Metalpha Technology Holding Limited (“the Company”), formerly Dragon Victory International Limited, was formed in the Cayman Islands on July 19, 2015. The Company operates through its PRC operating entities and Metalpha Limited, a company incorporated in the British Virgin Islands. The PRC operating entities currently have one line of business, namely, supply chain management platform services. Metalpha Limited operates cryptocurrency derivative product services in Hong Kong.

On September 21, 2022, the Company transferred 100% of the equity interest in Radiant Alpha Limited, a wholly-owned subsidiary of Metalpha Limited to Antalpha Technologies Holdings Limited (“Antalpha”), the minority shareholder of Metalpha Limited, for a consideration of US$1. Radiant Alpha Limited has no operations as at the date of the disposal.

On November 15, 2022, the shareholders of the Company approved the change of the name of the Company from “Dragon Victory International Limited” to “Metalpha Technology Holding Limited”.

Particulars of subsidiaries of the Company are as below:

Notes:

The condensed consolidated financial statements of the Company have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). This basis of accounting involves the application of accrual accounting and consequently, revenue and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s condensed consolidated financial statements are expressed in U.S. dollars (“US$”).

These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s annual report on Form 20-F for the year ended March 31, 2022, filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 16, 2023. Certain disclosures included in the annual financial statements have been condensed or omitted from these condensed consolidated financial statements as they are not required for interim financial statements under IAS and the rules of the SEC.

These condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.

The Company has disclosed its condensed consolidated financial statements under International Financial Reporting Standards (“IFRS”) for the six months ended September 30, 2022 and 2021. The latest consolidated financial statements under generally accepted accounting principles (U.S. GAAP) were prepared for the year ended March 31, 2021, and the date of transition to IFRS is April 1, 2020. The comparative amounts for the six months ended September 30, 2021 has been restated.

There were no recent accounting pronouncements adopted by the Company.

The accounting policies applied in these condensed consolidated financial statements are the same as those applied in the most recent annual audited consolidated financial statements issued on August 16, 2022.

(a) Right-of-use assets

The Company has entered into leases of buildings, which are used for the Company’s operations. Leases of buildings have lease terms of between over one and six years (March 31, 2022: over one and six years).

(b) Lease liabilities

Set out below are the carrying amounts of lease liabilities and the movements during the period/year:

Presentation on:

Condensed Consolidated Statements of Financial Position:

The following are the contractual undiscounted cash outflows of lease liabilities for the maturity analysis:

The effective interest rate applied to the lease liabilities recognized in the condensed consolidated statements of financial position range from 4.75% to 4.90% per annum (March 31, 2022: 4.75% to 4.90% per annum).

Other receivables and prepayments consisted of the following:

Movements of allowance for doubtful accounts as followings:

Notes:

An impairment analysis is performed on loan receivables at each reporting date and expected credit losses are estimated by applying a loss rate approach with reference to the historical credit records of the Company’s borrowers. The loss rate is adjusted to reflect the current conditions and forecasts of future economic conditions, as appropriate. According to historical experience, all of the proceeds have been received within their due date, and therefore, management considers the probability of default is minimal as of September 30, 2022.

The digital assets held on third party exchange institutions are measured at fair value. They represented balance of digital assets attributable to the Company held in shared wallets of the third party exchanges.

The balance is measured at fair value through profit or loss.

Fair value loss of approximately US$1,330,133 (2021: Nil) from remeasurement of digital assets for the six months ended September 30, 2022.

The Company had the cash and cash equivalents in the following currencies:

The cash and cash equivalents of US$477,713 (March 31, 2022: US$369,035) are located in mainland China. RMB is not a freely convertible currency and the remittance of funds out of mainland China is subject to exchange restrictions imposed by the PRC government.

(i) Share capital and additional paid-in capital

The addition of share capital and additional paid-in capital represented the issue of 3,300,000 ordinary shares in private placement on August 2, 2022.

(ii) Share purchase warrants

A continuity schedule of outstanding share purchase warrants and fair value charged to profit or loss are as follows:

On October 27, 2021, the Company issued 1,800,000 share purchase warrants to consultants, exercisable at the lower of (i) $1.50 per share or (ii) 88% of the lowest daily volume-weighted average price, for a period of five years.

