CYPHERPUNK HOLDINGS INC. INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2023 AND 2022
(Unaudited - Expressed in Canadian Dollars)
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying interim condensed consolidated financial statements of Cypherpunk Holdings Inc. were prepared by management in accordance with International Financial Reporting Standards. The most significant of these standards have been set out in the note 2 of these interim condensed consolidated financial statements. Any applicable changes in accounting policies have also been disclosed in these financial statements. Management acknowledges responsibility for
the preparation and presentation of the financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company's circumstances.
The Board of Directors is responsible for ensuring management fulfills its financial reporting responsibilities and for reviewing and approving the financial statements together with other financial information. The Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the internal controls over the financial reporting process and the period end financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the financial statements together with other financial information of the Company for issuance to the shareholders.
Management recognizes its responsibility for conducting the Company's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate control over its financial reporting. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on "Internal Control Over Financial Reporting Guidance for Smaller Public Companies" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as at December 31, 2023.
CONCLUSION RELATING TO DISCLOSURE CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of management, including the Chief Executive and Chief Financial Officers, of the effectiveness of the Company's disclosure controls and procedures as defined in the National Instrument 52-109. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of the Company's disclosure controls and procedures were effective as at December 31, 2023.
NOTICE TO READER
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the financial statements; they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying interim condensed consolidated 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 interim condensed consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of financial statements by an entity's auditor.
CYPHERPUNK HOLDINGS INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (EXPRESSED IN CANADIAN DOLLARS)
December 31, | September 30, | ||||||
2023 | 2023 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents (note 3) | $ | 1,940,949 | $ | 1,927,280 | |||
Receivables and prepaid expenses (note 4) | 107,609 | 117,138 | |||||
2,048,558 | 2,044,418 | ||||||
Cryptocurrencies pledged as collateral (note 5 and 6) | 5,680,339 | - | |||||
Cryptocurrencies (note 6) | 6,437,583 | 7,852,418 | |||||
Investments (note 7) | 9,113,130 | 6,464,119 | |||||
Other assets (note 8) | 52,236 | 60,145 | |||||
Deferred tax asset (note 17) | 633,145 | 633,145 | |||||
$ | 23,964,991 | $ | 17,054,245 | ||||
Liabilities | |||||||
Current Liabilities | |||||||
Accounts payable and accrued liabilities (note 9 and 14) | $ | 172,892 | $ | 226,476 | |||
172,892 | 226,476 | ||||||
Shareholders' Equity | |||||||
Capital stock (note 10) | 17,864,782 | 17,864,782 | |||||
Reserves | 17,707,122 | 17,669,046 | |||||
Accumlated other comprehensive income (loss) | 4,082,632 | (196,846) | |||||
Accumulated deficit | (15,862,437) | (18,509,213) | |||||
23,792,099 | 16,827,769 | ||||||
$ | 23,964,991 | $ | 17,054,245 | ||||
Nature of operations and going concern (note 1) | |||||||
Subsequent events (note 20) | |||||||
SIGNED ON BEHALF OF THE BOARD | |||||||
(Signed) "Rubsun Ho" | (Signed) "Moe Adham" | ||||||
Director | Director |
Page 1
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (EXPRESSED IN CANADIAN DOLLARS)
Three months ended December 31, | 2023 | 2022 | |||
Income (loss) | |||||
Unrealized gain (loss) on investments (note 7) | $ | 2,649,011 | $ | (471,116) | |
Realized gain (loss) on investments (note 7) | 270,661 | (707,649) | |||
Other income | 10,451 | 42,677 | |||
Dividend income | 2,613 | 3,867 | |||
Realized gain on disposition of assets (Note 8) | - | 536,633 | |||
2,932,736 | (595,588) | ||||
Expenses | |||||
Consulting fees (note 13) | 106,360 | 116,914 | |||
Professional fees (note 13) | 44,466 | 155,299 | |||
Foreign exchange loss | 44,217 | 190,931 | |||
General and administrative | 39,407 | 86,310 | |||
Stock-based compensation (notes 11 and 13) | 38,076 | 141,806 | |||
Director fees (note 13) | 10,298 | 15,000 | |||
Amortization (note 8) | 7,909 | 47,110 | |||
290,733 | 753,370 | ||||
Income (loss) for the period | 2,642,003 | (1,348,958) | |||
Other comprehensive income | |||||
Items that may be reclassified to profit or loss | 4,279,478 | - | |||
