Pursuant to Rule 424(b)(3)

Registration No. 333-256814

PRELIMINARY PROSPECTUS

DIGINEX LIMITED

94,487 Ordinary Shares

This prospectus relates to the resale from time to time by the selling securityholders of Diginex Limited (the “Company”) named in this prospectus or their permitted transferees (collectively, the “Selling Securityholders”) of (i) 71,057 ordinary shares issued to certain service providers in connection with commercial arrangements described in this prospectus and (ii) 23,430 ordinary shares issued to certain non-executive directors and current and former employees pursuant to arrangements described in this prospectus.

The Selling Securityholders may sell the securities covered by this prospectus in a number of different ways and at varying prices. We will not receive any of the proceeds from the sale of the securities by the Selling Securityholders. We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution.”

Our ordinary shares trade on the Nasdaq Stock Market under the symbol “EQOS.” On July 8, 2021, the closing price of the ordinary shares was $6.05 per ordinary share.

An investment in our securities involves risks. See “Risk Factors” beginning on page 6 of this prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is July 9, 2021.

TABLE OF CONTENTS

You should rely only on the information provided in this prospectus and any applicable prospectus supplement. Neither we nor the Selling Securityholders have authorized anyone to provide you with different information. Neither we nor the Selling Securityholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any applicable prospectus supplement is accurate as of any date other than the date of the applicable document. Since the date of this prospectus, our business, financial condition, results of operations and prospects may have changed.

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form F-1 that we filed with the SEC using a “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, offer and sell any combination of the securities described in this prospectus in one or more offerings. The Selling Securityholders may use the shelf registration statement to sell up to an aggregate of 94,487 ordinary shares as described in the section entitled “Plan of Distribution.”

We will not receive any proceeds from the sale of ordinary shares to be offered by the Selling Securityholders pursuant to this prospectus. We will pay the expenses associated with the sale of ordinary shares pursuant to this prospectus. To the extent required, we and the Selling Securityholders, as applicable, will deliver a prospectus supplement with this prospectus to update the information contained in this prospectus. The prospectus supplement may also add, update or change information included in this prospectus. You should read both this prospectus and any applicable prospectus supplement, together with additional information described below under the caption “Where You Can Find More Information.”

No offer of these securities will be made in any jurisdiction where the offer is not permitted.

Unless the context indicates otherwise, the terms “Diginex Limited,” “Eqonex,” “Eqonex Group,” the “Group,” the “Company,” “we,” “us” and “our” refer to Diginex Limited, a Singapore corporation, and its consolidated subsidiaries. References in this prospectus to the “Business Combination” or “Transaction” refer to the consummation of our combination with 8i Enterprises Acquisition Corp. (“8i”), a special purpose acquisition company (“SPAC”), pursuant to that certain Share Exchange Agreement, dated as of July 9, 2019, as amended and supplemented by the Amendment and Joinder to the Share Exchange Agreement, Second Amendment to the Share Exchange Agreement, Third Amendment to the Share Exchange Agreement, and Fourth Amendment to the Share Exchange Agreement (dated October 8, 2019, January 28, 2020, May 6, 2020 and June 24, 2020, respectively), and the Merger Agreement, dated as of October 8, 2019, which transactions were consummated on September 30, 2020.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes statements that express Eqonex’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs or current expectations concerning, among other things, the Business Combination, the benefits and synergies of the Business Combination, including anticipated cost savings, results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which the Company operates. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting Eqonex. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of Eqonex to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties include those generally set forth under “Risk Factors” and elsewhere in this prospectus, including without limitation:

Readers are urged to carefully review and consider the various disclosures made by us in this prospectus and our other filings with the SEC. These filings attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this prospectus speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

FREQUENTLY USED TERMS

Except as otherwise indicated by the context and for purposes of this prospectus only, references in this prospectus to:

RISK FACTORS

An investment in our securities involves a high degree of risk. Before you invest in our securities you should carefully consider those risk factors hereunder and those risk factors that may be included in any applicable prospectus supplement, together with all of the other information included in this prospectus and any prospectus supplement, in evaluating an investment in our securities. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment. Before deciding whether to invest in our securities, you should also refer to the other information contained in this prospectus, including the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Industry

Eqonex has a limited operating history and has incurred operating losses since its inception as it has been investing in the build out of its business lines. Its business lines are nascent, unproven and subject to material legal, regulatory, operational, reputational, tax and other risks in every jurisdiction and are not assured to be profitable.

