership units of SDK at a fair value of $3,42,000. SDK is a privately held Web3 blockchain technology company driving mass adoption of user-centric platforms and mobile consumption of decentralized finance and related offerings. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at September 30, 2024, SDK was valued at $nil. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of SDK would result in an estimated increase in loss to DeFi of $0.

 

Skolem Technologies Ltd. (“STL”)

 

During Q4, 2021, these rights were converted into 16,354 series A preferred shares. STL is an Institutional DeFi trade execution platform. As at September 30, 2024, STL was valued at $nil which was based on STL ceasing operations. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of STL would result in an estimated increase in loss to DeFi of $0.

 

VolMEX Labs Corporation (“VLC”)

 

During Q1, 2021, the Company invested US$30,000 ($37,809) in VLC for the rights to certain preferred shares of VLC. VLC is a protocol for volatility indices and non-custodial trading build on Ethereum. As at September 30, 2024, VLC was valued at $0. The investment represented 0.0% of the total assets of the Company. A 10% decline in the fair market value of VLC would result in an estimated increase in loss to DeFi of $0.

 

22

 

 

ZKP Corporation (“ZKP”)

 

On August 2, 2024, the Company invested US$1,000,000 ($1,385,800) to acquire shares of ZKP. Zero Computing is revolutionizing the generation of zero-knowledge proofs by providing specialized cloud infrastructure tailored to the specific needs of proof requests. As at September 30, 2024, the valuation of ZKP was based on the recent financing price. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of ZXP will result in a corresponding +/-$134,990 change in the carrying amount.

 

Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at September 30, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $27,409,833 change in the carrying amount.

 

23

 

 

 

Financial REsults

 

 

The following is a discussion of the results of operations of the Company for the three and nine months ended September 30, 2024, and 2023. They should be read in conjunction with the Company’s condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023 and related notes.

 

Three and nine months ended September 30, 2024 and 2023:

 

   Three months ended September 30,   Nine months ended September 30 
   2024   2023   2024   2023 
   $   $   $   $ 
   (Restated - see note 27)   (Restated - see Note 26)   (Restated - see note 27)   (Restated - see Note 26) 
Revenues                
Realized and net change in unrealized gains and (losses) on digital assets   33,955,436    (11,096,160)   180,223,680    39,319,425 
Realized and net change in unrealized gains and (losses) on ETP payables   (56,506,455)   16,105,048    (175,665,345)   (40,424,382)
Staking and lending income   8,794,327    746,871    22,865,351    2,083,346 
Management fees   2,069,013    243,845    5,946,327    703,538 
Research revenue   261,741    -    1,102,192    - 
Node revenue   182    3,280    4,891    8,256 
Realized gain (loss) on investments   -    (658)   634,271    (4,683)
Unrealized gain (loss) on investments   2,144,940    1,217    (353,478)   316,080 
Unrealized gain on equity investments   29,191,921    -    14,738,452    - 
Interest income   2,756    552    4,268    809 
Total revenues   19,913,861    6,003,995    49,500,609    2,002,389 
Expenses                    
Operating, general and administration   6,270,895    3,246,755    39,751,013    7,118,691 
Share based payments   11,962,871    387,329    17,014,376    1,830,209 
Depreciation - equipment   1,601    3,236    6,929    9,709 
Amortization - intangibles   537,546    509,575    1,568,925    1,528,725 
Finance costs   783,865    1,082,576    3,450,634    2,644,105 
Transaction costs   1,989,609    164,900    3,569,813    484,619 
Foreign exchange (gain) loss   (22,650,847)   3,526,454    (15,509,641)   8,280,483 
Impairment loss   -    -    4,962,021    - 
Total expenses   (1,104,460)   8,920,825    54,814,070    21,896,541 
Income (loss) before other item   21,018,321    (2,916,830)   (5,313,461)   (19,894,152)
Loss on settlement of debt   -    26,389    -    (172,093)
Net income (loss) for the period   21,018,321    (2,890,441)   (5,313,461)   (20,066,245)
Other comprehensive (loss)                    
Foreign currency translation (loss)   (932,468)   (1,829,345)   (2,091,058)   (102,841)
Net income (loss) and comprehensive income (loss) for the period   20,085,853    (4,719,786)   (7,404,519)   (20,169,086)
Net income (loss) attributed to:                    
Owners of the parent   21,018,244    (2,891,620)   (5,317,952)   (20,067,424)
Non-controlling interests   77    1,179    4,491    1,179 
    21,018,321    (2,890,441)   (5,313,461)   (20,066,245)
Net income (loss) and comprehensive income (loss) attributed to:                    
Owners of the parent   20,085,776    (4,720,965)   (7,409,010)   (20,170,265)
Non-controlling interests   77    1,179    4,491    1,179 
    20,085,853    (4,719,786)   (7,404,519)   (20,169,086)
Income (loss) per share                    
Basic   0.07    (0.01)   (0.02)   (0.09)
Diluted   0.06    (0.01)   (0.02)   (0.09)

 

For the three and nine months ended September 30, 2024, the Company recorded a net income of $21,018,321 and a net loss of $5,313,461, respectively, on total revenues of $19,913,861 and $49,500,609 compared to net income (loss) of $(2,890,441) and $(20,066,245) on total revenues of $6,003,995 and $2,002,389 for the three and nine months ended September 30, 2023.

 

For the three and nine months ended September 30, 2024, realized and net change in unrealized gains and (loss) on digital assets was $(33,965,436) and $180,223,680 and realized and net change in unrealized gains and (loss) on ETP payables was $(56,506,465) and $(175,665,345). DeFi Alpha trading returns and higher digital asset prices in 2024 resulted in gains on our digital assets that were offset by losses on ETP payables due to the increased share price of the ETPs.

 

24

 

 

The Company earned staking and lending income of $8,794,328 and $22,865,352 for the three and nine months ended September 30, 2024 compared to $764,662 and $2,083,346 for the same periods in 2023. The Company actively stakes and lends its digital assets to earn additional revenue. The staking and lending income was significantly higher for the three and nine months ended September 30, 2024 due to the increased digital asset prices as well as the Company staking and lending more digital assets compared to 2023.

 

The Company had management fee revenue of $2,069,013 and $5,946,327 for the three and nine months ended September 30, 2024 compared to $243,845 and $703,538 for the same periods in 2023. In 2024, the Company’s had higher AUM and additional ETP products resulting in higher management fees.

 

The Company had node revenue of $182 and $4,891 for the three and nine months ended September 30, 2024 compared to $3,280 and $8,256 for the same period in 2023. During the nine months ended September 30, 2024, the Company earned 340,039.11663 (September 30, 2023 – 1,312,080.05899) Shyft tokens for its services.

 

The Company had realized gain (loss) on investments of $nil and $634,271 for the three and nine months ended September 30, 2024 compared to $(658) and $(4,683) for the same periods in 2023. The Company had unrealized gain (loss) on investments of $2,144,940 and $(353,478) compared to $1,217 and $316,080 in the prior period. The unrealized loss for the nine months ended September 30, 2024 primarily consisted of unrealized losses on Amina and Brazil Potash.

 

Management and consulting fees were $724,000 and $31,009,078 during the three and nine months ended September 30, 2024 compared to $1,576,590 and $3,861,814 during the same periods in 2023. Management and consulting fees increased due to DeFi Alpha trading bonus in Q2 2024.

 

Share based payments were $11,962,871 and $17,014,376 during the three and nine months ended September 30, 2024 compared to $387,329 and $1,830,209 in the same periods in 2023. The Company granted 8,492,767 options and 8,264,007 DSUs to directors, officers and consultants of the Company during 2024 compared to the 2,000,000 DSUs and 1,000,000 options to directors, officers and consultants of the Company during 2023. Higher share price and volatility inputs used in the Black Scholes model in 2024 contributed to the increased value of share based payments compared to the same periods in 2023.

 

Travel and promotion was $3,694,667 and $5,299,163 during the three and nine months ended September 30, 2024 compared to $218,322 and $457,938 during the same period in 2023. Corporate activities and business development increased in 2024 compared to 2023.

 

Office and rent was $1,604,890 and $2,065,157 during the three and nine months ended September 30, 2024 compared to $247,180 and $1,099,834 during the same periods in 2023.

 

Accounting and legal was $207,782 and $1,214,825 during the three and nine months ended September 30, 2024 compared to $1,177,471 and $1,548,065 during the same periods in 2023. The 2024 was lower is due to slightly lower legal fees in 2024.

 

Total depreciation and amortization was $539,147 and $1,575,854 for the three and nine months ended September 30, 2024 compared to $512,811 and $1,528,434 during the prior periods in 2023. This relates to the equipment, right of use assets and intangible assets acquired as part of the acquisitions of Reflexivity LLC, DeFi Capital and Valour.

 

25

 

 

Finance costs were $783,865 and $3,450,634 for the three and nine months ended September 30, 2024 compared to $1,082,576 and $2,644,105 during the prior periods in 2023. The increase in financing costs relates to the interest expense on the digital asset provider loans and other loans of the Company. The interest rates on these loans were higher in 2024 compared to 2023.

 

Transaction costs were $1,989,609 and $3,569,813 for the three and nine months ended September 30, 2024 compared to $164,900 and $484,619 in the prior period. The increase in transaction costs relates to the trading of digital assets as brokerage commission and ETP issuance costs as well as transaction costs related to DeFi Alpha trading activity.

 

Foreign (gain) loss was $(22,650,847) and $(15,509,641) for the three and nine months ended September 30, 2024 compared to $3,526,454 and $8,280,483 in the prior period. The (gains) loss reflects the currency fluctuations primarily in Company’s cash balances which are denominated in Swedish Krona, Euro and Swiss Franc.

 

Impairment loss was $4,962,021 for the nine months ended September 30, 2024 compared to $nil in the prior period. The Company impaired the costs related to the Solana IP acquisition in Q1 2024.