Items that will not be reclassified to profit or loss | 4,773 | - | |||
Total comprehensive income (loss) | $ | 6,926,254 | $ | (1,348,958) | |
Earnings (loss) per share - basic and diluted | $ | 0.02 | $ | (0.01) | |
Weighted average number of shares outstanding - basic and diluted | 152,067,183 | 160,070,718 | |||
Page 2
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (EXPRESSED IN CANADIAN DOLLARS)
Accumulated | |||||||||||
Other | |||||||||||
Common | Capital | Comprehensive | Retained | ||||||||
Shares | Stock | Reserves | Income | Deficit | Total | ||||||
Balance, September 30, 2022 | 160,070,718 | $ | 18,572,547 | $ | 17,238,101 | $ | - | $ | (12,226,885) | $ | 23,583,763 |
Stock-based compensation (note 11) | - | - | 141,806 | - | - | 141,806 | |||||
Net loss for the period | - | - | - | - | (1,348,958) | (1,348,958) | |||||
Balance, December 31, 2022 | 160,070,718 | $ | 18,572,547 | $ | 17,379,907 | $ | - | $ | (13,575,843) | $ | 22,376,611 |
Stock-based compensation (note 11) | - | - | 289,139 | - | - | 289,139 | |||||
Purchase of shares for cancellation (note 10) | (8,003,535) | (707,765) | - | - | - | (707,765) | |||||
Net loss for the period | - | - | - | - | (4,933,370) | (4,933,370) | |||||
Items that may be reclassified to profit or loss | - | - | - | (196,846) | - | (196,846) | |||||
Balance, September 30, 2023 | 152,067,183 | $ | 17,864,782 | $ | 17,669,046 | $ | (196,846) | $ | (18,509,213) | $ | 16,827,769 |
Stock-based compensation (note 11) | - | - | 38,076 | - | - | 38,076 | |||||
Net income for the period | - | - | - | - | 2,642,003 | 2,642,003 | |||||
Items that may be reclassified to profit or loss | - | - | - | 4,284,251 | - | 4,284,251 | |||||
Items reclassified to retained earnings | - | - | - | (4,773) | 4,773 | - | |||||
Balance, December 31, 2023 | 152,067,183 | $ | 17,864,782 | $ | 17,707,122 | $ | 4,082,632 | $ | (15,862,437) | $ | 23,792,099 |
Page 3
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN CANADIAN DOLLARS)
Three months ended December 31, | 2023 | 2022 | ||
Cash and cash equivalents (used in) provided by: | ||||
Operating activities | ||||
Income (loss) for the period | $ | 2,642,003 | $ | (1,348,958) |
Adjustments for: | ||||
Unrealized (gain) loss on investments | (2,649,011) | 707,649 | ||
Realized loss (gain) on investments | (536,633) | |||
Stock-based compensation | 38,076 | 141,806 | ||
Asset impairment | - | 2,837 | ||
Interest | - | 15,688 | ||
Foreign exchange loss | - | 190,931 | ||
Amortization of assets sold | - | 263,895 | ||
Amortization | 7,909 | 47,110 | ||
Net change in non-cash working capital items: | ||||
Receivables and prepaid expenses | 9,529 | (3,893) | ||
Treasury management assets | - | 60,037 | ||
Accounts payable and accrued liabilities | (53,584) | (39,862) | ||
Cash used in operating activities | (5,078) | (499,393) | ||
Investing activities | ||||
Proceeds from sale of cryptocurrencies | 18,747 | 3,035 | ||
Proceeds from sale of assets | - | 1,172,863 | ||
Sale/redemption of investments | - | 1,591,591 | ||
Cash used in investing activities | 18,747 | 2,767,489 | ||
Change in cash and cash equivalents | 13,669 | 2,268,096 | ||
Cash and cash equivalents, beginning of the period | 1,927,280 | 18,537,221 | ||
Cash and cash equivalents, end of the period | $ | 1,940,949 | $ | 20,805,317 |
Page 4
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN CANADIAN DOLLARS)
Three months ended December 31, 2023 and 2022
1. NATURE OF OPERATIONS AND GOING CONCERN
Cypherpunk Holdings Inc. (the "Company" or "Cypherpunk") is a publicly listed company incorporated in Canada under the
legislation of the Province of Ontario. The registered office of the Company is located at 217 Queen St W #401, Toronto, ON M5V 0R2. Since February 4, 2019, the Company's common shares trade on the Canadian Securities Exchange ("CSE") under
the trading symbol "HODL".
The Company's business plan is based on its investment thesis that there will be increasing demand for technologies and cryptocurrencies with strong privacy, self-sovereignty, and digital property rights (the "Thesis"). Cypherpunk executes its
Thesis through three lines of effort: (1) Treasury management and diversified yield generation - a core holding of crypto currencies supported with risk management strategies to reduce volatility, and lending, staking and liquidity provisioning to generate yield; (2) Private equity focused on early stage companies in the privacy, gaming, DeFi and blockchain sectors; and
- Active investments to generate yield including bitcoin mining. The Company's cryptocurrencies and related investments may be subject to significant fluctuations in value and are subject to risks unique to the asset class and different from traditional financial assets (note 16). Additionally, during the three months ended December 31, 2023, certain assets were held in cryptocurrency exchanges or with custodians that are limited in oversight by regulatory authorities.
