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Wellfield Technologies Inc. — Management Reports 2025
Mar 4, 2025
48100_rns_2025-03-03_1c7ebf49-d6f0-42a3-8001-a221ba8c2ee4.pdf
Management Reports
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Wellfield Technologies Inc.
Management’s Discussion & Analysis
Nine months ended December 31, 2024 and 2023
(Expressed in Canadian dollars)
Introduction
The following Management's Discussion and Analysis ("MD&A") comments on the financial condition and results of operations of Wellfield Technologies Inc. ("Wellfield" or the "Company") for the nine months ended December 31, 2024. The information contained herein should be read in conjunction with Wellfield's unaudited condensed interim consolidated financial statements for the nine months ended December 31, 2024 and 2023 (the "Financial Statements") and audited consolidated financial statements for the twelve months ended March 31, 2024. All financial data in this MD&A has been derived from the Financial Statements which are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and interpretations of the IFRS Interpretations Committee.
Unless the context otherwise requires, all references to "Wellfield", "Company", "our", "us", and "we" refer to Wellfield Technologies Inc. and its direct and indirect subsidiaries.
This MD&A is dated February 28, 2025. All amounts are presented in Canadian dollars, unless otherwise noted. The functional currency for Wellfield Technologies Inc. is the Canadian dollar.
Advisory Regarding Forward-Looking Statements
Certain statements contained in this MD&A constitute forward-looking information or forward-looking statements under applicable securities laws (collectively, "forward-looking statements"). In particular, this MD&A contains forward-looking statements with respect to, among other things, our objectives, goals, strategies, intentions, plans, estimates, outlook, expected growth, business opportunities and completion of proposed transactions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties and undue reliance should not be placed on such statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, or future events or performance (often, but not always, using words or phrases such as "may", "would", "could", "will", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", "continue", "project", "forecast", "potential", "targeting", "intend", "might", "should", and similar expressions, as they relate to the Company), are not statements of historical fact and may be "forward-looking statements". Further information regarding forward-looking information and statements can be found at the end of this MD&A.
Overview and Nature of Business
Wellfield builds blockchain powered technology that meets the everyday finance and digital asset investing needs of consumers and institutions through its wholly owned subsidiaries Coinmama.com, Tradewind Markets, and Brane Trust. The Company has strong academic and development expertise with a focus on architecting fully decentralized solutions built directly on public blockchains like Bitcoin and Ethereum. Wellfield aims to combine this novel IP, branded applications, digital identity, and everyday finance solutions to create blockchain based financial ecosystems that offer alternatives to traditional finance and centralized cryptocurrency exchanges. Wellfield develops decentralized and permissionless "on blockchain" technologies, focusing on solutions where centralized exchanges and other institutions have proven market demand and where infrastructure gaps currently prevent blockchains from supporting competitive alternatives. Management places an emphasis on research and leverages its strong academic and blockchain team to ensure its decentralized solutions operate securely as publicly accessible utilities. Our mission is to develop foundational infrastructure that empowers blockchain to support global finance. Management includes founders and academic advisors with decades of experience in economics, finance, and technology, as well as deep knowledge in computer science fields related to blockchain, cryptography and complexity.
Wellfield's business operations comprise a worldwide, regulated platform that has already generated revenue from over 4 million registered users who have undergone regulatory verification and conducted transactions on the platform. The Company's main offering provides non-custodial services for individuals and organizations to purchase and sell digital currencies, such as Bitcoin and Ether. The management team is actively implementing a multi-quarter strategy to integrate its innovative blockchain technology into its consumer and institutional-facing business lines, with the aim of capitalizing on the trend of capital and transactions moving away from centralized solutions towards decentralized onchain smart contracts and protocols. This includes a strategic focus on leveraging the Company's
interest in Tradewind Markets Inc. to establish blockchain based financial markets for initially for precious metals and subsequently for a wider portfolio of tokenized real-world assets.