 

During the nine months ended September 30, 2024, the Company used $23,670,738 in operations of which $7,212,242 was used by changes in working capital, $347,279,352 was used to purchase digital assets offset by $603,388,535 was provided from the disposal of digital assets, and $238,090,603 was used to purchase equity investments. During the comparative nine months ended September 30, 2023, the Company used $40,039,333 in operations of which $2,741,852 was provided by the changes in working capital, $88,193,590 was used to purchase digital assets offset by $12,407 was provided from the sales of investments and $64,269,115 was provided from the disposal of digital assets. The cash used from operations was lower in 2024 compared to 2023 due to higher adjustments to net income in 2024 compared to 2023 and net disposals (purchases) of digital assets and equity investments in 2024 of $18,018,580 compared in 2023 net purchases of digital assets was $(23,974,475) reflecting increased activity in digital asset market.

 

During the nine months ended September 30, 2024, $37,247,236 was provided by financing activities compared to $37,450,213 in the prior period. The Company received proceeds of $489,877,373 from ETP holders, proceeds of $1,051,950 from option exercises and $1,505,712 provided from warrant exercises offset by $409,290,734 used for payments to ETP holders and $43,871,750 from loan repayments. During the nine months ended September 30, 2023, the Company received proceeds of $150,736,395 from ETP holders and proceeds of $4,260,870 from loans offset by $117,547,052 used for payments to ETP holders. The cash provided from financing was higher in 2024 compared to 2023 due to higher net ETP sales in 2024, warrant and option exercises offset by loan repayment.

 

Liquidity and capital resources

 

 

In management’s view, given the nature of the Company’s operations, the most relevant financial information relates primarily to current liquidity, solvency and planned expenditures. The Company’s financial success will be dependent upon the execution and development of its new investment strategy and business operations. Such execution and development may take years to complete and the amount of resulting income, if any, is difficult to determine.

 

To date, the Company has not had any negative impacts to the Company’s digital assets holdings with the bankruptcies of Celsius, Voyager and Blockfi, with the exception for a small exposure to FTX as it held some of its own digital assets on the exchange. The Company has pay down its loans from cash flow generated by the business.

 

26

 

  

The Company loaned and staked more digital assets in 2024 compared to 2023 and as a result the Company earned more revenue via staking and lending. Higher AUM in the Company’s fee earning ETPs in H1 2024 compared to the same period 2023 resulted in higher management fees. Overall, the Company’s total revenues improved in 2024 as a result of improving digital asset markets and from

 

profitable trades from DeFi Alpha.

 

DeFi relies upon various sources of funds for its ongoing operating activities. These resources include operating profits, proceeds from dispositions of investments, interest and dividend income from investments and private placement financing.

 

Loans Payable

 

On January 14, 2022 and January 17, 2022, the Company entered into various loans with a digital asset liquidity provider totaling $46,235,200 (US$37,000,000). On April 4, 2022, the Company entered into a loan with a second digital asset provider for US$5,500,000. In April 2022, the Company partially repaid of one of the loans of US$3,500,000, while the remainder of these loans have since been renewed and continue to be outstanding. The Company has spread the loans among three different digital asset liquidity providers to reduce single entity concentration and be able to obtain more competitive rates. During the nine months ended September 30, 2024, the Company repaid loans of US$29,500,000. As of September 30, 2024, the loan principal of $13,499,000 (US$10,000,000) (December 31, 2023 - $52,242,700 (US$39,500,000)) was outstanding. The loans terms are open to 90 days and have interest rates ranging from 7.25% and 10.5% The extended loans are secured with 380 BTC and 1845 ETH. Subsequent to September 30, 2024, the Company repaid loans of US$4,000,000.

 

One of Company’s digital asset liquidity provider loans payable is held with Genesis. On January 20, 2023, Genesis declared bankruptcy and currently is not allowing withdrawals and not extending new loans. On March 15, 2023, the Court ruled that the Genesis debtors may not sell, buy, trade in crypto assets without prior consent by the creditors. The Court also allowed for the payment of some service providers required for upholding the operations but nothing beyond that. The Company’s loan with Genesis is an open term loan. The Genesis loan and interest payable is US$6,834,237 and secured with 380 BTC. See Note 7.

 

On March 23, 2023, the Company entered into a loan agreement with an institutional investment firm that specializes in long-term asset backed financing for secured loan of $4,101,300 (US$3,000,001). The loan is secured by 158.2614 BTC. The Company paid a 1% origination fee to the lender. The principal is due eighteen months from the closing date. Interest payments of US$24,375 are due quarterly with the first payment due on June 23, 2023. During the nine months ended September 30, 2024, the Company repaid the loan of US$3,000,001. As of September 30, 2024, the loan principal of $Nil (US$Nil) (December 31, 2023 - $3,967,801 (US$3,000,001)) was outstanding.

 

DeFi used cash of $23,670,737 in its operating activities during the nine months ended September 30, 2024. Included in cash used in operations are $585,369,955 used in the purchase of digital assets, $7,212,242 provided by changes of working capital and $603,388,535 generated from the disposal of digital assets. DeFi also provided $37,247,236 in financing activities. Included in cash provided in financing activities are $489,877,373 from ETP holders, proceeds of $1,051,950 from option exercises and $1,505,712 provided from warrant exercises offset by $409,290,734 used for payments to ETP holders and $43,871,750 from loan repayments.

 

27

 

 

As at September 30 2024, the Company’s sources of funds include the estimated fair value of its cash of $20,702,196, equity investments of $44,351,316 and digital assets of $806,975,856 offset by total liabilities of $789,761,126.

 

Currency Risk

 

Currency risk is the risk to the Company’s earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates.

 

As at September 30, 2024 and December 31, 2023, the Company had the following financial and non-financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:

 

 

September 30, 2024
   United States   British   Swiss   Euro   SEK 
Cash  $1,884,374   $1,159   $5,410,389   $1,444,020   $11,040,311 
Receivables   148,883    -    8,668    -    - 
Private investments   2,563,676    -    40,090,000    -    - 
Prepaid expenses   40,762    -    63,372    -    - 
Digital assets   430,327,688    -    -    -    - 
Equity investment   274,098,333                     
Accounts payable and accrued liabilities   (1,149,420)   (79,964)   (307,995)   (22,614)   134 
Loan payable   (13,499,000)   -    -    -    - 
ETP holders payable   (770,485,178)   -    -    -    - 
Deferred revenue   (548,262)   -    -    -    - 
Net assets (liabilities)  $(76,618,144)  $(78,805)  $45,264,434   $1,421,406   $11,040,177 

 

December 31, 2023
   United States   British   Swiss   European 
   Dollars   Pound   Franc   Euro 
Cash  $6,668,518   $-   $-   $- 
Receivables   47,159    -    -    - 
Private investments   4,016,636    -    39,395,000    - 
Prepaid investment   1,509,824    -    -    - 
Digital assets   489,865,637    -    -    - 
Accounts payable and accrued liabilities   (3,080,229)   (74,466)   (101,828)   (21,939)
Loan payable   (56,210,709)               
ETP holders payable   (508,130,490)   -    -    - 
Net assets (liabilities)  $(65,313,654)  $(74,466)  $39,293,172   $(21,939)

 

As at September 30, 2024, United States Dollar was converted at a rate of $1.3499 (December 31, 2023 - $1.3226) Canadian Dollars to $1.00 US Dollar. British Pounds was converted at a rate of $1.8080 (December 31, 2023 - $1.6837) Canadian Dollars to 1.00 British Pound. Euro was converted at a rate of $1.5076 (December 31, 2023 - $1.4626) Canadian Dollars to 1.00 Euro. Swiss Franc was converted at a rate of $1.6036 (December 31, 2023 - $1.5758).

 

Capital Management

 

The Company considers its capital to consist of share capital, equity reserve and deficit. The Company’s objectives when managing capital are:

 

●to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments;

 

●to give shareholders sustained growth in value by increasing shareholders’ equity; while

 

●taking a conservative approach towards financial leverage and management of financial risks.

 

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The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:

 

●raising capital through equity financings; and

 

●realizing proceeds from the disposition of its investments

 

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders’ equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million. There were no changes to the Company’s capital management during the nine months ended September 30, 2024.

 

Commitments

 

Management Contract Commitments

 

The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $2,312,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these consolidated financial statements. Minimum commitments remaining under these contracts were approximately $974,000, all due within one year.

 

Legal Commitments

 

The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

 

Summary of Quarterly Results

 

 

The following is a summary of the Company’s financial results for the eight most recently completed quarters:

 

   30-Sep   30-Jun   31-Mar   31-Dec   30-Sep   30-Jun   31-Mar   31-Dec   30-Sep   30-Jun 
   2024   2024   2024   2023   2023   2023   2023   2022   2022   2022 
Revenue  $20,299,457   $34,509,314   ($4,922,567)  $8,548,779   $6,003,995   $7,147,292   ($11,344,052)  ($11,123,848)  $295,605   ($5,219,545)
Net income (loss) and comprehensive income (loss)  $20,085,853   $(8,179,564)  $(19,310,808)  $1,415,946   $(4,719,786)  $800,012   $(16,444,465)  $(254,464,521)  $(9,011,375)  $(18,870,125)
                                                   
Income (loss) per Share - basic   0.07    -0.03    (0.06)   -    (0.01)   -    (0.08)   (0.13)   (0.04)   (0.09)
Income (loss) per Share - diluted   0.06    -0.02    (0.06)   -    (0.01)   -    (0.08)   (0.13)   (0.04)   (0.09)
Total Assets  $826,409,413   $789,087,114   $983,940,422   $591,960,107   $253,585,558   $259,787,932   $267,666,904   $194,003,779   $263,678,822   $241,666,497 
Total Long Term Liabilities  $0   $0   $0   $0   $0   $0   $0   $1,709,911   $1,681,358   $0 

 

 

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Selected annual information

 

 

The highlights of financial data for the Company for the three most recently completed financial years are as follows:

 

   31-Dec-23   31-Dec-22   31-Dec-21 
(a) Net Revenue    10,356,014   (14,226,780)  $15,081,078 
                
(b) Net Income (Loss) and Comprehensive Income (Loss)               
                
(i) Total income (loss)   (18,948,293)   (69,135,318)  $(71,254,155)
(ii) Income (loss) per share – basic   (0.09)   (0.32)   (0.37)
(iii) Income (loss) per share – diluted   (0.09)   (0.32)   (0.37)
(c) Total Assets 591,960,108   194,003,779   $459,690,575      
(d) Total Liabilities 573,516,045   166,094,517   $367,909,179      

 

Off Balance Sheet Arrangements

 

 

There are no off-balance sheet arrangements to which the Company is committed.