Basis of Presentation
The unaudited interim condensed consolidated financial statements have been prepared and presented on a going concern basis. The Company has sufficient cash and cash equivalents and other assets to supports its operations for the next twelve months from the date of the issuance of the unaudited interim condensed consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB") and the interpretations issued by the IFRS Interpretations Committee. These unaudited interim condensed consolidated financial statements for the three month period ending December 31, 2023 (the "Interim Statements") have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting.
Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by the IASB.
The policies applied in these Interim Statements are based on IFRSs issued and outstanding as of February 29, 2024, the date the Board of Directors approved the Interim Statements. The same accounting policies and methods of computation are followed in these Interim Statements as compared with the most recent audited annual financial statements as at and for the year ended September 30, 2023. Any subsequent changes to IFRS that are given effect in the Company's annual financial statements for the year ending September 30, 2024 could result in restatement of these Interim Statements.
Page 5
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN CANADIAN DOLLARS)
Three months ended December 31, 2023 and 2022
3. CASH AND CASH EQUIVALENTS
The balance consists of funds in cash and banks immediately available for use in the Company's operations. There were no restricted balances at December 31, 2023 and September 30, 2023.
December 31, | September 30, | |||
2023 | 2023 | |||
Cash in banks | $ | 1,940,949 | $ | 1,927,280 |
$ | 1,940,949 | $ | 1,927,280 |
4. RECEIVABLES AND PREPAID EXPENSES
The balances are comprised as follows:
December 31, | September 30, | |||
2023 | 2023 | |||
Prepaid expenses | $ | 36,365 | $ | 54,477 |
Harmonized sales tax | 71,244 | 62,661 | ||
$ | 107,609 | $ | 117,138 |
5. TREASURY MANGEMENT INVESTMENTS
During the quarter ended December 31, 2023 the Company resumed its treasury management investment strategy to generate income on its cryptocurrency assets, previously executed during the year ended September 30, 2022. As at the
date hereof, the treasury management investment strategy involves selling covered European call options (each, an "Option") on OTC markets. During the three months ended December 31, 2023, the Company transferred 50 Bitcoin to each of Zerocap Pty Ltd. ("Zerocap") and Wintermute Trading Ltd. ("Wintermute") to use as collateral. The Company recognizes premium income upon the sale of an Option. In the event the Option expires in-the-money, the Company's underlying
Bitcoin used as collateral to sell the Option are sold at the strike price of the Option. There were no Options written during the year ended September 30, 2023. The active treasury management trades at December 31, 2023 are as follows:
Trading | Option | Bought/ | Crypto- | Strike | Premium | Bitcoin | |||
Platform | type | Sold | Trade Date | currency | Expiry | (USD) | (Bitcoin) | Pledged | |
Zerocap Pty Ltd. | Call | Sold | 29-Dec-23 | Bitcoin | 12-Jan-24 | $ | 51,000 | 0.20800 | 50.73 |
Wintermute Trading Ltd | Call | Sold | 29-Dec-23 | Bitcoin | 12-Jan-24 | $ | 52,000 | 0.27410 | 50.40 |
Total
Page 6
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN CANADIAN DOLLARS)
Three months ended December 31, 2023 and 2022
6. CRYPTOCURRENCIES
Cryptocurrencies are digital assets that are typically part of a decentralized system of recording transactions, new digital assets are issued based on reliance on cryptography to secure its transactions, to control the creation of additional digital assets, and to verify the transfer of assets.
The balance of cryptocurrencies at cost and at market value, is as follows:
Quantity | Cost (USD) (a) | Cost (CAD) (a) | Market Value | ||||
Bitcoin | 216.78 | $ | 6,097,183 | $ | 8,251,638 | $ | 12,117,922 |
Balance at December 31, 2023 | $ | 6,097,183 | $ | 8,251,638 | $ | 12,117,922 | |
Quantity | Cost (USD) (a) | Cost (CAD) (a) | Market Value | ||||
Bitcoin | 215.37 | $ | 6,038,069 | $ | 8,172,065 | $ | 7,852,418 |
Balance at September 30, 2023 | $ | 6,038,069 | $ | 8,172,065 | $ | 7,852,418 |
- The cost is determined as the historical weighted average cost of the cryptocurrencies acquisitions and disposals.
