🔥 What This Document Is

This is DeFi Technologies' 40-F annual report filed with the SEC. It’s the comprehensive annual financial filing for a foreign company (Canadian) listing in the U.S. The core of what you’re reading is the audited financial statements for the years ended December 31, 2025 and 2024.

👉 Why it matters: This isn’t just a routine filing. The independent auditor’s report leads with a major red flag—a "material uncertainty related to going concern." This means the auditors doubt the company can continue as a going business for the next year without a major change.

🏢 What The Company Does

👉 In simple terms, DeFi Technologies acts as a bridge between traditional stock markets and the world of decentralized finance (DeFi). Instead of you needing a crypto wallet, they create investment products (ETPs) that trade on regular stock exchanges but track the value of specific DeFi protocols or cryptocurrencies. They also invest directly in DeFi projects and companies and earn fees for managing these products.

• Core Business: Issuing and managing exchange-traded products (ETPs) that synthetically track DeFi assets.
• Other Activities: Building a portfolio of investments across the DeFi ecosystem, selling research subscriptions, and operating blockchain nodes.
• Listings: Trades on CBOE Canada (DEFI) and dual-listed on the Nasdaq (DEFT) in May 2025.

🚨 The Going Concern Warning

This is the most critical part of the report. The auditor states that the company’s net working capital deficiency (current liabilities exceed current assets) raises "substantial doubt" about its ability to continue.

• The Numbers: As of Dec 31, 2025, working capital deficit was $5.1 million (much improved from a massive $188.5 million deficit in 2024).
• The Catch: While the cash position improved to $91.2 million, the company is still burning cash in its operations. The report notes that future success depends heavily on cryptocurrency prices and securing more financing.

👉 Why it matters: This is a formal, serious warning from the auditors. It signals that the company's survival is not guaranteed and depends on factors outside its direct control, like crypto market prices and its ability to raise more money.

💰 Financial Highlights (The Rollercoaster)

The financials show extreme volatility, perfectly reflecting the crypto market's wild swings.

Revenues & Profitability:

• Total Revenue 2025: $99.1 million (a big jump from $31.4 million in 2024).
• Net Income 2025: $62.4 million profit vs. a $28.5 million loss in 2024.
• The Twist: This profitability is almost entirely due to massive swings in the value of crypto assets and related liabilities. Core operating revenue (fees, commissions) was $33.2 million.

The Wild Card: Unrealized Gains/Losses This is where the crypto volatility hits the bottom line directly.

• Loss on Digital Assets: ($234.0 million) in 2025 vs. a $252.0 million gain in 2024.
• Gain on ETP Payables: $351.0 million in 2025 vs. a ($352.5 million) loss in 2024. (This is a key accounting nuance: as crypto prices fall, the liability to ETP holders decreases, creating an accounting gain, and vice-versa).

👉 Why it matters: The company's profit is a mirror of crypto market performance, not necessarily its core operational strength. A strong crypto market inflates profits; a bear market can wipe them out.

📦 Financial Position & Balance Sheet

The balance sheet is complex, heavy with crypto-related assets and liabilities.

• Big Assets: Digital Assets ($418.8 million total), Equity Investments in Funds ($132.0 million), and Cash ($91.2 million).
• Big Liabilities: ETP Holders Payable ($622.3 million) is the largest item. This represents the value they owe to investors in their ETP products, moving in sync with crypto prices.
• Equity Swing: Shareholder equity improved dramatically to $149.6 million (from $19.1 million), largely due to the profitable year and a $100 million private placement.

👉 Why it matters: The company’s financial health is intrinsically tied to cryptocurrency valuations. A sustained crypto downturn would shrink asset values and potentially flip the equity position negative again.

⚖️ Big Picture: Strengths & Risks

👍 Potential Strengths:

• Market Position: A first-mover as a publicly traded company focused on bridging TradFi and DeFi.
• Improved Cash: Significantly strengthened cash position to $91.2 million.
• Reduced Deficit: Dramatically improved working capital deficit from -$188.5M to -$5.1M.
• Profitable Year: Demonstrated ability to generate significant profit in a favorable crypto market.

⚠️ Significant Risks:

• Going Concern: The auditor’s warning overshadows everything.
• Extreme Volatility: Financial results are wildly unpredictable and tied to crypto prices.
• Operational Cash Burn: Core operations still consumed cash in 2025.
• Complex & Niche Business: Relies on investor appetite for a novel, complex financial product.
• Regulatory Risk: The DeFi and crypto space faces evolving and uncertain regulations globally.

🔍 Critical Audit Matters Explained

The auditor highlighted two areas that were especially complex to verify:

1. Digital Assets: Confirming the company actually owns, controls, and can value the crypto assets held in various ways (self-custody, staked, loaned out) is very challenging. Auditors had to check blockchain records and physically observe asset transfers.
2. Equity Investments in Funds: Valuing these private fund investments is subjective. They use models with "unobservable inputs," like discounts for lack of marketability, which require significant auditor judgment.

👉 Why it matters: These aren't standard audits. Verifying crypto holdings and the value of private fund investments is a cutting-edge, complex process. The auditors' emphasis shows these are high-risk areas for potential misstatement.

🔮 What's Next

The filing doesn't provide explicit future guidance, but the context points to key priorities:

1. Address Going Concern: Securing additional financing is now a survival imperative.
2. Manage Volatility: Navigate the business through the inherent volatility of the crypto markets.
3. Grow Core Revenues: Increase the stable, fee-based income from managing ETPs and other services.
4. Strategic Focus: Continue positioning itself as the public-market gateway to DeFi.

🧠 The Analogy

DeFi Technologies is like a surfer trying to ride a massive, unpredictable wave (the crypto market). They’ve managed to get back on their board after a wipeout in 2024 and caught a great wave in 2025, making it look profitable. But the auditor is pointing out that their board (working capital) is cracked, and the next wave could be a monster that swallows them whole unless they can fix it fast.

📇 Key Contacts & People

• Directors Approving Statements: Johan Wattenstrom, Per von Rosen
• Auditor: Harpreet Dhawan, HDCPA Professional Corporation (served since 2023)
• Company Head Office: 333 Bay Street, Suite 2400, Toronto, Ontario, Canada, M5H 2R2.

🧩 Final Takeaway

DeFi Technologies had a fantastically profitable year on paper, but that profit is a volatile mirage built on crypto price swings. The most important takeaway is the auditor's formal warning about the company's ability to survive, which makes this a high-risk investment that hinges entirely on favorable market conditions and successful fundraising.