 

Compensation of Directors and Officers

 

 

During the nine months ended September 30, 2024, the Company paid or accrued $990,018 (nine months ended September 30, 2023 - $694,232) to directors and officers of the Company and $2,810,286 (nine months ended September 30, 2023 - $264,829) to directors and officers of the Company in share-based compensation.

 

As September 30, 2024, the Company had $82,655 (December 31, 2023 - $147,485) owing to its current key management, and $394,274 (December 31, 2023 - $314,136) owing to its former key management. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment or “due on demand”.

 

More detailed information regarding the compensation of officers and directors of the Company is disclosed in the management information circular and such information is incorporated by reference herein. The management information circular is available under profile of the Company on SEDAR at www.sedar.com

 

30

 

 

Related party transactions

 

 

The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of September 30, 2024 and December 31, 2023.

 

       Estimated 
Investment    Nature of relationship to invesment   Fair value 
Brazil Potash Corp.*   Officer (Ryan Ptolemy) of Investee   $1,697,640 
Aminna Bank AG *   Former Director (Olivier Roussy Newton) of investee    40,090,000 
ZKP*   Director (Olivier Roussy Newton) of investee    1,349,900 
Total investment - September 30, 2024       $43,137,540 

 

*Private companies

 

         Estimated 
Investment   Nature of relationship to invesment    Fair value 
Brazil Potash Corp.*   Officer (Ryan Ptolemy) of Investee   $2,138,380 
Aminna Bank AG (formerlt SEBA Bank AG)*   Former Director (Olivier Roussy Newton) of investee    39,395,000 
Total investment - December 31, 2023       $41,533,380 

 

*Private companies

 

Valour Inc. holds 4,000,000 common shares of the Company.

 

The Company has a diversified base of investors. To the Company’s knowledge, no one holds more than 10% of the Company’s shares on a basic share and partially diluted share basis as at September 30, 2024.

 

During the nine months ended September 30, 2024, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

 

●The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at September 30, 2024 the Company had a payable balance of $327,700 (December 31, 2023 - $226,000) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former director and former officer of the Company, is also a director of 2227929 Ontario Inc.

 

●The Company incurred $24,599 (September 30, 2023 - $102,546) in legal fees to a firm in which a director of the Company is a partner. Included in accounts payable and accrued liabilities were legal expenses of $918 (December 31, 2023 – $165,868) incurred in the ordinary course of business at a law firm where a director of the company is a Partner.

 

●Included in accounts payable and accrued liabilities were expenses of GBP 44,228 ($79,964) (December 31, 2023 - $74,466) expenses owed to Vik Pathak, a former director and officer of the Company.

 

●During the nine months ended September 30, 2024, Valour purchased 1,320,130 USDT for EUR 1,213,237 from a former director of Valour.

 

●During the nine months ended September 30, 2023, the Company paid to a company (“Valour Holdco”) controlled by an employee of Valour US$20,000,000 related to DeFi Alpha trading profits.

 

All of the above noted transactions have been in the normal course of operations and are recorded at their exchange amounts, which is the consideration agreed upon by the related parties.

 

31

 

 

Financial instruments and other instruments

 

 

Fair value

 

IFRS requires that the Company disclose information about the fair value of its financial assets and liabilities. Fair value estimates are made at the statements of financial position date, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

 

The Company has determined the carrying values of its financial instruments as follows:

 

●The carrying values of cash, amounts receivable, accounts payable and accrual liabilities approximate their fair values due to the short-term nature of these instruments.

 

●Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 of the Company’s audited consolidated financial statements for the years ended December 31, 2023 and 2022.

 

●Digital assets classified as financial assets relate to USDC which is measured at fair value

 

The following table illustrates the classification and hierarchy of the Company's financial instruments, measured at fair value in the statements of financial position as at September 30, 2024 and December 31, 2023.

 

                
       (Valuation   (Valuation     
   (Quoted Market   technique -observable   technique -non-observable     
Investments, fair value  price)   market Inputs)   market inputs)   Total 
Privately traded invesments  $   -   $-   $44,351,316   $44,351,316 
Equtiy investments   -    -    274,098,333    274,098,333 
Digital assets   -    688    -    688 
September 30, 2024  $-   $688   $318,449,649   $318,450,337 
Privately traded invesments  $-   $-   $43,540,534   $43,540,534 
Digital assets   -    673    -    673 
December 31, 2023  $-   $673   $43,540,534   $43,541,207 

 

Level 2 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 2 during the period ended September 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   September 30,   December 31, 
Investments, fair value for the period ended  2024   2023 
Balance, beginning of period  $     673   $ 1,586 
Acquired (disposal)   15    (913)
Balance, end of period  $688   $673 

 

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Level 3 Hierarchy

 

The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the period ended September 30, 2024 and December 31, 2023. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.

 

   September 30,   December 31, 
Investments, fair value for the period ended  2024   2023 
Balance, beginning of period  $43,540,534   $30,015,445 
Purchases   239,451,003    128,898 
Disposal   (830,411)   - 
Transferred out   (3,698,577)   - 
Realized gain (loss)   634,271    - 
Unrealized gain/(loss)   39,352,829    13,396,191 
Balance, end of period  $318,449,649   $43,540,534 

 

Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly traded companies.

 

As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results.

 

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The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at September 30, 2024 and December 31, 2023.

 

             Range of 
          Significant  significant 
       Valuation  unobservable  unobservable 
Description  Fair vaue   technique  input(s)  input(s) 
3iQ Corp.  $409,861   Recent financing  Marketability of shares   0% discount 
Brazil Potash Corp.   1,697,640   Recent financing  Marketability of shares   0% discount 
Earnity   -   Recent financing  Marketability of shares   0% discount 
Luxor Technology Corporation   675,017   Recent financing  Marketability of shares   0% discount 
Neuronomics AG   128,898   Recent financing  Marketability of shares   0% discount 
SDK:meta, LLC   -   Recent financing  Marketability of shares   0% discount 
Amina Bank   40,090,000   Market approach  Marketability of shares   0% discount 
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares   0% discount 
VolMEX Labs Corporation   -   Recent financing  Marketability of shares   0% discount 
ZKP Corporation   1,349,900   Recent financing  Marketability of shares   0% discount 
Equity investments in digital   274,098,333   Recent financing  Discount for lack of marketability   27.3% discount 
September 30, 2024  $318,449,649            
3iQ Corp.  $1,216,890   Recent financing  Marketability of shares   0% discount 
Brazil Potash Corp.   2,138,380   Recent financing  Marketability of shares   0% discount 
Earnity   -   Recent financing  Marketability of shares   0% discount 
Luxor Technology Corporation   661,366   Recent financing  Marketability of shares   0% discount 
SEBA Bank AG   39,395,000   Market approach  Marketability of shares   0% discount 
Neuronomics AG   128,898   Recent financing  Marketability of shares   0% discount 
SDK:meta, LLC   -   Recent financing  Marketability of shares   0% discount 
Skolem Technologies Ltd.   -   Recent financing  Marketability of shares   0% discount 
VolMEX Labs Corporation   -   Recent financing  Marketability of shares   0% discount 
December 31, 2023  $43,540,534            

 

3iQ Corp. (“3iQ”)

 

On March 31, 2020, the Company acquired 187,007 common shares of 3iQ as part of the Company’s acquisition of Valour. As at September 30, 2024, the valuation of 3iQ was based on the recent transaction which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of 3iQ will result in a corresponding +/-$40,986 (December 31, 2023 - $121,689) change in the carrying amount.

 

Amina Bank AG (“Amina”)

 

On January 14, 2022, the Company invested $34,498,750 to acquire 3,906,250 non-votes shares of Amina. As at September 30, 2024, the valuation of Amina was based on a market approach which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of Amina will result in a corresponding +/-$4,009,000 (December 31, 2023 +/- $3,939,500) change in the carrying amount.

 

Brazil Potash Corp. (“BPC”)

 

On September 11, 2020, the Company received 404,200 common shares of BPC as consideration of selling the Company’s Royalties to a non-arms length party of the Company. As at September 30, 2024, the valuation of BPC was based on BPC weighted average of comparable public market stock prices of $4.20 per share, which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of BPC will result in a corresponding +/- $169,764 (December 31, 2023 - $213,828) change in the carrying amount.

 

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Earnity Inc. (“Earnity”)

 

On April 13, 2021, the Company subscribed US$40,000 ($50,076) to acquire certain rights to certain future equity of Earnity. As at September 30, 2024, the valuation of Earnity was determined to be nil based on Earnity ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at September 30, 2024, a +/-10% change in the fair value of Earnity will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Luxor Technology Corporation (“LTC”)

 

On December 29, 2020, the Company subscribed US$100,000 ($128,060) to acquire certain rights to the preferred shares of LTC. The transaction was closed on February 15, 2021. On May 11, 2021, the Company subscribed additional rights of US$62,500 ($75,787). As at September 30, 2024, the valuation of LTC was based on the December 2021 financing which is indicative of being the fair market value. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024. a +/- 10% change in the fair value of LTC will result in a corresponding +/- $67,502 (December 31, 2023 - $66,137) change in the carrying amount.