Discussion of Operations
Coinmama
On May 27, 2022, Wellfield acquired Coinmama, a trusted global retail brand since 2013. This acquisition brought consistent revenue, a significant customer base, and strong organic user growth. Recently, management completed an operational reorganization of Coinmama, improving efficiency and reducing costs through strategic partnerships and outsourcing. This has resulted in a material reduction in the workforce and meaningful improvements to the Company's cost structure and gross margins. Management is now focusing on increasing user growth and revenues through product expansion and broadening its brand identity to serve the wider DeFi community.
The Company's product expansion strategy is divided into two parts – mobile and DeFi. Leveraging its previously announced strategic collaboration with Fireblocks, Coinmama is preparing to launch its new self-custody blockchain mobile application, positioned as the easiest and safest way to own cryptocurrencies and access DeFi. Given Coinmama's strong organic user acquisition, the Company anticipates robust adoption of this product from both existing and new users. This product is expected to increase mobile user metrics and improve user retention, enhancing the company's core offering of buying and selling cryptocurrency with fiat. The Company believes that the shift to mobile will significantly improve adoption of DeFi products, which will be a new revenue-generating offering when launched.
Decentralized finance today is broadly fragmented and lacks user-friendliness. More importantly, it is difficult for consumers to distinguish between trustworthy and risky products. The Company aims to capitalize on this opportunity through the launch of third-party and internally developed DeFi products on Coinmama's web and mobile platforms, positioned to users as a consolidation of the best solutions across the DeFi ecosystem in one effortless platform. Management aims to leverage this and broaden Coinmama's brand identity from "the world's friendliest cryptocurrency exchange" that makes cryptocurrency "simple, secure, and accessible" to a trusted brand that makes decentralized finance simple, secure, and accessible. In doing so, Coinmama would benefit from increased user retention, new user acquisition channels, and new revenue streams including staking and yield.
Tradewind Markets
Tradewind Markets operates the Tradewind Ledger, a permissioned blockchain platform that allows institutions to issue digitized assets, which are physically backed by real-world assets. This system benefits both the mutual customers of Tradewind and the digital asset issuers by providing a secure and transparent platform to digitize and financialize commodities. VaultChain™ Gold, issued by the Royal Canadian Mint for its customers (Custodial Participants), is the Tradewind Ledger's flagship product. There are currently ~$170M worth of physical silver and gold digitized on the Tradewind Ledger.
Since the Company's acquisition of Tradewind Markets in 2023, management has undertaken efforts to replace the existing business model and blockchain infrastructure with a strategy built around combining gold as an investment asset with the potential of decentralized finance.
This infrastructure upgrade effort includes a strategic collaboration with Fireblocks to improve the security and processes of tokenizing real-world assets, replacing the existing blockchain with an Ethereum Layer 2 rollup based on the Optimism OP Stack, a decentralized exchange based on the Uniswap protocol (V3), onchain block trading solutions, and a selection of the Company's proprietary DeFi services that create decentralized yield and volatility products for gold. Leveraging these new Ethereum based solutions, the Company aims to shift Tradewind Markets' revenue model from a low-margin, custody-based fee structure to one that monetizes gold financial transactions on the Tradewind Ledger. This new platform is now operational on the Tradewind Ledger testnet, with public launch anticipated before the end of the year, timing dependent on the progress of strategic opportunities.
The Company has signed a definitive share purchase agreement aimed to spin-off Tradewind as a separately listed entity on the TSXV, with Wellfield to retain a significant controlling interest in Tradewind. This transaction, if completed successfully, gives Wellfield an opportunity to strengthen its balance sheet and enables management to
focus its efforts beyond gold, advancing its proprietary decentralized finance technologies within the blockchain space. Additional details are provided in the subsequent events disclosure below.
Brane Trust
During December 2023, the Company closed its acquisition of Brane Trust Company Ltd. ("Brane Trust") and certain technology and assets owned by Brane Inc. ("Brane") and its subsidiaries in a transaction valued at $7.9 million. These combined assets were acquired by the Company to operate Brane Trust as a wholly owned subsidiary and Canadian digital asset custodian and public trust, pending license approval by the province of Alberta.
