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Galaxy Digital Announces Third Quarter 2018 Financial Results and Provides Corporate Updates

NEW YORK , Nov. 27, 2018 /CNW/ - Galaxy Digital Holdings Ltd. (TSXV: GLXY; Frankfurt : 7LX) ("Galaxy Digital", "GDH Ltd.", or the "Company"), today released both Galaxy Digital Holdings LP's ("GDH LP" or the "Partnership") and GDH Ltd.'s financial results for the third quarter ended September 30, 2018 ("Q3 2018" or "the third quarter"), as well as the Partnership's corporate updates through the date of this press release. GDH Ltd. is a holding company which holds a minority interest in GDH LP as its only material asset. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. The financial results of GDH LP have been prepared and are shown separately, as GDH LP is not deemed to control GDH Ltd. as of September 30, 2018 . All figures are in U.S. Dollars unless otherwise noted.

Corporate Highlights

  • During the third quarter, the Partnership's Principal Investments team executed on six new investments and one add-on investment, representing $19.8 million and $0.9 million of invested capital, respectively. These investments included: 
  • In aggregate, the Partnership's Principal Investments team has deployed approximately $108.6 million represented by 17 new investments and 7 add-on investments since the beginning of 2018 through the end of the third quarter.
  • In October 2018 , the Partnership's Asset Management business ("GDCM") co-hosted an event with Bloomberg and Fidelity Digital Assets focused on the state of crypto asset's institutionalization and an announcement surrounding Fidelity's new crypto asset custody offering. GDCM intends to be Fidelity's alpha custody client starting in early 2019.
  • The EOS VC Fund continued to build its pipeline of potential investments during the quarter, with investments in Bloq, Inc., Varius Solutions, Inc., GoQii, Inc., and Mythical, Inc. closing in the early part of the fourth quarter of 2018 and additional deals expected to close prior to year-end.
  • GDH LP's Trading business ("GDT") further bolstered its institutional presence through the expansion of its OTC counter-party network and sustained activity across a spectrum of liquid assets. The effective management of principal risk and trading strategies continues to differentiate GDT from its competitors. Additionally, GDT's in-house, quantitative development team continues to build and expand its proprietary infrastructure. The business leverages deep trading and technology expertise to create a suite of market neutral trading strategies across a variety of crypto assets and exchanges.  During the third quarter, GDT more than doubled the total number of its onboarded counterparties.
  • As previously announced, given the changing regulatory framework and the opportunities the Partnership is currently seeing, Galaxy Digital is repositioning its Advisory Services business away from small ICO advisory and technical blockchain consulting to instead focus on larger institutional clients in the space. To that end, the Partnership closed its Vancouver office, and will be adding to its New York -based team.


Select GDH LP's Financial Highlights (Q3 2018)

  • As of September 30, 2018 , digital assets and investments totaled $323.0 million , an increase from $313.4 million as of June 30, 2018 . The $9.5 million increase was a result of additional purchases and capital deployed during the quarter which was partially offset by $38.1 million of net realized losses on digital assets and $4.2 million of net unrealized losses on investments.
  • Partners' capital increased $175.1 million to $379.8 million as of September 30, 2018 , primarily due to the $229.2 million contribution from GDH Ltd. This contribution relates to the purchase of a minority interest in the Partnership by GDH Ltd. as a result of the previously announced definitive arrangement agreement ("the Arrangement") between Galaxy Digital LP ("Galaxy LP"), Bradmer Pharmaceuticals Inc. ("Bradmer"), and First Coin Capital Corporation ("First Coin"). On completion of the Arrangement: (i) Galaxy LP and First Coin became wholly owned subsidiaries of the Partnership, (ii) Bradmer changed its name to Galaxy Digital Holdings Ltd. and resumed an active public listing on the TSXV, and (iii) GDH Ltd. acquired a minority interest in the Partnership using the net proceeds from a private placement offering completed in February 2018 . The Partnership will be managed by the board of managers and officers of its general partner. The officers of the general partner are also the principals of Galaxy LP.
  • As of September 30, 2018 , the Partnership's net book value per unit1 was approximately $1.36 (or C$1.76 ).
  • The Partnership's net losses for the period were $75.1 million due primarily to a combination of a net realized loss on digital assets of $38.1 million , equity based compensation of $14.3 million and a one-time goodwill impairment of $6.2 million related to the repositioning of the Advisory Services business and closure of the Partnership's Vancouver office.