 

SDK:Meta LLC

 

On June 3, 2021, the Company entered into a share exchange agreement with SDK exchanging 1,000,000 membership units of SDK with 3,000,000 shares of the Company valuing the investment at $3,420,000. During 2022, the Company impaired its investment in SDK:Meta LLC as they were unsuccessful in raising additional funds to continue to advance the company. As at September 30, 2024, the valuation of SDK:Meta LLC was $nil (December 31, 2023 - $nil). Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly. As at September30, 2024, a +/- 10% change in the fair value of SDK:Meta LLC will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

Skolem Technologies Ltd. (“STL”)

 

On December 29, 2020, the Company invested US$20,000 ($25,612) to acquire certain rights to the preferred shares of STL. On October 29, 2021, the Company rights were converted into 16,354 series A preferred shares. As at September 30, 2024, the valuation of STL was determined to be nil based on STL ceasing operations. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of STL will result in a corresponding +/- $nil (December 31, 2023 - $nil) change in the carrying amount.

 

VolMEX Labs Corporation (“VLC”)

 

On February 23, 2021, the Company invested US$30,000 ($37,809) to acquire certain rights to the preferred shares of VLC. As at June 30, 2024, the valuation of VLC was nil. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of VLC will result in a corresponding +/- nil (December 31, 2023 - $nil) change in the carrying amount.

 

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ZKP Corporation (“ZKP”)

 

On August 2, 2024, the Company invested US$1,000,000 ($1,385,800) to acquire shares of ZKP. As at September 30, 2024, the valuation of ZKP was based on the recent financing price. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2024. As at September 30, 2024, a +/- 10% change in the fair value of ZXP will result in a corresponding +/- $134,990 change in the carrying amount.

 

Equity Investments in Digital Assets at FVTPL (“Equity Investments”)

 

During Q2 2024, the Company invested $238,090,603 (US$173,814,136) to acquire interest in two entities set up to hold SOL and AVAX acquired from a bankrupt estate. Management used the net asset values as determined by the entities managers and applied a 25% discount for lack of marketability. As at September 30, 2024, a +/- 10% change in the fair value of the Equity Investments will result in a corresponding +/- $27,409,833 change in the carrying amount.

 

Outstanding Share Data

 

 

Authorized unlimited common shares without par value – 306,020,368 are issued and outstanding as at November 14, 2024.

 

Authorized 20,000,000 preferred shares, at 9% cumulative dividends, non-voting, non-participating, non-redeemable, non-retractable, and non-convertible – 4,500,000 are issued and outstanding as at November 14, 2024.

 

Stock options and convertible securities outstanding as at November 14, 2024 are as follows:

 

Stock Options:

 

29,026,187 with an exercise price ranging from $0.09 to $3.92 expiring between November 16, 2025 and November 4, 2029.

 

Warrants:

 

37,146,769 with an exercise price ranging from $0.20 to $0.30 expiring between November 14, 2024 and November 6, 2028.

 

Deferred shares units:

 

12,576,012 with vesting terms ranging from six months to two years.

 

Risks and Uncertainties

 

 

The Company is exposed to a number of risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. The following outlines certain risk factors specific to the Company. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward–looking information relating to the Company. Please also refer to the Company’s AIF for the year ended December 31, 2023 filed on SEDAR for a full description of the Company’s risks in addition to those highlighted below.

 

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Risks Relating to the Business and Industry of the Company

 

Staking and Lending of Cryptocurrencies, DeFi Protocol Tokens or other Digital Assets

 

The Company may stake or lend crypto assets to third parties, including affiliates. On termination of the staking arrangement or loan, the counterparty is required to return the crypto assets to the Company; any gains or loss in the market price during the period would inure to the Company. In the event of the bankruptcy of the counterparty, the Company could experience delays in recovering its crypto assets. In addition, to the extent that the value of the crypto assets increases during the term of the loan, the value of the crypto assets may exceed the value of collateral provided to the Company, exposing the Company to credit risks with respect to the counterparty and potentially exposing the Company to a loss of the difference between the value of the crypto assets and the value of the collateral. If a counterparty defaults under its obligations with respect to a loan of crypto assets, including by failing to deliver additional collateral when required or by failing to return the crypto assets upon the termination of the loan, the Company may expend significant resources and incur significant expenses in connection with efforts to enforce the staking or loan agreement, which may ultimately be unsuccessful.

 

Furthermore, the Company and its affiliates may also pledge and grant security over its crypto assets to secure loans. In the event that the Company or its affiliates defaults under its obligations with respect to the loan, including failure to repay the principal amount of the loan or accrued interest, lenders may realize upon its security and take possession to such pledged crypto assets.

 

The crypto assets that are staked, loaned or pledged to third parties by the Company include crypto assets held by Valour for the purposes of hedging its ETPs. The Company is exposed to a potentially significant liquidity risk if, for example, the aggregate sale of ETPs exceed the quantum of uncommitted cryptocurrency available to the Company to satisfy such sale requests. A similar risk applies with respect to individual reserves of each type of cryptocurrency should the sale of ETPs, and correspondingly, the underlying cryptocurrency, exceed the Company’s available reserves.

 

Custody Risk

 

The Company uses multiple custodians (or third-party “wallet providers”) to hold digital assets for its DeFi Ventures business line as well as for digital assets underlying Valour ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. The Company could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the execution of hedging ETPs, the value of the Company’s assets and the value of any investment in the Common Shares.

 

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Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Momentum Pricing Risk

 

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Cryptocurrency and DeFi protocol token market prices are determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and DeFi Protocol tokens inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of the Company’s cryptocurrency and DeFi protocol token inventory and thereby affect the Company’s shareholders.

 

The profitability of our operations will be significantly affected by changes in prices of cryptocurrencies, DeFi protocol tokens and other digital assets. Cryptocurrencies, DeFi protocol tokens and other digital assets prices are highly volatile, can fluctuate substantially and are affected by numerous factors beyond our control, including use of such cryptocurrencies, DeFi protocol tokens and other digital assets in the DeFi industry, demand, inflation and expectations with respect to the rate of inflation, global or regional political or economic events. If cryptocurrencies, DeFi protocol tokens and other digital assets prices should decline and remain at low market levels for a sustained period, we could determine that it is not economically feasible to continue activities.

 

The price and trading volume of any crypto asset is subject to significant uncertainty and volatility, depending on several factors, including, but not limited to:

 

●changes in liquidity, market-making volume, and trading activities;

 

●investment and trading activities of highly active retail and institutional users, speculators, miners, and investors;

 

●decreased user and investor confidence in crypto assets and crypto platforms;

 

●negative publicity or events and unpredictable social media coverage or “trending” of crypto assets;

 

●the ability for crypto assets to meet user and investor demands;

 

●the functionality and utility of crypto assets and their associated ecosystems and networks;

 

●consumer preferences and perceived value of crypto assets and crypto asset markets;

 

●regulatory or legislative changes and updates affecting the cryptoeconomy;

 

●the characterization of crypto assets under the laws of various jurisdictions around the world;

 

●the maintenance, troubleshooting, and development of the blockchain networks;

 

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●the ability for crypto networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently;

 

●interruptions in service from or failures of major crypto platforms;

 

●availability of an active derivatives market for various crypto assets;

 

●availability of banking and payment services to support crypto-related projects;

 

●level of interest rates and inflation;

 

●national and international economic and political conditions;

 

●global cryptocurrency supply;

 

●changes in the software, software requirements or hardware requirements underlying a blockchain network;

 

●competition for and among various cryptocurrencies; and

 

●actual or perceived manipulation of the markets for cryptocurrencies.

 

Cryptocurrencies, DeFi Protocol Tokens and Digital Assets Volatility Risk

 

As Valour’s ETPs track the market price of cryptocurrencies and DeFi protocol tokens, the value of the Common Shares relates partially to the value of such cryptocurrencies and DeFi protocol tokens, and fluctuations in the price of cryptocurrencies, DeFi protocol tokens and other digital assets could materially and adversely affect an investment in the Common Shares. Several factors may affect the price of cryptocurrencies, DeFi protocol tokens and other digital assets, including: the total number of cryptocurrencies, DeFi protocol tokens and other digital assets in existence; global cryptocurrency, DeFi protocol tokens and other digital assets demand; global cryptocurrencies, DeFi protocol tokens and other digital assets supply; investors’ expectations with respect to the rate of inflation of fiat currencies; investors’ expectations with respect to the rate of deflation of cryptocurrencies, DeFi protocol tokens and other digital assets; interest rates; currency exchange rates, including the rates at which cryptocurrencies, DeFi protocol tokens and other digital assets may be exchanged for fiat currencies; fiat currency withdrawal and deposit policies of cryptocurrency exchanges and liquidity of such cryptocurrency exchanges; interruptions in service from or failures of major cryptocurrency exchanges; Cyber theft of cryptocurrencies, DeFi protocol tokens and other digital assets from online wallet providers, or news of such theft from such providers or from individuals’ wallets; investment and trading activities of large investors; monetary policies of governments, trade restrictions, currency devaluations and revaluations; regulatory measures, if any, that restrict the use of cryptocurrencies, DeFi protocol tokens and other digital assets as a form of payment or the purchase of cryptocurrencies, DeFi protocol tokens and other digital assets; the availability and popularity of businesses that provide cryptocurrencies, DeFi protocol tokens and other digital assets and blockchain-related services; the maintenance and development of the open-source software protocol of various cryptocurrency or DeFi protocol networks; increased competition from other forms of cryptocurrency or payments services; global or regional political, economic or financial events and situations; expectations among cryptocurrencies, DeFi protocol tokens and other digital assets economy participants that the value of cryptocurrencies, DeFi protocol tokens and other digital assets will soon change; and fees associated with processing a cryptocurrency, DeFi protocol token or other digital asset transaction.

 

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Cryptocurrencies, DeFi protocol tokens and other digital assets have historically experienced significant intraday and long-term price volatility. If cryptocurrency, DeFi protocol token and other digital asset markets continue to be subject to sharp fluctuations, shareholders may experience losses if they need to sell their Common Shares at a time when the price of cryptocurrencies, DeFi protocol tokens and other digital assets is lower than it was when they purchased their Common Shares. In addition, investors should be aware that there is no assurance that cryptocurrencies, DeFi protocol tokens and other digital assets will maintain their long-term value in terms of future purchasing power or that the acceptance of cryptocurrencies, DeFi protocol tokens and other digital assets payments by mainstream retail merchants and commercial businesses will continue to grow.