The activity of the Company's cryptocurrencies, excluding the 101.61 Bitcoin posted as collateral (50.94 Bitcoin at Zerocap and 50.67 Bitcoin at Wintermute, including premium on active trades), for the three months ended December 31, 2023 and the year ended September 30, 2023 is as follows is as follows:
Balance at September 30, 2022 | $ | 3,035 |
Cash purchases | 8,120,383 | |
Cash sales | (19,620) | |
Investment income received in cryptocurrencies | 31,625 | |
Dividend income received in cryptocurrencies | 36,642 | |
Change in fair value | (319,647) |
Balance at September 30, 2023 | $ | 7,852,418 |
Cash purchases | - | |
Cash sales | (18,747) | |
Gain of cash sales | 4,773 | |
Investment income received in cryptocurrencies | 9,278 | |
Cryptocurrencies posted as collateral | (3,646,063) | |
Change in fair value | 2,235,924 | |
Balance at December 31, 2023 | $ | 6,437,583 |
Page 7
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
CYPHERPUNK HOLDINGS INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN CANADIAN DOLLARS)
Three months ended December 31, 2023 and 2022
The activity of the Company's cryptocurrencies posted as collateral (note 5) for the three months ended December 31, 2023 and year ended September 30, 2023, is as follows:
Balance at September 30, 2022 and September 30, 2023 | $ | - |
Cryptocurrencies post as collateral | 3,646,063 | |
Investment income received in cryptocurrencies | 85,335 | |
Change in fair value | 1,948,941 | |
Balance at December 31, 2023 | $ | 5,680,339 |
7. INVESTMENTS
The Company's investments in equity instruments are classified as FVTPL and are carried at fair value. The detail is as follows:
December 31, | September 30, | |||||
Quantity | 2023 | Quantity | 2023 | |||
Animoca Brands Corporation Limited (a) | 9,090,909 | $ | 7,795,533 | 9,090,909 | $ | 5,120,897 |
Chia Network Inc. (b) | 19,860 | 358,953 | 19,860 | 366,932 | ||
GOAT Gaming Pte Ltd. (c) | 176,470 | - | 176,470 | - | ||
ISLA Digital Strategies SP (d) | - | - | - | - | ||
Lucy Labs Flagship Offshore Fund SPC (e) | 500 | - | 500 | - | ||
NGRAVE.IO (f) | 138,966 | 82,799 | 138,966 | 80,976 | ||
Streetside Development, LLC (g) | 1,429 | 119,979 | 1,429 | 122,646 | ||
zkSNACKS Limited - Shares (h) | 4,500 | 755,866 | 4,500 | 772,668 | ||
$ | 9,113,130 | $ | 6,464,119 |
- During the year ended September 30, 2023, the Company purchased 9,090,909 shares of Animoca Brands Corporation Limited ("Animoca") at a cost of AUD $1.10 ($1.04 CAD) per share for a total cost of AUD $10,000,000 ($9,434,917 CAD). At December 31, 2023 the Company determined the fair value of its Animoca shares was $7,795,533 (September 30, 2023 - $5,120,897) recognizing an unrealized gain of $2,674,636 in the Interim Statements (2022 - $nil).
-
During the year ended September 30, 2021, pursuant to the Company's Simple Agreement for Future Equity ("SAFE") investment in Chia Network Inc. ("Chia"), the Company received 19,806 shares of Series B Stock priced at US$15 per share, and the Company also exercised its
participation rights and acquired 600 common shares of Chia at a price of US$21.21. Based on a review of the financial status of Chia as at
September 30, 2023, management estimated Chia's fair market value per share to be $17.98 (US$13.30), the Company wrote its investment Chia down by $2,558 (2022 - $188,231) to a value of $366,932 (2022 - 369,490) in the consolidated statements of comprehensive income. The Company determined the fair value of its Chia shares was $358,953 as at December 31, 2023 recognizing an unrealized loss of $7,979 in the Interim Statements (2022 - $nil). - During the year ended September 30, 2022 the Company acquired 176,470 subscription shares of GOAT Gaming Pte Ltd. ("GOAT") for consideration of US$200,000 priced at US$1.13333 per subscription share ($252,695). The Company's management determined that as at September 30, 2023 and 2022, the fair value of GOAT was $nil, and recognized a realized loss of $252,695 in the consolidated statements of comprehensive income for the year ended September 30, 2022.
-
During the year ended September 30, 2022, the Company invested US$1,500,000 ($1,923,658) in three tranches acquiring 14,762.1833 Class
B common shares of the AB Digital Strategies Fund (the "Isla Shares") managed by UK FCA-regulatedIsla Capital Ltd. ("Isla"). During the year ended September 30, 2023, the Company redeemed its Isla shares for proceeds of $1,591,591, realizing a loss of $471,116 in the consolidated
statements of comprehensive income. During the three months ended December 30, 2023 Isla sold its right to FTX bankruptcy claims (the "Claims"). As a result, the Company recognized a realized gain of $270,661 in its Interim Statements (2022 - a realized loss of $471,116)
Page 8
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
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Cypherpunk Holdings Inc. published this content on 06 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 March 2024 01:57:04 UTC.
