Mr. Som Seif reports

ETHER CAPITAL CORPORATION REPORTS 2023 Q4 AND ANNUAL FINANCIAL RESULTS

Ether Capital Corp. has released its audited consolidated financial results for the year ended Dec. 31, 2023.

During the year, the company:

• Increased its staked ether from 20,512 to 45,440 ether units, representing approximately 98 per cent of its ether unit balance;
• Began staking its ether on its proprietary in-house infrastructure, which at Dec. 31, 2023, was 64 per cent of all staked ether;
• Earned staking rewards of 1,843 ether, equating to staked ether rewards (yield) of $4,496,102, compared with $2,445,369 in fiscal 2022; during the year ended Dec. 31, 2023, the gross yield was 4.94 per cent per year (5.13 per cent for 2022);
• Implemented a reduction in employee-related and other operating overhead expenses of $800,000 on an annualized basis;
• Repurchased 726,400 shares under its normal course issuer bid program at a weighted-average share price of $2 per share, for total cash consideration of $1,430,359; total shares repurchased represent a reduction of 2.9 per cent of the public float of issued and outstanding shares from the time the NCIB program was commenced in June, 2023; the earnings per share impact of the NCIB was four cents.

The company believes these actions have helped position the company for continued positive operating profit (a non-international financial reporting standard measure defined as revenue less operating expenses before impairment and revaluation expenses).

Highlights of its financial results include:

• The total value of digital assets held by the company was $140.3-million as at Dec. 31, 2023, versus $73.1-million as at Dec. 31, 2022, a 91.9-per-cent year-over-year increase. The increase was primarily the result of the 86.5-per-cent increase in the value of ethereum to $3,022 at the end of 2023 ($1,620 in 2022).
• Total revenue in fiscal 2023 was $5.2-million versus $3.7-million in fiscal 2022, representing an increase of 39.5 per cent.
• The company incurred Operating Expenses before Impairment and Revaluation expenses in fiscal 2023 of $3.7-million, a 6.1-per-cent decrease from fiscal 2022's level of $3.9-million.
• Revenue in fourth quarter 2023 increased 78 per cent to $1.4-million versus $800,000 in Q4 2022 due in part to an increase in the market price of ether in Q4 2023 versus Q4 2022. Operating expenses in Q4 decreased by 16 per cent to $800,000 from $900,000 for Q4 2022.
• Fiscal 2023 generated a positive operating profit of $1.5-million, compared with an operating loss in fiscal 2022 of $200,000. The improvement was attributable to higher staked ether rewards due to the staking strategy outlined above and lower operating expenses resulting from the cost reduction initiatives noted above.
• Shareholders equity as at Dec. 31, 2023, was $134.6-million compared with $75.6-million a year ago, an increase of 78.0 per cent. Shareholders equity per share also increased from $2.24 per share at the end of fiscal 2022 to $4.02 per share at the end of fiscal 2023. The increases in fiscal 2023 were primarily attributable to the 91.9-per-cent increase in the value of the digital assets in 2023.

Ether and staking results

The company earned staked ether rewards revenue of $4.5-million for the year ended Dec. 31, 2023 (compared with $2.4-million for 2022). The year-over-year increase was attributed to: (i) the increased level of ether treasury being staked; (ii) a full year of earning yield generated from execution layer rewards (versus 3.5 months in fiscal 2022); and (iii) to a lesser extent, the increase in the price of ether during fiscal 2023. Annualized staking yield in fiscal 2023 was 4.94 per cent (5.13 per cent in fiscal 2022). Current yields are approximately 3.84 per cent as at March 14, (unaudited).

"Our staking strategy, which was executed on over fiscal 2023, proved to have had a positive impact. The company increased its staked ether to 45,440 units by the end of 2023, an increase of 121.5 per cent from December, 2022. At year-end, the company was staking 64 per cent of its staked ether using its internal, lower-cost infrastructure," said Jillian Friedman, chief operating officer and interim chief financial officer. The company plans to continue to migrate its staked ether to the internal infrastructure in the first half of fiscal 2024, which is expected to yield additional cost savings, pending the outcome of the strategic review.

Assets, liabilities and equity

Over the 2023 fiscal year, the trading price of ether increased by approximately 88 per cent and thus impacted the valuation of the company's digital assets. The company's ether, valued at $73.1-million on Dec. 31, 2022, increased to $140.3-million on Dec. 31, 2023. The price of ether as at Dec. 31, 2022, was $1,620 versus $3,022 as at Dec. 31, 2023.

The total cryptocurrency market capitalization saw an impressive increase in 2023, reflecting renewed positive sentiment across the industry in the second half of the year. The anticipated Shanghai upgrade took place in April, 2023, and facilitated the withdrawal of staked ether.

Operating expenses

In June, 2023, the company implemented the 2023 restructuring, which primarily impacted operating expenses. Operating expenses decreased in the second half of fiscal 2023 to $1.6-million, a 25.0-per-cent decline from the first half of fiscal 2023. Expenses were $3.7-million in the current fiscal year, comparing favourably with the prior year's amount of $3.9-million. On a quarterly basis, fourth quarter operating expenses in 2023 declined by 15.9 per cent from the comparable period in fiscal 2022. These decreases were primarily attributable to reduced employee compensation (salaries, benefits and share-based compensation expenses). The full effect of the employee reductions on operating expenses is expected to be visible in the first quarter of 2024 and on a go-forward basis. During the year ended Dec. 31, 2023, the company incurred $131,000 in severance costs related to the restructuring (Q4: nil).

NCIB

On June 15, 2023, the company announced it had received approval to implement a NCIB with Cboe Canada (formerly known as the NEO Exchange) for the purchase of up to 7.5 per cent of its common shares. Pursuant to the NCIB, the company may purchase up to a maximum of 2,566,662 common shares. During the year ended Dec. 31, 2023, 726,400 shares were purchased and cancelled for a cost of $1,437,704, including commissions, at a weighted-average share price of $2 per share.

Strategic review

In December, 2023, the company announced that it was initiating a strategic review to determine the best path forward for the company's development. The strategic review is continuing. The company is continuing to focus on maximizing operational efficiency and yield generation as it undertakes the strategic review process.

Supplementary information

The following supplementary financial and other data are provided for information purposes, noting that they are unaudited and dated as at March 14, 2024:

• 46,203 total ether, including 45,408 staked ether;
• $1.06-million in cash;
• 33,060,020 shares issued and outstanding;
• Staking yield (31-day average) at 3.84 per cent.

From Jan. 1 to Feb. 29, 2024, the company purchased an additional 356,000 shares at a cost of $1,103,093.

The company sold 391 units of ether on Jan. 23, 2024, for a value of $1,161,923, and on March 8, 2024, sold 156 units of ether for a value of $810,248. The funds are used to provide cash for the NCIB and operations.

About Ether Capital Corp.

The company's mission is to be the premier access point in the public markets for investment in ethereum's native token, ether. The company generates yield on its ether treasury through staking, a process that allows ether holders to participate in securing the ethereum network and earn rewards in the form of additional ether tokens.

The company's strategy is to hold and stake ether, build intellectual property related to staking and ethereum infrastructure in general, and supplement staking income with consulting and subadvisory mandates in the digital asset sector.

We seek Safe Harbor.