 

Cybersecurity Threats, Security Breaches and Hacks

 

As with any other computer code, flaws in cryptocurrency and DeFi protocol source code have been exposed by certain malicious actors. Several errors and defects have been found and corrected, including those that disabled some functionality for users and exposed users’ information. Discovery of flaws in or exploitations of the source code that allow malicious actors to take or create cryptocurrencies and / or DeFi protocol tokens can occur.

 

Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin and other cryptocurrency exchange market since the launch of the Bitcoin Network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm the Company’s business operations or result in loss of the Company’s assets. Any breach of the Company’s infrastructure could result in damage to the Company’s reputation and reduce demand for the Common Shares, resulting in a reduction in the price of the Common Shares. Furthermore, the Company believes that if its assets grow, it may become a more appealing target for security threats, such as hackers and malware.

 

Any security procedures implemented cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by the Company. The security procedures and operational infrastructure of the Company may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s cryptocurrency account, private keys, data or cryptocurrencies. Additionally, outside parties may attempt to fraudulently induce employees of the Company to disclose sensitive information in order to gain access to the Company’s infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of one of the Company’s accounts occurs, the market perception of the effectiveness of the Company could be harmed.

 

As technological change occurs, the security threats to the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets will likely adapt and previously unknown threats may emerge. The Company’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets. To the extent that the Company is unable to identify and mitigate or stop new security threats, the Company’s cryptocurrencies, DeFi protocol tokens and other digital assets may be subject to theft, loss, destruction or other attack

 

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Cryptocurrency Exchanges and other Trading Venues are Relatively New

 

The Company and its affiliates manages its holdings of cryptocurrency, DeFi protocol tokens and other digital assets through cryptocurrency exchanges. In particular, DeFi relies on cryptocurrency exchanges to be able to buy and sell the digital assets which its ETPs track. To the extent that cryptocurrency exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, this could result in a reduction in cryptocurrency prices. Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, derivatives and other currencies. For example, in the past, a number of cryptocurrency exchanges have been closed due to fraud, business failure or security breaches. In many of these instances, the customers of these exchanges were not compensated or made whole for the partial or complete losses of their account balances in such exchanges. While smaller exchanges are less likely to have the infrastructure and capitalization that provide larger exchanges with additional stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information, or gain access to private computer systems) and may be more likely to be targets of regulatory enforcement action.

 

Regulatory Risks

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies with certain governments deeming them illegal while others have allowed their use and trade. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the ability of the Company to continue to operate. The effect of any future regulatory change on the DeFi ecosystem or any cryptocurrency, project or protocol that the Company may hold is impossible to predict, but such change could be substantial and adverse to the space as a whole, as well as potentially to the Company.

 

Governments may, in the future, restrict or prohibit the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency mining companies to additional regulation. On August 24, 2017 and June 11, 2018, the Canadian Securities Administrators published CSA Staff Notice 46-307 – Cryptocurrency Offerings and CSA Staff Notice 46-308 – Securities Law Implications for Offerings of Tokens, respectively, each providing guidance on whether token offerings are subject to Canadian securities laws.

 

While the Company does not have operations in the United States, the Company reviews development of the cryptocurrency regulatory environment in the United States on an ongoing basis due to the proximity of United States to Canada. In comparison to traditional securities or commodities markets, U.S. law and regulation remains thinly developed with respect to financial services provided to the cryptocurrency and crypto asset markets. Although recent years have seen some guidance emerge with respect to the question of whether a crypto asset constitutes a security for certain purposes under U.S. law, there remains little or no clear legal authority or established practice with respect to the application to crypto assets of concepts like staking and lending of cryptocurrency, fungibility, settlement, trade execution and reporting, collateralization rehypothecation, custody, repo, margin, restricted securities, short sales, bankruptcy and insolvency and many others. Some or all of these concepts may be needed for crypto-related marketplaces to continue to grow, mature and attract institutional participants; there can be no assurances that rules and practices for such concepts will develop in the United States in a manner that is timely, clear, favorable to the Company or compatible with other jurisdictions’ regimes in which the Company operates. Furthermore, to the extent the Company offers any of these financial services, emerging regulation or enforcement activity may have a material impact on the Company’s ability to continue providing such service thereby affecting the Company’s revenues and profitability as well as its reputation and resources.

 

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Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. By extension, similar actions by other governments may result in the restriction of the acquisition, ownership, holding, selling, use or trading in the common shares of the Company’s common shares. Such a restriction could result in the Company liquidating its cryptocurrency investments at unfavorable prices and may adversely affect the Company’s shareholders.

 

DeFi Venture Portfolio Exposure

 

Given the nature of the Company’s DeFi Venture activities, the results of operations and financial condition of the Company are dependent upon the market value of the securities, tokens and cryptocurrencies that comprise DeFi Venture’s portfolio assets. Market value can be reflective of the actual or anticipated operating results of companies or projects in the portfolio and/or the general market conditions that affect the technology, crypto and DeFi sectors. Various factors affecting these sectors could have a negative impact on the Company’s portfolio of investments and thereby have an adverse effect on its business. Additionally, the Company’s investments are mostly in early stage ventures that may never mature or generate adequate returns or may require a number of years to do so. Junior companies may never achieve commercial success. This may create an irregular pattern in the Company’s investment gains and revenues (if any) and an investment in the Company’s securities may only be suitable for investors who are prepared to hold their investment for a long period of time. Macro factors such as commodity prices, the growth and decline of disruptive technologies, including DeFi technologies, and global political and economic conditions could have an adverse effect on the mining, technological and Defi sectors, thereby negatively affecting the Company’s portfolio of investments. Company and project-specific risks, such as the risks associated with emerging companies and project in the technology, crypto and DeFi sectors generally, could have an adverse effect on one or more of the investments in the portfolio at any point in time. Company, project and industry-specific risks that materially adversely affect the Company’s investment portfolio may have a materially adverse impact on operating results.

 

Banks May Cut off Banking Services to Businesses that Provide Cryptocurrency-related Services

 

A number of companies that provide cryptocurrency-related services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, a number of such companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to cryptocurrency related companies or companies that accept cryptocurrencies for a number of reasons, such as perceived compliance risks or costs. The difficulty that many businesses that provide cryptocurrency-related services have and may continue to have in finding banks willing to provide them with bank accounts and other banking services may be currently decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies or could decrease its usefulness and harm its public perception in the future. Similarly, the usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks were to close the accounts of many or of a few key businesses providing cryptocurrency-related services. This could decrease the market prices of cryptocurrencies and adversely affect the value of the Company’s cryptocurrency inventory.

 

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Impact of Geopolitical Events

 

Crises may motivate large-scale purchases of cryptocurrencies which could increase the price of cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of the Company’s cryptocurrency holdings. The possibility of large-scale purchases of cryptocurrencies in times of crisis may have a short-term positive impact on the prices of same. Future geopolitical crises may erode investors’ confidence in the stability of cryptocurrencies and may impair their price performance which would, in turn, adversely affect the Company’s cryptocurrency holdings.

 

As an alternative to fiat currencies that are backed by central governments, cryptocurrencies are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally. Large-scale sales of cryptocurrencies would result in a reduction in their market prices and adversely affect the Company’s operations and profitability.

 

Further Development and Acceptance of Cryptocurrency and DeFi Networks

 

The further development and acceptance of cryptocurrency and other cryptographic and algorithmic protocols governing the issuance of transactions in cryptocurrencies and DeFi Protocols, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of such networks may adversely affect the value of the corresponding cryptocurrencies and DeFi Protocol tokens, and thus may adversely affect the Company’s operations. The factors affecting the further development of the industry, include, but are not limited to the following:

 

●continued worldwide growth in the adoption and use of cryptocurrencies and DeFi;

 

●governmental and quasi-governmental regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency and DeFi systems;

 

●changes in consumer demographics and public tastes and preferences;

 

●the maintenance and development of the open-source software protocol of relevant networks;

 

●the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

●general economic conditions and the regulatory environment relating to digital assets and decentralized finance; and

 

●negative consumer sentiment and perception of cryptocurrencies.

 

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Currently, there is relatively small use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect the Company’s operations, investment strategies, and profitability.

 

As relatively new products and technologies, cryptocurrencies have not been widely adopted, for example as a means of payment for goods and services, by major retail and commercial outlets. Conversely, a significant portion of cryptocurrency demand is generated by speculators and investors seeking to profit from the short-term or long-term holding of cryptocurrencies. The relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services or other direct use cases that may arise. A lack of expansion by cryptocurrencies into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in their market prices, either of which could adversely impact the Company’s operations, investment strategies, and profitability. Further, if fees increase for recording transactions in the applicable Blockchain, demand for cryptocurrencies may be reduced and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the price of cryptocurrencies.

 

There are material risks and uncertainties associated with custodians of digital assets

 

We multiple custodians (or third-party “wallet providers”) to hold digital assets for our DeFi Ventures business line as well as for digital assets underlying Valour ETPs. Such custodians may or may not be subject to regulation by U.S. state or federal or non-U.S. governmental agencies or other regulatory or self-regulatory organizations. We could have a high concentration of its digital assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, compromised access credentials, malware or cyberattacks. Custodians may not indemnify us against any losses of digital assets. Digital assets held by certain custodians may be transferred into “cold storage” or “deep storage,” in which case there could be a delay in retrieving such digital assets. The Company may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect our trading execution, the value of our and the value of any investment in our common shares. Furthermore, there is, and is likely to continue to be, uncertainty as to how U.S. and non-U.S. laws will be applied with respect to custody of cryptocurrencies and other digital assets held on behalf of clients. For example, U.S.- regulated investment advisers may be required to keep client “funds and securities” with a “qualified custodian”; there remain numerous questions about how to interpret and apply this rule, and how to identify a “qualified custodian” of, digital assets, which are obviously kept in a different way from the traditional securities with respect to which such rules were written. The uncertainty and potential difficulties associated with this question and related questions could materially and adversely affect our ability to continuously develop and launch our business lines. We may also incur costs related to the third-party custody and storage of its digital assets. Any security breach, incurred cost or loss of digital assets associated with the use of a custodian could materially and adversely affect the our execution of hedging ETPs, the value of our assets and the value of any investment in our common shares.