Since the acquisition, management began efforts to commercialize this business line, including pursuing license approval, making platform improvements, and finalizing the go-to-market strategy. In February 2024, the Company announced its strategic collaboration with Fireblocks, leveraging their flagship Crypto & DeFi Treasury Management solution to offer institutional customers best-in-class regulated custody and, with regulatory approval, access to the Fireblocks Network.
As blockchains continue to attract more capital and transactions and the Company executes on its real-world asset strategy, management believes Brane Trust enhances its offering to accredited investors and institutions. This is based on the view that these customers will continue to demand regulated custody services, even while they adopt and utilize decentralized services on the blockchain.
The Company is actively undertaking strategic transactions and opportunities to strengthen the balance sheet by reducing debt and enhancing liquidity to improve the company's overall capital position and is deferring major efforts in this business line until after it has executed on its broader financing and capital strategy.
Selected Annual Information
Selected financial information for the Company is provided below:
| For the three months ended December 31, | For the nine months ended December 31, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| ($) | ($) | ($) | ($) | |
| Revenue | 543,699 | 1,435,490 | 1,974,032 | 51,336,002 |
| Net loss | (2,561,247) | (2,891,785) | (4,572,964) | (8,752,678) |
| Net loss per share (basic and fully diluted) | (0.01) | (0.02) | (0.03) | (0.05) |
| Total assets | 16,005,454 | 16,664,019 | 16,005,454 | 16,664,019 |
| Total non-current financial liabilities | 6,635,679 | 6,654,487 | 6,635,679 | 6,654,487 |
Results of Operations
| Three months ended December 31, | Nine months ended December 31, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| ($) | ($) | ($) | ($) | |
| Revenue | 543,699 | 1,435,490 | 1,974,032 | 51,336,002 |
| Cost of revenue | 84,340 | 515,771 | 329,613 | 48,590,962 |
| Gross profit | 459,359 | 919,719 | 1,644,419 | 2,745,040 |
| Operating expenses | ||||
| Research and development | 319,688 | 808,018 | 821,769 | 2,940,642 |
| Growth and marketing | 45,148 | 169,397 | 213,318 | 533,543 |
| Operations | (21,646) | - | 114,492 | - |
| General and administrative | 971,841 | 2,262,626 | 2,611,343 | 7,179,587 |
| Amortization and depreciation | 182,434 | 384,904 | 680,432 | 1,169,184 |
| 1,497,465 | 3,624,945 | 4,441,354 | 11,822,956 | |
| Operating loss | (1,038,106) | (2,705,226) | (2,796,935) | (9,077,916) |
| Other income (loss) | (1,210,370) | (219,603) | (1,796,794) | (41,342) |
| Loss before income taxes | (2,248,476) | (2,924,829) | (4,593,729) | (9,119,258) |
| Income tax expense (recovery) | 312,771 | (33,044) | (20,765) | (366,580) |
| Net loss | (2,561,247) | (2,891,785) | (4,572,964) | (8,752,678) |
| Foreign currency translation adjustment | 961,727 | (185,295) | 1,006,015 | (141,007) |
| Gain on cash flow hedging derivative instruments | - | - | - | 46,058 |
| Comprehensive loss | (1,599,520) | (3,077,080) | (3,566,949) | (8,847,627) |
| Basic and diluted loss per share | (0.01) | (0.02) | (0.03) | (0.05) |
| For the three months ended December 31, | For the three months ended September 30, | For the nine months ended December 31, | For the nine months ended December 31, | |
| 2024 | 2023 | 2024 | 2023 | |
| ($) | ($) | ($) | ($) | |
| Selling of cryptocurrencies - institutions | - | 14,918 | - | 58,262 |
| Selling of cryptocurrencies - consumers | - | 277,227 | - | 51,041,488 |
| Referrals - consumers | 471,235 | 1,075,420 | 1,812,946 | 236,252 |
| Transaction revenue - Tradewind | 31,310 | 41,009 | 76,778 | - |
| Storage revenue - Tradewind | 41,154 | 26,916 | 84,308 | - |
| 543,699 | 1,435,490 | 1,974,032 | 51,336,002 |
Cost of revenue
| Three months ended December 31, 2024 ($) | Three months ended December 31, 2023 ($) | Nine months ended December 31, 2024 ($) | Nine months ended December 31, 2023 ($) | |
|---|---|---|---|---|
| Cost of revenue | 84,340 | 515,771 | 329,613 | 48,590,962 |
| Percentage of revenue | 13.6% | 39.8% | 23.0% | 94.7% |
The Company anticipates further improvements in cost of revenue metrics, particularly as Tradewind and Coinmama continue to commercialize new products and services.