On October 29, 2021, the Company issue warrants to Natural Selection Capital Holdings Limited (the “Consulting Company”) to purchase an aggregate of 14,000,000 ordinary shares, par value US$0.0001 per share of the Company with each such warrant expiring on the tenth anniversary from the date on which the Consulting Company warrants become exercisable, which exercise date shall be the later of: (i) the one year anniversary date of the issuance of such Consulting Company warrants (such one-year period following the date of the issuance of such Consulting Company warrants, and (ii) the applicable vesting date. The warrants are described below:

On November 30, 2021, the Company issued 2,000,000 share purchase warrants to Mr. Ming Ni, a consultant, appointed as director of the Company on December 9, 2021, which are exercisable at the lower of (i) $1.50 per share or (ii) 88% of the lowest daily volume-weighted average price, for a period of five years.

On May 10, 2022, the Company issued 200,000 share purchase warrants to an employee of the Company which are exercisable at the lower of (i) $1.50 per share or (ii) 88% of the lowest daily volume-weighted average price, for a period of five years.

On May 26, 2022, the Company issued 500,000 share purchase warrants to consultants of the Company which are exercisable at the lower of (i) $1.50 per share or (ii) 88% of the lowest daily volume-weighted average price, for a period of five years.

On July 2022, the Company issued 6,600,000 share purchase warrants to consultants and employees of the Company, which are exercisable at the lower of (i) $1.00 per share or (ii) 88% of the lowest daily volume-weighted average price, for a period of five years.

The Company used the following assumptions in calculating the fair value of the warrants for the period ended:

At September 30, 2022, the Company had share purchase warrants outstanding as follows:

(iii) Non-controlling interests 

Note:

The amount due to related parties are unsecured, interest-free and repayable on demand.

These payables were unsecured, interest-free, and repayable by an agreed amount of digital assets as stipulated in the Digital Asset Trading Agreements.

The digital assets payables are measured at fair value through profit or loss and refer to Note 20(a) to the condensed consolidated financial statement for the details of fair value analysis.

The consultation services expenses represented consultation fees to external consultants who provided consultation services on cryptocurrencies trading to the Company.

The following items have been included in arriving at general and administrative expenses:

The Company is formed in Cayman Islands and is not subject to tax on its income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax is imposed.

The Company’s subsidiary formed in British Virgin Island is not subject to tax on its income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no British Virgin Island withholding tax is imposed.

The Company’s subsidiary formed in Hong Kong is subject to the profits tax on the taxable income derived from its activities conducted in Hong Kong. The applicable tax rate is 16.5% in Hong Kong. From year of assessment of 2019/2020 onwards, Hong Kong profits tax rates are 8.25% on assessable profits up to US$254,268 (HK$2,000,000), and 16.5% on any part of assessable profits over US$254,268 (HK$2,000,000).

The Company’s subsidiaries incorporated in the PRC are subject to profits tax rate at 25% for income generated and operation in the local jurisdiction.

The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company’s ability to generate taxable income during the carry forward period.

The Company’s subsidiaries incorporated in the PRC has unused net operating losses available for carry forward to future years for PRC income tax reporting purposes up to five years. No deferred tax asset has been recognized in respect of these tax losses due to the unpredictability of future profit streams.

The Company’s maximum exposure to credit risk in the event that counterparties fail to perform their obligations in relation to each class of recognized financial assets is the carrying amounts of those assets as stated in the consolidated statement of financial position. The Company’s credit risk is primarily attributable to its loan receivables, deposits and other receivables, and cash and cash equivalents. In order to minimize credit risk, the directors of the Company have delegated a team to be responsible for the determination of credit limits, credit approvals and other monitoring procedures. In addition, the directors of the Company review the recoverable amount of each individual debt regularly to ensure that adequate impairment losses are recognized for irrecoverable debts. The credit risk on cash and cash equivalents are limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. In this regard, the directors of the Company consider that the Company’s credit risk is significantly reduced.

The Company has no significant concentration of credit risk, with exposure spread over a number of counterparties.

The Company has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are principally denominated in the functional currencies of the Company entities.

As Hong Kong dollar is pegged to United States dollar, the Company considers the risk of movements in exchange rates between Hong Kong dollars and United States dollars to be insignificant.

The Company currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities. The Company will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

Digital assets that the Company deals with in its trading activities are digital assets such as Bitcoin (“BTC”) and Ethereum (“ETH”) which can be traded in a number of public exchanges.

Company’s exposure to price risk arises from digital assets and digital assets payables, which are both measured on fair value basis. In particular, the Company’s operating result may depend upon the market price of BTC and ETH, as well as other digital assets. Digital asset prices have fluctuated significantly from time to time. There is no assurance that digital asset prices will reflect historical trends.

The price risk of digital assets arising from trading of digital assets business is partially offset by remeasurement of digital assets payables representing the obligations to deliver digital assets held by the Company in the customers’ accounts to the customers under the respective trading and lending arrangements with the Company.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability which market participants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such basis.

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3, based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and