 

Risk of Loss, Theft or Destruction of Cryptocurrencies

 

There is a risk that some or all of the Company’s cryptocurrencies could be lost, stolen or destroyed. If the Company’s cryptocurrencies are lost, stolen or destroyed under circumstances rendering a party liable to the Company, the responsible party may not have the financial resources sufficient to satisfy the Company’s claim.

 

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Irrevocability of Transactions

 

Bitcoin and most other cryptocurrency and DeFi protocol token transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies or DeFi protocol tokens may be irretrievable. Such transactions are not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of cryptocurrencies or a theft of cryptocurrencies generally will not be reversible and the Company may not be capable of seeking compensation for any such transfer or theft. To the extent that the Company is unable to seek a corrective transaction with the third party or is incapable of identifying the third party that has received the Company’s cryptocurrencies through error or theft, the Company will be unable to revert or otherwise recover incorrectly transferred cryptocurrencies. The Company will also be unable to convert or recover cryptocurrencies transferred to uncontrolled accounts.

 

Potential Failure to Maintain the Cryptocurrency Networks

 

Many cryptocurrency networks, including the Bitcoin Network, operates based on an open-source protocol maintained by the core developers of such networks and other contributors. As such protocols are not sold and their uses do not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating such network protocols. Consequently, there is a lack of financial incentive for developers to maintain or develop such networks and the core developers may lack the resources to adequately address emerging issues with such network protocol. Although the many networks, including the Bitcoin Network, is currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. To the extent that material issues arise with the such network protocol and the core developers and opensource contributors are unable to address the issues adequately or in a timely manner, such networks and an investment in the Common Shares may be adversely affected.

 

Potential Manipulation of Blockchain

 

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains control of more than 50% of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter or manipulate the Blockchain on which the Bitcoin Network and most Bitcoin transactions rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new Bitcoins or transactions using such control. The malicious actor could “double-spend” its own Bitcoins (i.e., spend the same Bitcoins in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the processing power on the Bitcoin Network or the Bitcoin community did not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible. To the extent that the Bitcoin ecosystem, including the core developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin Network will increase.

 

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Miners May Cease Operations

 

If the award of Bitcoins or other cryptocurrencies for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners in relevant networks, miners may cease expending processing power to solve blocks and confirmations of transactions on the Bitcoin Blockchain or other networks could be slowed. A reduction in the processing power expended by miners on the applicable blockchain network could increase the likelihood of a malicious actor or botnet obtaining control.

 

Risks Related to Insurance

 

The Company intends to insure its operations in accordance with technology industry practice. However, given the novelty of cryptocurrency mining and associated businesses, such insurance may not be available, may be uneconomical for the Company, or the nature or level may be insufficient to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the Company.

 

Concentration of Investments

 

Other than as described herein, there are no restrictions on the proportion of the Company’s funds and no limit on the amount of funds that may be allocated to any particular investment. The Company may participate in a limited number of investments and, as a consequence, its financial results may be substantially adversely affected by the unfavorable performance of a single investment. Completion of one or more investments may result in a highly concentrated investment in a particular company, commodity or geographic area resulting in the performance of the Company depending significantly on the performance of such company, commodity or geographic area. As at September 30, 2024, the Company’s investments through its Defi Venture business arm comprise of $45,106,173 represented approximately 4.9% of the Company’s total assets.

 

We operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively. The cryptoeconomy is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. Our DeFi ETPs and DeFi Governance business line compete against several companies and expect that we will face even more competition in the future. These competitors could have various competitive advantages over us, including but not limited to:

 

●greater name recognition, longer operating histories, and larger market shares;

 

●larger sales and marketing budgets and organizations;

 

●more established marketing, banking, and compliance relationships;

 

●greater resources to make acquisitions;

 

●lower labor, compliance, risk mitigation, and research and development costs;

 

●operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and

 

●substantially greater financial, technical, and other resources.

 

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If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results, and financial condition could be adversely affected.

 

Harm to our brand and reputation could adversely affect our business.

 

Our reputation and brand may be adversely affected by complaints and negative publicity about us, even if factually incorrect or based on isolated incidents. Damage to our brand and reputation may be caused by:

 

●cybersecurity attacks, privacy or data security breaches, or other security incidents;

 

●complaints or negative publicity about us, our ETPs, our management team, our other employees or contractors or third-party service providers;

 

●actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by our management team, our other employees or contractors or third-party service providers;

 

●unfavorable media coverage;

 

●litigation involving, or regulatory actions or investigations into our business;

 

●a failure to comply with legal, tax and regulatory requirements;

 

●any perceived or actual weakness in our financial strength or liquidity;

 

●any regulatory action that results in changes to or prohibits certain lines of our business;

 

●a failure to operate our business in a way that is consistent with our values and mission;

 

●a sustained downturn in general economic conditions; and

 

●any of the foregoing with respect to our competitors, to the extent the resulting negative perception affects the public’s perception of us or our industry as a whole.

 

Private Issuers and Illiquid Securities

 

Through its DeFi Ventures business line, the Company invests in securities and / or digital assets of private issuers or projects. These may be subject to trading restrictions, including hold periods, and there may not be any market for such securities or digital assets. These limitations may impair the Company’s ability to react quickly to market conditions or negotiate the most favourable terms for exiting such investments. Investments in private issuers or projects are subject to a relatively high degree of risk. There can be no assurance that a public market will develop for any of the Company’s private investments, or that the Company will otherwise be able to realize a return on such investments.

 

The value attributed to securities and / or digital assets of private issuers or projects will be the cost thereof, subject to adjustment in limited circumstances, and therefore may not reflect the amount for which they can actually be sold. Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a ready market had existed for the investments.

 

The Company may also invest in illiquid securities of public issuers. A considerable period of time may elapse between the time a decision is made to sell such securities and the time the Company is able to do so, and the value of such securities could decline during such period. Illiquid investments are subject to various risks, particularly the risk that the Company will be unable to realize its investment objectives by sale or other disposition at attractive prices or otherwise be unable to complete any exit strategy. In some cases, the Company may be prohibited by contract or by law from selling such securities for a period of time or otherwise be restricted from disposing of such securities. Furthermore, the types of investments made may require a substantial length of time to liquidate.

 

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The Company may also make direct investments in publicly traded securities that have low trading volumes. Accordingly, it may be difficult to make trades in these securities without adversely affecting the price of such securities.

 

Cash Flow, Revenue and Liquidity

 

The Company’s revenue and cash flow is generated primarily from financing activities, proceeds from the disposition of investments, management fees of ETPs and staking and lending activities of cryptocurrencies and DeFi protocol tokens. The availability of these sources of income and the amounts generated from these sources depend upon various factors, many of which are outside of the Company’s direct control. The Company’s liquidity and operating results may be adversely affected if its access to the capital markets is hindered, whether as a result of a downturn in the market conditions generally or to matters specific to us, if the value of our investments decline, resulting in losses upon disposition, if there is low demand for our ETPs, resulting in lack of management fees received, and if rates provided by counterparties for staking and lending decrease.

 

Dependence on Management Personnel

 

The Company is dependent upon the efforts, skill and business contacts of key members of management, the Board and the Advisory Board, for among other things, the information and deal flow they generate during the normal course of their activities and the synergies that exist amongst their various fields of expertise and knowledge. Accordingly, the Company’s success may depend upon the continued service of these individuals who are not obligated to remain consultants to the Company. The loss of the services of any of these individuals could have a material adverse effect on the Company’s revenues, net income and cash flows and could harm its ability to maintain or grow existing assets and raise additional funds in the future.

 

Sensitivity to Macro-Economic Conditions

 

Due to the Company’s focus on decentralized finance industry, the success of the Company’s investments is interconnected to the growth of disruptive technologies. The Company may be adversely affected by the falling share prices of the securities of investee companies, cryptocurrencies, DeFi Protocol tokens and other crypto assets, as the trading price for the Common Shares may reflect the estimated aggregate value of the Company’s portfolio of investments and assets under management. The factors affecting current macro-economic conditions are beyond the control of the Company.

 

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Available Opportunities and Competition for Investments

 

The success of the Company’s DeFi Ventures line of business will depend upon: (i) the availability of appropriate investment opportunities; (ii) the Company’s ability to identify, select, acquire, grow and exit those investments; and (iii) the Company’s ability to generate funds for future investments. The Company can expect to encounter competition from other entities having similar investment objectives, including institutional investors and strategic investors. These groups may compete for the same investments as the Company, may be better capitalized, have more personnel, have a longer operating history and have different return targets. As a result, the Company may not be able to compete successfully for investments. In addition, competition for investments may lead to the price of such investments increasing which may further limit the Company’s ability to generate desired returns. There can be no assurance that there will be a sufficient number of suitable investment opportunities available to invest in or that such investments can be made within a reasonable period of time. There can be no assurance that the Company will be able to identify suitable investment opportunities, acquire them at a reasonable cost or achieve an appropriate rate of return. Identifying attractive opportunities is difficult, highly competitive and involves a high degree of uncertainty. Potential returns from investments will be diminished to the extent that the Company is unable to find and make a sufficient number of attractive investments.

 

Share Prices of Investments

 

Investments in securities of public companies are subject to volatility in the share prices of the companies. There can be no assurance that an active trading market for any of the subject shares is sustainable. The trading prices of the subject shares could be subject to wide fluctuations in response to various factors beyond the Company’s control, including quarterly variations in the subject companies’ results of operations, changes in earnings, results of exploration and development activities, estimates by analysts, conditions in the mining, technological and cryptocurrency industries and general market or economic conditions. In recent years equity markets have experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on market prices, often unrelated to the operating performance of the specific companies. Such market fluctuations could adversely affect the market price of the Company’s investments.