Research and development
| Three months ended December 31, 2024 ($) | Three months ended December 31, 2023 ($) | Nine months ended December 31, 2024 ($) | Nine months ended December 31, 2023 ($) | |
|---|---|---|---|---|
| Salaries and benefits | 271,929 | 402,549 | 728,834 | 1,814,751 |
| Consulting | 23,575 | 289,017 | 60,060 | 946,425 |
| Dues and subscriptions | 26,246 | 85,021 | 47,468 | 201,369 |
| Other | 22,051 | 64,400 | 18,376 | 212,825 |
| Tax credits | (24,114) | (32,969) | (32,969) | (234,729) |
| 319,688 | 808,018 | 821,769 | 2,940,641 |
Research and development expenses primarily consist of salaries and benefits for the development and product team, as well as consulting fees for outsourced development work. Costs related to the Company's Portugal based development costs are included in consulting expenses and have been reduced resulting from managements broad cost savings and liquidity management efforts.
Growth and marketing
| Three months ended December 31, 2024 ($) | Three months ended December 31, 2023 ($) | Nine months ended December 31, 2024 ($) | Nine months ended December 31, 2023 ($) | |
|---|---|---|---|---|
| Consulting, advertising, other | 45,148 | 144,464 | 167,004 | 372,528 |
| Slaries and benefits | - | 24,933 | 46,314 | 161,015 |
| 45,148 | 169,397 | 213,318 | 533,543 |
Growth and marketing expenses primarily consist of salaries and benefits, consultants and advertising expenses incurred in the promotion of the Company's brand and products. The Company's growth and marketing payroll costs have declined from the prior year as a result of a reduced headcount. The growth headcount was further reduced as part of the Company's operational reorganization. Growth expenses are expected to continue to decline in the short-term until such time when management believes the Company is well positioned for growth.
General and administrative
| Three months ended December 31, 2024 ($) | Three months ended December 31, 2023 ($) | Nine months ended December 31, 2024 ($) | Nine months ended December 31, 2023 ($) | |
|---|---|---|---|---|
| Salaries and benefits | 695,830 | 1,498,036 | 1,870,003 | 4,087,546 |
| Legal and professional fees | 184,253 | 318,399 | 463,748 | 1,085,243 |
| Insurance | 10,663 | 205,128 | 70,737 | 313,819 |
| Investor relations | 22,176 | 91,956 | 44,352 | 265,617 |
| Consulting | 22,084 | 87,652 | 42,358 | 208,001 |
| Directors fees | 28,000 | 67,098 | 56,000 | 844,944 |
| Meals and entertainment | 5,597 | 34,761 | 16,162 | 185,077 |
| General | - | 14,898 | 36,770 | 83,438 |
| Advisory board | - | 13,539 | - | 54,404 |
| Dues and subscriptions | 876 | 13,133 | 4,217 | 88,439 |
| Travel | 213 | 7,640 | 224 | 18,382 |
| Bank charges and interest | 2,149 | 6,525 | 4,460 | 33,672 |
| Filing Fees | - | 5,299 | 2,312 | 12,443 |
| Government assistance | (101,438) | (101,438) | ||
| 971,841 | 2,262,626 | 2,611,343 | 7,179,587 |
General and administrative expenses primarily comprise costs related to salaries and benefits, insurance, directors' fees, and legal and professional fees. These expenses are essential to sustaining the Company's operations as a public entity and effectively supporting its various business lines. The salaries and benefits component primarily covers compensation for personnel in finance, human resources, legal, and compliance roles, in addition to certain executives. Following the Company's reorganization and headcount reduction, general and administrative spending naturally declined.
