DeFi Technologies Inc(DEFT) - 2025 Q1 - Quarterly Report

Financial Statements Statement of Financial Position Total assets decreased to $1.04 billion, liabilities to $960.4 million, while equity significantly increased to $79.7 million Financial Position Highlights | Financial Position Highlights | March 31, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Total Assets | 1,040,124,824 | 1,317,366,412 | | Digital Assets (Current & Non-Current) | 664,810,958 | 799,796,591 | | Equity investments in digital assets, at FVTPL | 226,175,101 | 370,408,924 | | Total Liabilities | 960,414,160 | 1,294,214,985 | | ETP holders payable | 921,440,301 | 1,253,515,501 | | Total Equity | 79,710,664 | 23,151,427 | Statement of Operations and Comprehensive Loss Q1 2025 net income of $43.1 million reverses Q1 2024's $18.0 million loss, driven by fair value changes Income Statement Highlights | Income Statement Highlights | Q1 2025 ($) | Q1 2024 ($) | | :--- | :--- | :--- | | Total Revenues | 62,658,562 | (4,922,567) | | Staking and lending income | 14,039,548 | 5,808,001 | | Total Expenses | 18,529,807 | 13,119,189 | | Net Income (Loss) for the period | 43,056,392 | (18,041,756) | | Basic Income (Loss) per share | 0.13 | (0.06) | | Diluted Income (Loss) per share | 0.12 | (0.06) | Statement of Cash Flows Q1 2025 saw a net cash outflow of $2.9 million, with operating activities using $78.3 million offset by $75.8 million from financing Cash Flow Summary | Cash Flow Summary | Q1 2025 ($) | Q1 2024 ($) | | :--- | :--- | :--- | | Net cash (used in) operating activities | (78,294,898) | (57,050,633) | | Net cash provided by investing activities | (783,169) | 319,643 | | Net cash provided by financing activities | 75,763,595 | 59,312,083 | | Change in cash and cash equivalents | (2,927,263) | 2,685,380 | | Cash and cash equivalents, end of period | 19,996,609 | 9,412,862 | Statement of Changes in Equity Total equity increased to $79.7 million in Q1 2025, primarily driven by $43.1 million in net income - Total equity grew by $56.6 million in Q1 2025, primarily due to a net income of $43.1 million[9] - Share capital increased by over $9 million from share issuances related to acquisitions, DSU exercises, and option exercises[9] Notes to the Financial Statements Nature of Operations and Going Concern DeFi Technologies, a DeFi-focused tech company, faces going concern doubts due to a $135.0 million working capital deficiency - The company's business model involves issuing ETPs, investing in DeFi protocols, and providing research[10] - A working capital deficiency of $135.0 million was reported as of March 31, 2025[11] - Management has identified material uncertainties that cast significant doubt on the company's ability to continue as a going concern[11] Material Accounting Policies Q1 2025 adoption of SAB 122 de-recognized client digital assets; company digital assets are fair valued as commodity broker-trader inventory - In Q1 2025, the company adopted SAB 122, removing client digital assets and safeguarding liabilities from its statement of financial position. This was applied retrospectively to the Dec 31, 2024 balance sheet[24][26] - Digital assets are accounted for as inventory under IAS 2 and measured at fair value through profit or loss (FVTPL), as the company acts as a commodity broker-trader[28] - ETP holders payable are also measured at FVTPL, with fair value determined by the underlying digital asset's price less accumulated management fees[29][34] Investments (FVTPL) Private investments totaled $53.9 million, with Amina Bank AG comprising 94.7%, and a $674k realized loss recognized in Q1 2025 Private Investment Portfolio | Private Investment | Fair Value (Mar 31, 2025) | % of Total | | :--- | :--- | :--- | | Amina Bank AG | $51,020,503 | 94.7% | | ZKP Corporation | $1,437,600 | 2.7% | | Luxor Technology Corporation | $719,522 | 1.3% | | 3iQ Corp. | $431,940 | 0.8% | | Other | $287,340 | 0.5% | | Total | $53,896,906 | 100.0% | - In Q1 2025, the company recorded a realized loss of $673,967 and an unrealized gain of $3,809 on its private and public investments[44] Digital Assets and Equity Investments in Digital Assets Total digital asset exposure decreased to $891.0 million due to unrealized losses, impacting direct holdings and equity investments Digital Asset Holdings Direct digital asset holdings decreased to $664.8 million due to $268.5 million in unrealized losses, with Bitcoin as the largest position Digital Asset Continuity | Digital Asset Continuity | Q1 2025 ($) | | :--- | :--- | | Opening