 

Additional Financing Requirements

 

The Company anticipates ongoing requirements for funds to support its growth and may seek to obtain additional funds for these purposes through public or private equity, or debt financing. There are no assurances that additional funding will be available on acceptable terms, at an acceptable level or at all. Any additional equity financing may cause shareholders to experience dilution, and any debt financing would result in interest expense and possible restrictions on the Company’s operations or ability to incur additional debt. Any limitations on the Company’s ability to access the capital markets for additional funds could have a material adverse effect on its ability to grow its investment portfolio.

 

No Guaranteed Return

 

There is no guarantee that an investment in the Company’s securities will earn any positive return in the short term or long term. The task of identifying investment opportunities, monitoring such investments and realizing a significant return is difficult. Many organizations operated by persons of competence and integrity have been unable to make, manage and realize a return on such investments. In addition, past performance provides no assurance of future success.

 

Management of the Company’s Growth

 

Significant growth in the business, as a result of acquisitions or otherwise, could place a strain on the Company’s managerial, operational and financial resources and information systems. Future operating results will depend on the ability of senior management to manage rapidly changing business conditions, and to implement and improve the Company’s technical, administrative and financial controls and reporting systems. No assurance can be given that the Company will succeed in these efforts. The failure to effectively manage and improve these systems could increase costs, which could have a materially adverse effect on the Company’s operating results and overall performance.

 

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Due Diligence

 

The due diligence process undertaken by the Company in connection with investment opportunities may not reveal all facts that may be relevant in connection with the investments. Before making investments, the Company conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, the Company may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, the Company relies on resources available including information provided by the target of the investment and, in some circumstances, third-party investigations. The due diligence process that is carried out with respect to investment opportunities may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful.

 

Exchange Rate Fluctuations

 

A significant portion of the Company’s cryptocurrency, DeFi protocol tokens and digital asset holdings could be invested in United States dollar denominated investments or other foreign currencies. Changes in the value of the foreign currencies in which the Company’s investments are denominated could have a negative impact on the ultimate return on its investments and overall financial performance.

 

Non-controlling Interests

 

The Company’s investments include debt instruments and equity securities of companies that it does not control. Such instruments and securities may be acquired through trading activities or through purchases of securities directly from the issuer. These investments are subject to the risk that the company in which the investment is made may make business, financial or management decisions with which the Company does not agree or that the majority stakeholders or the management of the investee company may take risks or otherwise act in a manner that does not serve the Company’s interests. If any of the foregoing was to occur, the value of the Company’s investments could decrease and its financial condition, results of operations and cash flow could suffer as a result.

 

Changes in Legislation and Regulatory Risk

 

There can be no assurance that laws applicable to the Company or the businesses in which the Company invests, including securities legislation, will not be changed in a manner which adversely affects the Company. If such laws change, such changes could have a negative effect upon the value of the Company and upon investment opportunities available to the Company.

 

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Risks Relating to the Financial Condition of the Company

 

Limited Operating History as a DeFi Company

 

The Company announced its focus in the DeFi industry on January 19, 2021. The Company’s limited operating history and the lack of meaningful historical financial data makes it difficult to fully evaluate the Company’s prospects. To the extent that the Company is able to execute its business plan, its business will be subject to all of the problems that typically affect a business with a limited operating history, such as unanticipated expenses, capital shortfalls, delays in program development and possible cost overruns. Investment in the securities of the Company is highly speculative given the nature of the Company’s business.

 

The Company’s success will depend on many factors, including some which may be beyond its control or which cannot be accounted for at this time, such as the market’s acceptance of the products of its investee companies, the emergence of potential competitors, and changes in economic conditions. For the reasons discussed in this section and elsewhere in this AIF, it is possible that the Company may not generate revenues or profits in the foreseeable future or at all.

 

No History of Operating Revenue and Cash Flow

 

The Company is dependent on financings and future cash flows to meet its obligations. The future performance of the business and the ability of the Company’s subsidiaries to provide the Company with payments may be constrained by factors such as, among others: success of the Company’s corporate strategy, economic downturns; technological and regulatory changes; the cash flows generated by operations, investment activities and financing activities; and the level of taxation, particularly corporate profits and withholding taxes. If the Company is unable to generate sufficient cash from operations, the Company may be required to incur indebtedness, raise funds in a public or private equity or debt offering, or sell some or all of its assets. There can be no assurance that any such financing will be available on satisfactory terms or that it will be sufficient.

 

The Company may be subject to limitations on the repatriation of earnings in each of the countries where the Company, including its investee companies, do business. In particular, there may be significant withholding taxes applicable to the repatriation of funds from foreign countries to Canada. There can be no assurance that changes in regulations, including tax treaties, in and among the relevant countries where the Company or its investee companies do business will not take place, and if such changes occur, they may adversely impact the Company’s ability to receive sufficient cash payments from its subsidiaries.

 

Insufficient Cash Flow and Funds in Reserve

 

The Company’s cash flow and funds in reserve may not be sufficient to fund its ongoing activities at all times and from time to time and it may require additional financing in order to carry out its activities. In addition, the Company may incur major unanticipated liabilities or expenses. Although the Company has been successful in the past in financing its activities, there can be no assurance that the Company will be able to obtain additional financing on commercially acceptable terms. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of Company. There is risk that if the economy and banking industry experienced unexpected and/or prolonged deterioration, the Company’s access to additional financing may be affected. This may be further complicated by the limited market liquidity for shares of smaller companies such as the Company, restricting access to some institutional investors. Due to uncertainty in the capital markets, the Company may from time to time have restricted access to capital and increased borrowing costs. To the extent that external sources of capital become limited, unavailable, or available on onerous terms, the Company’s ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition, results of operations and prospects may be affected materially and adversely as a result.

 

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The Company, along with all other companies, may face reduced cash flow and restricted access to capital if the global economic situation deteriorates. A prolonged period of adverse market conditions may impede the Company’s ability to grow and complete additional acquisitions, if desired. In addition, a prolonged period of adverse market conditions may impede the Company’s ability to service any of its loans or arrange alternative financing when the existing loans become due. In each case, the Company’s business, financial condition, results of operations and prospects would be adversely affected.

 

Conflicts of Interest may Arise

 

Certain current or future directors and officers of the Company and its subsidiaries may be shareholders, directors and officers of other companies that may operate in the same sectors as the Company. Such associations may give rise to conflicts of interest from time to time. The directors and officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in such conflict is required under the applicable corporate laws to disclose his or her interest and to abstain from voting on such matter.

 

Risks Relating to the Common Shares

 

Market Price of Common Shares may Experience Volatility

 

The market price of the Common Shares has been volatile in the past and may continue to be volatile. The market price is, and could be, subject to wide fluctuations due to a number of factors, including actual or anticipated fluctuations in the Company’s results of operations, changes in estimates of its future results of operations by management or securities analysts, market rumours, investments or divestments by the Company or its competitors and general industry changes.

 

Many of the factors that could affect the market price of the Common Shares are outside of the Company’s control. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of the Common Shares. The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of the Common Shares.

 

Shareholders’ Interest in the Company may be Diluted in the Future

 

If the Company raises additional funding by issuing additional equity securities, or securities convertible into equity, such financing may substantially dilute the interests of shareholders.

 

The Company has Never Paid Dividends and may not do so in the Foreseeable Future

 

The Company has never paid cash dividends on its Common Shares. Currently, the Company intends to retain its future earnings, if any, to fund the development and growth of its business, and does not anticipate paying any cash dividends on its Common Shares in the near future. As a result, shareholders will have to rely on capital appreciation, if any, to earn a return on investment in any Common Shares in the foreseeable future.

 

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Multilateral instrument 52-109 disclosure

 

 

In accordance with National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, management is responsible for the establishment and maintenance of DC&P and ICFR. The Company’s management, including the CEO and CFO, has designed the DC&P and ICFR based on the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO 2013 Framework”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.

 

Regardless of how well the DC&P and ICFR are designed, internal controls have inherent limitations and can only provide reasonable assurance that the controls are meeting the Corporation’s objectives in providing reliable financial reporting information in accordance with IFRS. These inherent limitations include, but are not limited to, human error and circumvention of controls and as such, there can be no assurance that the controls will prevent or detect all misstatements due to errors or fraud, if any.

 

The CEO and the CFO have concluded that the Corporation’s ICFR were not effective as of September 30, 2024 because of the material weakness identified above under the headings “Change in Valuation and Classification of Equity Investments in Digital Assets, at FVTPL” and “June 2023 restatement.”

 

Remediation of Material Weakness in ICFR

 

We continue to work to fully remediate the material weakness and are taking steps to strengthen our internal control over financial reporting. We are taking appropriate and reasonable steps to remediate this material weakness through the planned implementation of a new ERP system and hiring of additional staff for our finance department.

 

Management expects to continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of our internal control over financial reporting. We believe these measures, and others that may be implemented, will remediate the material weakness in ICFR described above.

 

The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Material Accounting Policies

 

 

The Company’s material accounting policies can be found in Note 2 of its annual audited financial statements for the years ended December 31, 2023 and 2022.

 

Critical Accounting Estimates and Assumptions

 

The preparation of the Company’s Consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

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Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods.

 

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the Consolidated financial statements are as follows:

 

Accounting for digital assets

 

The IFRS Interpretations Committee (the “Committee”) published its agenda decision on Holdings of Cryptocurrencies in June 2019. The Committee concluded that IAS 2 – Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business, otherwise an entity should apply IAS 38 - Intangible Assets to holdings of cryptocurrencies. The Company has assessed that it acts in a capacity as a commodity broker trader as defined in IAS 2 - Inventories, in characterizing certain of its holdings as inventory, or more specifically, digital assets. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value less costs to sell are recognized in profit or loss. Digital currencies consist of cryptocurrency denominated assets (see Note 7) and are included in current and long-term assets. Digital currencies are carried at their fair value determined by the spot rate less costs to sell. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value is determined by taking the mid-point price at 17:30 CET from Kraken, Bitfinex, Binance, Coinbase other exchanges consistent with the final terms for each ETP. Fair value for Mobilecoin, Shyft, Blocto, Maps, Oxygen, Boba Network, Saffron.finance, Clover, Sovryn, Wilder World, Pyth and Vomex is determined by taking the last closing price for the day (UTC time) from www.coinmarketcap.com.