Legal and professional fees fluctuate with the level of merger and acquisition activity and are expected to increase in the following quarters in connection with the Company's effort to spin-off Tradewind.
Other income (loss) breakdown
| Three months ended December 31, 2024 ($) | Three months ended December 31, 2023 ($) | Nine months ended December 31, 2024 ($) | Nine months ended December 31, 2023 ($) | |
|---|---|---|---|---|
| Fair value adjustments on financial instruments | 208,042 | 390,000 | - | 390,000 |
| Other income (loss) | (150,100) | 162 | (303,097) | (82,640) |
| Finance expense | (56,309) | (121,403) | (308,559) | (191,598) |
| Exchange gain (loss) | (1,212,003) | (488,362) | (1,185,138) | (157,104) |
| (1,210,370) | (219,603) | (1,796,794) | (41,342) |
The material exchange gain for the three months ended December 31, 2024 was a result of the fluctuation of the loan denominated in BTC.
Liquidity and Capital Resources
The Company's capital structure consists of all components of shareholders' equity. The Company's objective when managing capital is to maintain adequate levels of funding to support the current operations and the necessary corporate and administrative functions to facilitate these activities. This is done primarily through equity financing. Future financings are dependent on market conditions and there can be no assurance the Company will be able to raise funds in the future. The Company is not subject to externally imposed capital requirements and the Company's overall strategy with respect to capital risk management remains unchanged from the prior period.
Initially financed through private equity placements in 2021, the Company has started generating revenue but has not yet achieved an operational surplus, continuing to rely on additional financings. Despite cost-cutting measures from the reorganization, there is a need to increase revenue or secure additional financing for planned long-term growth and development.
As at December 31, 2024, the Company has negative working capital of $16 million which includes cash and cash equivalents of $78,204. As at December 31, 2024, the Company has long-term commitments in the form of convertible and non-convertible debentures. As previously stated, management is committed to addressing all remaining debt and is actively working towards further initiatives, including non-dilutive transactions surrounding the Tradewind spin-off, to enhance the Company's financial health.
The Company has a current loan denominated in Bitcoin through a credit line with an individual, which matures in 2026. The fair value of the loan at December 31, 2024 was $3,069,885 (22.75 BTC). The Company continues to pay down the credit line. During the last two quarters of the fiscal year ending March 31, 2024, the Company entered short-term loans with employees of the Company to fund short-term working capital requirements. The employee loans are denominated in Bitcoin and ETH and had a combined fair value of $492,789 at December 31, 2024.
The Company continues to operate with negative working capital, necessitating the generation of positive cash flow from its operations in the near-term future. The Company is in a position where it needs to obtain financing to fund its planned launches of the Coinmama wallet and the Tradewind platform upgrade. Management is actively exploring and assessing various financing options to support ongoing working capital requirement needs and support the launch and marketing of its latest offerings.
Cash flow summary
| Nine months ended December 31, 2024 ($) | Nine months ended December 31, 2023 ($) | |
|---|---|---|
| Cash flow from (used in): | ||
| Operating activities | (1,262,539) | (3,388,968) |
| Investing activities | - | (135,883) |
| Financing activities | 1,311,859 | 2,820,344 |
| Effect of foreign exchange rate changes on cash | 1,789 | 91,648 |
| Net decrease in cash and cash equivalents | 51,109 | (612,859) |
| Cash and cash equivalents - Beginning | 27,095 | 727,967 |
| Cash and cash equivalents - Ending | 78,204 | 115,108 |
Related Party Transactions
The Company's related parties includes entities where the executive officers and directors of the Company are principles. Their position in these entities results in their having control or significant influence over the financial or operating policies of these entities.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel are the Company's executive management team and members of the Board of Directors.