GDH LP's Q3 2018 Financial Results


September 30,

December 31,


2018

2017

Assets



Current assets



Cash

$

90,327,691

$

32,098,217

Digital assets

123,178,275

22,650,240

Investments

199,792,651

-

Receivables

490,912

-

Prepaid expenses and other assets

2,908,907

-

Loans receivable           

1,772,270

-


418,470,706

54,748,457




Loans receivable

16,031,773

-

Property and equipment

1,001,984

-


17,033,757

-

Total assets

$

435,504,463

$

54,748,457







Liabilities



Current liabilities



Accounts payable and accrued liabilities

$

14,924,453

$

1,011,795

Digital assets sold short

32,547,054

-

Due to related party

-

42,650,240

Due to exchange

1,513,722

9,344,613

Total liabilities

48,985,229

53,006,648




Equity



Partners' capital

379,782,664

1,741,809

Non-controlling interest

6,736,570

-

Total equity

386,519,234

1,741,809




Total liabilities and equity

$

435,504,463

$

54,748,457

 


Three months

ended

September 30, 2018

Nine months
ended
September 30, 2018

Income



Advisory and management fees

$

1,473,297

$

2,806,510

Net realized loss on digital assets

(38,067,497)

(52,733,347)

Other income

535,232

852,128


(36,058,968)

(49,074,709)




Operating expenses



Equity based compensation

14,311,084

14,311,084

Compensation and compensation related

5,031,095

19,147,279

Professional fees

6,161,619

9,391,601

General and administrative

2,671,498

5,634,518

Interest     

1,310,341

4,294,669

Insurance

480,675

1,752,465

Director fees

25,000

25,000


(29,991,312)

(54,556,616)




Net unrealized gain (loss) on digital assets

366,717

(83,357,300)

Net unrealized gain (loss) on investments

(4,172,597)

16,545,019

Unrealized foreign currency gain (loss)

(1,474,820)

92,065

Realized foreign currency gain

893,387

893,387

Goodwill impairment

(6,216,914)

(6,216,914)


(10,604,227)

(72,043,743)




Net loss for the period

$

(76,654,507)

$

(175,675,068)




Net loss attributed to:



Unit holders of the Partnership

$

(75,148,680)

$

(174,169,241)

Non-controlling interest

(1,505,827)

(1,505,827)


$

(76,654,507)

$

(175,675,068)

Other comprehensive loss



Foreign currency translation adjustment

(7,298)

(7,298)




Net comprehensive loss for the period

$

(76,661,805)

$

(175,682,366)




Net comprehensive loss attributed to:



Unit holders of the Partnership

$

(75,155,978)

$

(174,176,539)

Non-controlling interest

(1,505,827)

(1,505,827)


$

(76,661,805)

$

(175,682,366)

 

Income and expenses by each reportable segment of GDH LP for the three months ended September 30, 2018 are as follows:



Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Income







Advisory and management fees

$

-

$

-

$

1,370,658

$

102,639

$

-

$

1,473,297

Net realized loss on digital assets

(38,091,252)

-

23,755

-

-

(38,067,497)

Other Income

173,134

151,890

12,743

11,805

185,660

535,232


(37,918,118)

151,890

1,407,156

114,444

185,660

(36,058,968)

Operating expenses







Equity based compensation

3,159,741

2,350,198

2,757,378

2,343,810

3,699,957

14,311,084

Compensation and compensation related

1,659,640

582,617

1,054,884

388,787

1,345,167

5,031,095

Professional fees

45,318

165,827

220,940

89,508

5,640,026

6,161,619

General and administrative

634,054

121,812

310,090

742,157

863,385

2,671,498

Interest

844,528

290,239

-

-

175,574

1,310,341

Insurance

-

-

-

-

480,675

480,675

Director fees

-

-

-

-

25,000

25,000


6,343,281

3,510,693

4,343,292

3,564,262

12,229,784

29,991,312








Net unrealized gain (loss) on digital assets

(3,189,334)

-

3,556,051

-

-

366,717

Net unrealized gain (loss) on investments

(46,668)

(4,125,929)

-

-

-

(4,172,597)

Unrealized foreign currency gain (loss)

82,989

-

-

11,921

(1,569,730)

(1,474,820)

Realized foreign currency gain (loss)

(52,095)

-

-

-

945,482

893,387

Goodwill impairment

-

-

-

-

(6,216,914)

(6,216,914)


(3,205,108)

(4,125,929)

3,556,051

11,921

(6,841,162)

(10,604,227)

Net comprehensive income (loss)

$

(47,466,507)

$

(7,484,732)

$

619,915

$

(3,437,897)

$

(18,885,286)

$

(76,654,507)



* Above table represents the three months ended September 30, 2018.  These amounts can also be derived by subtracting the six months ended June 30, 2018 from the nine months ended September 30, 2018, as previously disclosed.