 

Fair value of financial derivatives

 

Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. Valuation technique such as Black Scholes model is used to value these instruments.

 

Fair value of investment in securities not quoted in an active market or private company investments

 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values.

 

Share-based payments

 

The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk-free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense.

 

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Business combinations and goodwill

 

Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Goodwill is assessed for impairment annually.

 

Contingencies

 

Estimated useful lives and impairment considerations

 

Amortization of intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

 

Impairment of non-financial assets

 

The Company’s non-financial assets include prepaid expenses, digital assets excluding USDC, equipment and right of use assets, intangibles and goodwill. Impairment of these non-financial assets exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. See Note 8 for the discussion regarding impairment of the Company’s non-financial assets.

 

Functional currency

 

The functional currency of the Company has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and the currencies in which expenses are settled, by each entity, as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency.

 

Assessment of transaction as an asset purchase or business combination

 

Significant acquisitions require judgements and estimates to be made at the date of acquisition in relation to determining the relative fair value of the allocation of the purchase consideration over the fair value of the assets. The information necessary to measure the fair values as at the acquisition date of assets acquired requires management to make certain judgements and estimates about future performance of these assets.

 

Control

 

Significant judgment is involved in the determination whether the Company controls under IFRS 10. The Company is deemed to control an investee when it demonstrates: power over the investee, exposure, or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. There is judgement required to determine whether these criterions are met. The Company determined it controlled Valour Digital Securities Limited through its role as arranger.

 

 

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Exhibit 99.138

 

Form 52-109F2R

Certification of Refiled Interim Filings

 

This certificate is being filed on the same date that Defi Technologies Inc. (the “issuer”) has refiled the June 30, 2024 financial statements

 

I, Olivier Roussy Newton, Chief Executive Officer of DeFi Technologies Inc., certify the following:

 

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of the issuer for the interim period ended June 30, 2024

 

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

 

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

 

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

 

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

 

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

 

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

 

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO Framework) published by the Committee of Sponsoring organizations of the Treadway Commission (COSO).

 

 

 

 

5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing for the interim period ended June 30, 2024;

 

(a) a description of the material weakness;

 

(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

5.3 Limitation on scope of design: N/A

 

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2024 and ended on June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

Date: April 14, 2025

 

(signed) “Olivier Roussy Newton”  
Olivier Roussy Newton  
Chief Executive Officer  

 

 

 

Exhibit 99.139

 

Form 52-109F2R

Certification of Refiled Interim Filings

 

This certificate is being filed on the same date that Defi Technologies Inc. (the “issuer”) has refiled the June 30, 2024 financial statements

 

I, Paul Bozoki, Chief Financial Officer of DeFi Technologies Inc., certify the following:

 

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of the issuer for the interim period ended June 30, 2024

 

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

 

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

 

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

 

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

 

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

 

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

 

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO Framework) published by the Committee of Sponsoring organizations of the Treadway Commission (COSO).

 

 

 

 

5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing for the interim period ended June 30, 2024;

 

(a) a description of the material weakness;

 

(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

5.3 Limitation on scope of design: N/A

 

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2024 and ended on June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

Date: April 14, 2025

 

(signed) “Paul Bozoki”  
Paul Bozoki  
Chief Financial Officer  

 

 

 

Exhibit 99.140

 

Form 52-109F2R

Certification of Refiled Interim Filings

 

This certificate is being filed on the same date that Defi Technologies Inc. (the “issuer”) has refiled the September 30, 2024 financial statements

 

I, Olivier Roussy Newton, Chief Executive Officer of DeFi Technologies Inc., certify the following:

 

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of the issuer for the interim period ended September 30, 2024

 

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

 

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

 

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

 

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

 

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

 

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

 

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO Framework) published by the Committee of Sponsoring organizations of the Treadway Commission (COSO).

 

 

 

 

5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing for the interim period ended September 30, 2024;

 

(a) a description of the material weakness;

 

(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

5.3 Limitation on scope of design: N/A

 

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2024 and ended on September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

Date: April 14, 2025  
   
   
(signed) “Olivier Roussy Newton”  
Olivier Roussy Newton  
Chief Executive Officer  

 

 

Exhibit 99.141

 

Form 52-109F2R

Certification of Refiled Interim Filings

 

This certificate is being filed on the same date that Defi Technologies Inc. (the “issuer”) has refiled the September 30, 2024 financial statements

 

I, Paul Bozoki, Chief Financial Officer of DeFi Technologies Inc., certify the following:

 

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of the issuer for the interim period ended September 30, 2024

 

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

 

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

 

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

 

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

 

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

 

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

 

 

 

 

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO Framework) published by the Committee of Sponsoring organizations of the Treadway Commission (COSO).

 

5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing for the interim period ended September 30, 2024;

 

(a) a description of the material weakness;

 

(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

 

(c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

 

5.3 Limitation on scope of design: N/A

 

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2024 and ended on September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

Date: April 14, 2025  
   
   
(signed) “Paul Bozoki”  
Paul Bozoki  
Chief Financial Officer  

 

 

Exhibit 99.142

  

 

 

DeFi Technologies Refiles Q2 2024 and Q3 2024 Interim Financial Statements

 

Toronto, Ontario – (April 14, 2025) – DeFi Technologies Inc. (the "Company" or "DeFi Technologies") (Cboe CA: DEFI) (GR: R9B) (OTC: DEFTF), a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance, announces that it has filed restated interim financial statements for the period ending June 30 2024 along with the corresponding management discussion & analysis (“Restated Q2 Financials”) and restated interim financial statements for the period ending September 30 2024, along with the corresponding management discussion & analysis (“Restated Q3 Financials”). The decision follows a review that amends the accounting treatment of the Company’s investments in equity investments in digital assets (the “Equity Investments”) to (a) apply a discount for lack of marketability (“DLOM”) and (b) adjust the current and non-current classification and (c) adjust the net loss due to the application of the DLOM.

 

For the Restated Q2 Financials (a) a DLOM was $98,657,552 was applied to the Equity Investments, (b) $122,794,452 of the Equity Investments was reclassified from current assets to non-current assets and (c) net loss increased by $98,657,552 due to the application of the DLOM.

 

For the Restated Q3 Financials (a) a DLOM was $3,892,283 was applied to the Equity Investments (bringing the cumulative DLOM to $102,549,835), (b) $155,051,353 of the Equity Investments was reclassified from current assets to non-current assets and (c) net loss increased by $3,892,283 and $102,549,835 for the three and nine months ended September 30, 2024 respectively due to the application of the DLOM.

 

The effect of the restatement does not impact the Company's ongoing cash position and the changes are non-cash in nature. All other disclosure in the Restated Q2 Financials and Restated Q3 Financials remains essentially the same as when such documents were originally filed except for the material weakness in its internal control as a result of the foregoing restatements. Further to the press release of the Company dated March 31, 2024, the financial statements of the Company previously filed for the period ending June 30, 2024 and September 30, 2024 (the “Affected Periods”) should not be relied upon and similarly, any previously issued or filed reports, press releases, investor presentations or other Company communications describing the financial results or other financial information in connection with the Affected Periods should no longer be relied upon.

 

About DeFi Technologies

 

DeFi Technologies Inc. (CBOE CA: DEFI) (GR: R9B) (OTC: DEFTF) is a financial technology company that pioneers the convergence of traditional capital markets with the world of decentralized finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of experts with extensive experience in financial markets and digital assets, we are committed to revolutionizing the way individuals and institutions interact with the evolving financial ecosystem. Join DeFi Technologies’ digital community on Linkedin and Twitter, and for more details, visit https://defi.tech/ 

 

 

 

 

 

 

Cautionary note regarding forward-looking information:

 

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to statements the Restated Q2 Financials and the Restated Q3 Financials; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by the Company and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of ETPs by exchanges; growth and development of decentralised finance and digital asset sector; rules and regulations with respect to decentralised finance and digital assets; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

 

# # #

 

For further information, please contact:

 

Olivier Roussy Newton
Chief Executive Officer
ir@defi.tech
(323) 537-7681

 

 

Exhibit 99.143

 

 

April 14, 2025

 

DeFi Technologies Inc. (formerly Valour Inc.)

Suite 2400, 333 Bay Street,

Toronto, ON,

M5H 2T6

 

Re: Auditor Consent for 40-F Filing

 

Dear Mr. Olivier Roussy-Newton, Chairman of the BOD and Mr. Paul Bozoki, CFO:

 

We consent to the use of our reports to the shareholders of DeFi Technologies Inc. dated April 1, 2024 and March 30, 2025 on the financial statements of DeFi Technologies Inc., which comprise the consolidated statements of financial position as at December 31, 2023 and December 31, 2024, respectively, and the consolidated statements of loss and comprehensive loss, consolidated statements of cash flows and consolidated statements of changes in shareholders equity (deficiency) for the years then ended, and notes to the financial statements, including material accounting policy information, in the Registration Statement on Form 40-F/A, and any amendments thereto, to be filed by DeFi Technologies Inc, with Securities and Exchange Commission on EDGAR on or about April 14, 2025.

 

Yours truly,

 

Signed  ”Harpreet Dhawan”  
  Harpreet Dhawan CPA, CA  
  HDCPA Professional Corporation  
  Chartered Professional Accountants  
  Licensed Public Accountants  

 

www.hdcpa.ca | 647-793-8100  
5250 Solar Drive, Suite 206, Mississauga, ON, L4W 0G4  
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