Key management personnel compensation consists of the following:
| For the three months ended December 31, 2024 ($) | For the three months ended December 31, 2023 ($) | For the nine months ended December 31, 2024 ($) | For the nine months ended December 31, 2023 ($) | |
|---|---|---|---|---|
| Wages, salaries, fees and short-term benefits | 344,925 | 255,082 | 821,142 | 566,060 |
| Share-based payments | - | 514,934 | 1,372,394 | 857,460 |
| 344,925 | 770,016 | 2,193,536 | 1,423,520 |
The above related party transactions were in the normal course of operations and have been valued in the Financial Statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
Critical Accounting Estimates
The preparation of the Company's Financial Statements requires management to make judgments and estimates that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. Estimates are reviewed on an ongoing basis.
Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the Financial Statements are as follows:
Going concern
The assessment of the Company's ability to continue as a going concern requires significant judgment and is based on assumptions regarding its ability to raise future capital, successfully develop and market financial services offerings, and achieve profitable operations in the future. The Financial Statements do not include any adjustments or disclosures that would be required if assets are not realized, and liabilities are not settled in the normal course of operations. If the Company is unable to continue as a going concern, then the carrying value of certain assets and liabilities would require revaluation to a liquidation basis, which could differ materially from the values presented in the Financial Statements.
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 operating costs, financing and related transactions. Specifically, the Company considers the currencies in which expenses are settled as well as the currency in which it 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.
Income taxes
Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent probable that future taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax assets and unused tax losses can be utilized. In addition, the valuation of tax credits receivable requires management to make judgments on the amount and timing of recovery. The determination of the Company's tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgment by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities and the deferral and deductibility of certain items. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management's best estimate of the probable outcome of these matters.
Useful life of intangible assets
The Company's definite life intangible assets are amortized on a straight-line basis and calculated using the estimated useful life and residual values of the assets. Changes to these estimates may affect the carrying value of intangible assets, net loss and comprehensive loss.
Investments in private entities
The Company's long-term investments in private entities are carried at fair value through profit or loss and have been classified as level 3 within the fair value hierarchy. There is no observable market data available to determine the fair value therefore management is required to make judgments and estimates to determine the fair value of the financial instruments. Management uses various techniques to estimate the fair value of the assets including implied valuations on subsequent equity raises or sales, if available, changes in the financial results of the operations of the entities, and other market approaches, where applicable.
Impairment of non-financial assets
The Company evaluates each asset or cash generating unit every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of the recoverable amount is performed, and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. In the case of goodwill, an impairment test is performed on an annual basis regardless of whether there are any indicators of impairment. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use. The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information.
The fair value of the cash-generating units has been determined using a discounted cash flow valuation approach based on internal estimates of the cash-generating unit's future cash flows. Key assumptions made in the forecasts include the success of the launch of the new Coinmama wallet, the Company's ability to obtain approval to operate as a qualified custodian, the Company's ability to successfully launch its upgraded Tradewind ledger, the number of users/customers acquired, the timing of revenue-generating activities, expected revenue per customer, and total expenditures required to carry out business plans. Changes in the key assumptions could have a material effect on the recoverable amount of goodwill and other non-financial assets. The determination of the fair value less cost of disposal of the cash-generating units are sensitive to various factors, including revenue growth rates, EBITDA margin percentage and discount rates. A discount rate of 46% (2023 - 46%) was applied in the calculation of the fair value less cost of disposal.
Revenue recognition
In determining the amount of revenue from contracts with customers, the Company exercises judgment in determining whether it is a principal or an agent in the arrangement. For revenue derived from the sale of cryptocurrencies, this includes the evaluation of whether the Company is subject to the risks and benefits during the period the cryptocurrencies are under the control of the Company.
Share-based payments
Share-based payments with employees and directors are measured at the fair value of the equity instruments at the date at which they are granted. Share-based payments with non-employees/directors require measurement of the fair value of the services or goods received. Estimating the fair value of share-based payments requires the determination of the most appropriate valuation model taking into account the terms and conditions upon which those equity instruments were granted. Share options are valued using the Black-Scholes valuation model, which requires estimates of the share price volatility rate, risk-free rate, dividend yield, and expected life of the option.