 

Assets by each reportable segment of GDH LP as of September 30, 2018 are as follows:




Principal

Asset

Advisory

Corporate



Trading

Investing

Management

Services

and Other

Totals

Assets







Cash

$

86,781,301

$

358,161

$

1,633,470

$

350,870

$

1,203,889

$

90,327,691

Digital assets

123,178,275

-

-

-

-

123,178,275

Investments

181,552

199,611,099

-

-

-

199,792,651

Receivables

-

24,898

32,032

358,174

75,808

490,912

Prepaid expenses and other assets

511,498

-

677,363

233,286

1,486,760

2,908,907

Loans receivable

-

17,444,042

-

360,001

-

17,804,043

Property and equipment

4,448

-

-

35,805

961,731

1,001,984


$

210,657,074

$

217,438,200

$

2,342,865

$

1,338,136

$

3,728,188

$

435,504,463

 

Select statement of financial position information

The fair value of each asset class by reporting segment of GDH LP as of September 30, 2018 is as follows:



Principal

Asset


Corporate



Trading

Investing

Management

Advisory

and Other

Totals

Digital assets:







Cryptocurrency

$

123,178,275

$

-

$

-

$

-

$

-

$

123,178,275

Investments:







Pre-ICO

-

3,648,351

-

-

-

3,648,351

Convertible Note

-

100,000

-

-

-

100,000

Preferred Stock

-

56,862,464

-

-

-

56,862,464

Common Stock

108,072

97,933,172

-

-

-

98,041,244

LP/LLC Interests

-

38,367,151

-

-

-

38,367,151

Warrants/Trust Units

73,480

2,699,961

-

-

-

2,773,441


$

123,359,827

$

199,611,099

$

-

$

-

$

-

$

322,970,926

 

This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Consolidated Financial Statements for the three and nine months ended September 30, 2018 and (ii) GDH Ltd.'s Management Discussion and Analysis and Consolidated Financial Statements for the three and nine months ended September 30, 2018 , which have been filed on SEDAR at www.sedar.com

About GDH Ltd. and GDH LP (Galaxy Digital)
Galaxy Digital Holdings Ltd. is a holding company whose only significant asset is a minority investment in GDH LP. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. GDH LP's multi-disciplinary team has extensive experience spanning investing, portfolio management, capital markets, operations, and blockchain technology. GDH LP currently operates four distinct business lines, which include: Trading, Asset Management, Principal Investing and Advisory Services. The CEO of the general partner of GDH LP is Michael Novogratz . The Partnership is headquartered in New York City , with offices in London , Tokyo , Hong Kong , the Cayman Islands (registered office) and New Jersey . Additional information about GDH LP's businesses and products is available on www.galaxydigital.io.

Disclaimers and Additional Information

See the press releases of Bradmer dated January 9, 2018 , February 14, 2018 , March 15, 2018 , April 13, 2018 , May 18, 2018 , June 11, 2018 , June 12, 2018 , June 18, 2018 , and July 31, 2018 for further information concerning the Arrangement.

The TSXV has in no way passed upon the merits of the Arrangement and has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy Digital.

Forward-Looking Statements

Certain information in this press release, including, but not limited to, statements regarding future business operations, deals and opportunities, may constitute forward looking information (collectively, forward-looking statements, which can be identified by the use of terms such as "may," "will," "should," "expect," "anticipate," "project," "estimate," "intend," "continue" or "believe" (or the negatives) or other similar variations. Because of various risks and uncertainties, including those referenced below, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. As a result, you should not rely on such forward-looking statements. Additional information identifying assumptions, risks and uncertainties relating to Galaxy Digital is contained in Galaxy Digital's filings with the Canadian securities regulators available at www.sedar.com. These risks include those discussed in the risk factors section in the Notice of Annual and Special Meeting of Shareholders and Management Information Circular dated May 14, 2018 . The forward-looking statements in this press release are applicable only as of the date of this release or as of the date specified in the relevant forward-looking statement.

__________________________

1 Net book value per unit is calculated as partners' capital divided by the outstanding number of units of 278.5 million as of September 30, 2018

 

SOURCE Galaxy Digital Holdings Ltd.


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