balance (Dec 31, 2024) | 799,796,591 | | Digital assets acquired | 81,793,771 | | Digital assets disposed | (14,760,791) | | Staking, lending, and fee income | 14,039,548 | | Realized gain on digital assets | 39,111,070 | | Net change in unrealized losses | (268,506,435) | | Closing balance (Mar 31, 2025) | 664,810,958 | Top 5 Digital Asset Holdings | Top 5 Digital Asset Holdings | Fair Value (Mar 31, 2025) ($) | | :--- | :--- | | Bitcoin (BTC) | 296,891,716 | | Cardano (ADA) | 65,904,078 | | Ripple (XRP) | 63,020,370 | | Sui (SUI) | 44,035,063 | | Ethereum (ETH) | 56,025,296 | - As of March 31, 2025, the company had $87.4 million in digital assets loaned out and $276.5 million in digital assets staked[53] Equity Investments in Digital Assets (FVTPL) Equity investments in locked SOL/AVAX decreased to $226.2 million, resulting in a $130.4 million unrealized loss - The fair value of equity investments in digital assets (primarily locked SOL and AVAX) decreased from $370.4 million to $226.2 million in Q1 2025[66] - This decrease resulted in an unrealized loss of $130.4 million recognized in the income statement for the quarter[7][95] - The underlying Solana and Avalanche tokens are locked and will be released in monthly/weekly increments through 2027-2028[68][69][72] Acquisitions In Q1 2025, the company gained control of Neuronomics AG, recognizing $4.2 million in goodwill - On March 7, 2025, the company increased its stake in Neuronomics AG to 52.5%, gaining control[82] - The acquisition resulted in the consolidation of Neuronomics and the recognition of $4.18 million in goodwill[84] ETP Holders Payable ETP holders payable decreased to $921.4 million, fully hedged by underlying digital assets, with Solana and Bitcoin ETPs being largest - ETP holders payable, the company's largest liability, decreased from $1.25 billion to $921.4 million in Q1 2025[91] - The company's policy is to hedge 100% of the market risk by holding the underlying digital assets for its ETPs[92] Top 5 ETPs by Value | Top 5 ETPs by Value | Fair Value (Mar 31, 2025) ($) | | :--- | :--- | | Valour Solana SEK | 273,310,644 | | Valour Bitcoin Zero SEK | 265,682,548 | | Valour Cardano SEK | 63,827,150 | | Valour Ripple SEK | 62,424,382 | | Valour Ethereum Zero SEK | 51,676,087 | Share-Based Payments Share-based payment expenses significantly increased to $7.3 million in Q1 2025, driven by new stock option and DSU grants - Total share-based payment expense was $7.34 million in Q1 2025, up from $1.62 million in Q1 2024[7] - In Q1 2025, the company granted 1.3 million stock options and 1.5 million DSUs[102][117] - The expense was composed of $3.2 million for stock options and $4.1 million for DSUs[113][126] Financial Instruments and Risk Management The company faces significant liquidity, market, and currency risks, with a $135 million working capital deficiency and volatile digital assets - The company faces significant liquidity risk, with current liabilities of $1.04 billion exceeding current assets of $825.4 million, resulting in a working capital deficiency of $135.0 million[132][133][134] - The company has substantial currency risk. A 10% strengthening of the Canadian dollar against foreign currencies would result in an estimated $22.8 million decrease in net income[140] Fair Value Hierarchy | Fair Value Hierarchy (Mar 31, 2025) | Value ($) | | :--- | :--- | | Level 1 (Quoted Market Price) | - | | Level 2 (Observable Inputs) | 664,810,958 | | Level 3 (Non-observable Inputs) | 280,072,007 | | Total | 944,882,965 | Operating Segments Valour Inc. dominates segments with $60.3 million revenue and $56.6 million net income in Q1 2025, while corporate segment incurred a loss Segment Performance (Q1 2025) | Segment Performance (Q1 2025) | Total Revenue ($) | Net Income (Loss) After Tax ($) | | :--- | :--- | :--- | | Valour Inc. | 60,343,523 | 56,553,251 | | Stillman Digital | 3,077,756 | 483,132 | | Reflexivity | 262,230 | (113,430) | | DeFi (Corporate) | (912,940) | (13,626,355) | | Neuronomics | 27,288 | (52,182) | | Total | 62,658,562 | 43,056,392 | Earnings Per Share Q1 2025 basic EPS was $0.13 and diluted EPS was $0.12, a significant improvement from Q1 2024's loss per share Earnings Per Share Summary | Earnings Per Share | Q1 2025 ($) | Q1 2024 ($) | | :--- | :--- | :--- | | Net Income (Loss) for calculation | 43,056,392 | (18,041,756) | | Weighted Average Shares (Basic) | 323,886,775 | 284,134,127 | | Weighted Average Shares (Diluted) | 366,973,751 | 284,134,127 | | Basic EPS | 0.13 | (0.06) | | Diluted EPS | 0.12 | (0.06) |