Business combinations
The Company's business combinations required the Company to make assumptions and estimates to determine the fair value of the identifiable assets acquired and liabilities assumed. The fair value of the Coinmama technology and brand was valued using the relief from royalty method. This method requires assumptions and estimates about an arm's-length royalty rate that could be charged for the use of the intangible assets, future revenues attributable to the intangible assets and the useful life of the technology. The fair value of the Coinmama licenses was valued using the lost profits method. This method requires assumptions and estimates about future cash flows, including cash flows in a scenario where the licenses are not present. The Tradewind technology was valued using the multi-period excess earnings method, which requires estimates of future cash flows generated from the asset and the useful life of the asset. The Tradewind customer relationships asset was valued using the distributor method. This method requires assumptions and estimates about future revenues, the attrition rate of the relationship, and a reasonable distributor EBITDA margin. The Company also made estimates in the measurement of the fair value of consideration transferred where the fair value of the shares transferred, and convertible debt issued was not readily available. These assumptions and estimates have an impact on the assets and liabilities recognized in the consolidated statement of financial position, including goodwill which is measured as the excess of the consideration transferred over the fair value of the assets acquired and liabilities assumed.
Convertible debentures, at option of the Company
The convertible debentures, with conversion options exercisable at the discretion of the Company, are measured at fair value through profit or loss. The fair value is determined using a Monte Carlo simulation, modelling the potential price movements of the Company's stock over the term of the debentures. Key inputs used in the fair value calculation include share-price volatility, which reflects expected fluctuations in the Company's share price, the risk-free interest rate based on government bond yields with similar maturity terms, and the cost of similar debt, representing the interest rate for comparable non-convertible debt instruments. The value at maturity was discounted using a relevant discount rate to arrive at the fair value of the debentures.
Financial Instruments and Other Instruments
The Company is exposed, in varying degrees, to a variety of financial instruments related risks. The fair value of the Company's financial instruments, including cash and cash equivalents, receivables, and accounts payable and accrued liabilities approximates their carrying value due to their short-term nature. The investments in Bosonic and Verif-y and convertible debentures, convertible at the option of the Company have been classified as level 3 within the fair value hierarchy. The loans in cryptocurrency are classified as level 2 within the fair value hierarchy and are measured using the market price of the relevant cryptocurrencies. There have been no changes in levels during the period.
In determining fair value, the Company classifies the fair value of these transactions according to the following hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2 - Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3 - Unobservable inputs for the asset or liability (unobservable inputs reflect management's assumptions on how market participants would price the asset or liability based on the information available).
The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company's primary exposure to credit risk is on its receivables. The Company works with only a select few reputable providers and customers to mitigate the risk of potential defaults.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company is exposed to this risk mainly with respect to its accounts payable and accrued liabilities, loans in cryptocurrency, convertible debentures, and long-term debt. The Company manages this risk by managing its working capital and monitoring its ongoing operating requirements. The Company's continuation as a going concern is dependent upon its ability to raise capital from new equity or debt, the successful development and marketing of its financial services offerings, and attaining profitable operations in the future. The Company's contractual undiscounted obligations are as follows:
The Company's contractual undiscounted obligations are as follows:
| Carrying amount | Contractual cash flows | Less than 1 year | |
|---|---|---|---|
| Accounts payable and accrued liabilities | $ 9,249,966 | $ 9,249,966 | $ 9,249,966 |
| Loans in cryptocurrency | 3,562,674 | 3,562,674 | 3,562,674 |
| Convertible debentures | 7,935,331 | - | - |
| Non-convertible debentures | 2,482,187 | 2,735,697 | 2,735,697 |
The loans in cryptocurrency are expected to be settled in their native cryptocurrency. Convertible debentures include non-discounted liabilities totalling $9,750,000, which the Company holds the discretion to settle through the issuance of common shares.
Interest rate risk
Interest rate risk is the risk that a financial instrument's fair value or future cash flows will fluctuate because of changes in market rates. The Company is exposed to interest rate risk on its convertible debentures and long-term debt. The Company's interest-bearing debt instruments have fixed interest rates; therefore the Company is not exposed to fluctuations in its future cash flows related to these instruments.
