BANXA Holdings Inc (TSX-V:BNXA, OTCQX:BNXAF) told investors that it is in the process of completing its audited annual financial statements for the fiscal year ending June 30, 2022, as well as related management discussions and analysis, with the help of its auditors.
The Toronto-based Web3 payments and on-and-off ramp solutions provider said it is “dedicated to resolving the remaining audit items and submitting the necessary filings as soon as possible.”
Once completed, it said a news release will be issued to announce the submission of the annual filings and interim financial statements for the periods ended September 30, 2022, and December 31, 2022. Despite the challenges posed by current market conditions and the evolving regulatory landscape, it reassured investors that its operations remain positive and stable.
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"We understand the frustration and concern that the slow pace of the audit and current cease trade order (CTO) may have caused among our shareholders," Banxa founder and chairman Domenic Carosa said in a statement. "We are committed to providing timely and accurate financial reporting to our shareholders.”
Banxa said the delay in the annual filings and the prolonged audit are due to several factors, including:
- The company has conducted a comprehensive review and analysis of its transactions resulting in adjustments to its revenue recording methods for the fiscal year 2022. This adjustment was made to ensure that revenue is being appropriately presented based on how a specific cryptocurrency interacts with a Banxa wallet which has an impact if revenue is treated as ‘agency’ or ‘principal’ revenue. As a result of the review, Banxa said it will report approximately A$71 million (US$49 million) in revenue for FY2022 an increase of 53%. The revenue recording methods do not have any impact on the gross or net profit of the company but rather reflect a change in the business process that ensures accurate reporting and compliance with regulatory requirements around accounting standards.
- Liquidity providers: As part of its operations, Banxa said it sources liquidity from numerous global cryptocurrency exchanges known as liquidity providers. These exchanges are generally considered ‘un-regulated’ from a regulatory perspective and are usually not SOC compliant (a form of ISO accreditation) which has required further audit procedures needed to be implemented to validate the accounting treatment of these digital assets held on these exchanges. It said it is pleased to report that it is close to completing this review and does not anticipate any impact on its financial statements.
- Reclassification of 'deposits at exchanges' to 'receivables at exchanges': Given the current state of the cryptocurrency markets and the risks associated with holding coins on third-party cryptocurrency exchanges, Banxa said it has had to reclassify its digital assets held on third-party exchanges from a 'deposit' to a 'receivable'. Both remain current assets and will not impact the current assets on the balance sheet.
- Significant growth: the company said it achieved significant transaction volume of about A$1.6 billion (US$1.1 billion) in FY2022 and remains in a growth stage as it continues to expand its operations and offerings. As part of this growth, it said management recognizes the need for continuing to improve internal processes and better support financial reporting requirements. The company said it has now appointed its COO Sean Moynihan as interim CFO while the search for a full-time CFO continues.
Banxa confirmed that there is no material information regarding its affairs that has not been disclosed and believes that, upon the filing of its annual filings financial statement for the subsequent two quarters, it will have satisfied the conditions of the British Columbia Securities Commission (BCSC) and have the CTO lifted, allowing trading in its securities to resume.
“I want to emphasize that we are working hard to complete and file our audited financial statements as soon as possible, despite the challenges posed by the rapidly changing industry standards and regulations surrounding third-party deposits and the cryptocurrency industry,” Carosa added. “Our financial performance remains strong, with transaction volume of A$1.6 billion in the fiscal year 2022. We want to assure shareholders that this delay is not related to any undisclosed events or issues, and we remain committed to upholding the highest standards of transparency and disclosure.”
The companhy said it will provide another update in the coming 10-12 business days.
Banxa powers the world’s largest digital asset platforms by providing payments infrastructure and regulatory compliance across global markets.
Contact the author at stephen.gunnion@proactiveinvestors.com