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market. The Company is exposed to price risk on its investments in Bosonic and Verif-y and the loans in cryptocurrency. The Company manages the price risk of its investments by making strategic business investments in accordance with the Company's investment guidelines. The price risk on the loans in cryptocurrency has increased as the Company no longer holds cryptocurrencies as part of its operations, which previously mitigated the price risk on this liability. The Company's significant exposure on its assets and liabilities denominated in cryptocurrencies as stated in it's loan in cryptocurrency amounted to ~ 26 BTC and 11 ETH.
Outstanding Share Data
As of the date of this MD&A, the Company's authorized share capital consists of an unlimited number of common and preferred shares. The Company had the following securities outstanding as at December 31, 2024:
| Type | Outstanding |
|---|---|
| Common Shares | 190,691,123 |
| Warrants | 50,176,895 |
| Restricted share units | 15,543,687 |
| 256,411,705 |
Additional Information
Additional information relating to the Company, including the Financial Statements, is available on SEDAR at www.sedarplus.ca.
Forward-Looking Statements
Examples of forward-looking statements in this MD&A include, but are not limited to, statements in respect of: the Company's business objectives; the Company's revenues, operating costs and tariffs, taxes and fees; the Company's long-term growth and development plans; the decentralized finance and blockchain sectors in general; the Company's ability to develop various financially-viable decentralized finance software applications; the sufficiency of the Company's cash and cash generated from operations to meet its working capital and capital expenditure requirements; the ability of the Company to raise funds in the future; the impact of fluctuation of currencies in relation to the Canadian dollar on the profitability of the Company and the value of the Company's assets, liabilities, and the amount of shareholders' equity; the effect of a 10% fluctuation in foreign currencies and cryptocurrencies against the Canadian dollar on the Company; that Coinmama can operate on a cash flow positive basis; the Company's continued efforts to reduce its cost structure and improve operating cash flow; the reorganization resulting in improved efficiency in the Coinmama business; the Company's ability to integrate Fireblocks' wallet-as-a-service offering into Coinmama's retail blockchain wallet; the impact that the Coinmama web and mobile financial applications will have on improving user retention and increasing per user monetization metrics; the Company's ability to integrate its proprietary decentralized financial services to support real-world-asset use cases; the Company's ability to create a robust environment to secure digitized gold; the creation of new revenue streams from the sale of tokenized gold and fees collected on smart contracts; the existence of the market for yield on gold; the launch of the Company's financial decentralized suite of solutions in the future; the Company's ability to obtain license approval from the province of Alberta to operate Brane Trust as a Canadian digital asset custodian and public trust; the impact Brane Trust will have on to Company's ability to attract accredited investors and institutions; the expected timing of the reversal of deferred tax assets and liabilities and the deferral and deductibility of certain items; future earnings; the cash generating units' future cash flows; the share price volatility rate, risk-free rate, dividend yield, and expected life of the option; the fair value of the identifiable assets acquired and liabilities assumed; the number of users acquired, the timing of revenue generating activities; the expected revenue per user; total expenditures required to carry out business plans; and the effect that each risk factor will have on the company.
The Company cautions readers that the foregoing list may not contain all of the forward-looking statements made in this document. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits the Company will derive therefrom. These forward-looking statements involve risks and uncertainties relating to, among others: market price and demand of cryptocurrency; continued availability of capital financing and general economic, market or business conditions; the Company's ability to execute its business plans; changes in laws, regulations and guidelines including taxes and fees; changes in government and government policy; increased competition in the cryptocurrency market; the limited operating history of the Company; the Company's reliance on key persons; the failure of counterparties to perform contractual obligations; the difficulty in securing additional financing; results of litigation; performance of the Company's products; changes in the Company's overall business strategy; and the Company's assumptions stated herein being correct. Readers are cautioned that the foregoing list of factors is not exhaustive. When relying upon our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this document are made as at the date of this document and Wellfield does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.