Eqonex has a limited operating history on which an investor might evaluate its performance. It is therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel and financing sources and lack of revenues, any of which could have a material adverse effect on Eqonex and may force it to reduce or curtail its operations. Eqonex is not currently profitable and has incurred operating losses of $64.6 million, $42.5 million and $17.9 million for the years ended March 31, 2021, 2020 and 2019 respectively. There is no assurance that Eqonex will achieve a return on shareholders’ investments and the likelihood of success must be considered in light of the early stage of its operations. Even if Eqonex accomplishes its objectives, it may not generate positive cash flows or profits.

Furthermore, Eqonex’s business lines are nascent, unproven and subject to material legal, regulatory, operational, reputational, tax and other risks in every jurisdiction, including those applicable due to its use of distributed ledger technology, and are not assured to be profitable. In the year ended March 31, 2021, the business generated revenue, though not at a material level. Eqonex may fail to develop its business lines or produce a return for its investors. It is possible that some of Eqonex’s business lines may be difficult to enter and/or it may become evident that a particular business line is not a productive use of capital or time. This could result in Eqonex modifying its business and focus away from such business lines. For Eqonex’s business lines that have access to client or counterparty assets, the regulatory requirements associated with shutting down such businesses may be costly and expose Eqonex to inquiries, investigations, lawsuits and proceedings by clients, counterparties, other third parties and regulatory and other governmental agencies.

From time to time, Eqonex has and may continue to launch new business lines, offer new products and services within existing business lines or undertake other strategic projects. For example, Eqonex is currently working to launch the investment products business (the “Investment Products Business”). There are substantial risks and uncertainties associated with these efforts and Eqonex could invest significant capital and resources into such efforts. Regulatory requirements can affect whether initiatives are able to be brought to market in a manner that is timely and attractive to Eqonex’s customers. Initial timetables for the development and introduction of new business lines or new products or services and price and profitability targets may not be met. New products or services may need to be initially launched on a limited basis prior to their full launch. In addition, Eqonex’s revenues and costs may fluctuate because new business lines, products and services generally require startup costs while revenues take time to develop, which may adversely impact Eqonex’s results of operations.

If Eqonex is unable to successfully build its business while controlling expenses, its ability to continue in business could depend on the ability to raise sufficient additional capital, obtain sufficient financing and monetize assets. There can be no guarantee that Eqonex will be able to raise funding in sufficient quantity or at acceptable terms to fund the continued development of its business lines.

The occurrence of any of the foregoing risks would have a material adverse effect on Eqonex’s business, financial condition and results of operations.

Our operating results have and will significantly fluctuate due to the highly volatile nature of Digital Assets.

All of our sources of revenue are dependent on Digital Assets and the broader decentralized ledger ecosystem. Due to the highly volatile nature of the decentralized ledger economy and the prices of Digital Assets, our operating results have, and will continue to, fluctuate significantly from quarter to quarter in accordance with market sentiments and movements of the prices of Digital Assets.

Our operating results will continue to fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control, including without limitation:

As a result of these factors, it is difficult for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate, particularly in the short term. In view of the rapidly evolving nature of our business and the distributed ledger technologies, period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. Quarterly and annual expenses reflected in our financial statements may be significantly different from historical or projected rates. Our operating results in one or more future quarters may fall below the expectations of securities analysts and investors. As a result, the trading price of our common stock may increase or decrease significantly.

Our net revenue is substantially dependent on the prices of Digital Assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected.

We generate a large portion of our net revenue from transaction fees on our Exchange in connection with the purchase, sale, and trading of Digital Assets by our customers. Transaction revenue is based on transaction fees that are either a flat fee or a percentage of the value of each transaction. For our retail brokerage product, we also charge a spread to ensure that we are able to settle purchases and sales at the price we quote to customers. We also generate net revenue from our subscription products and services and, while revenue from these products and services have not been significant to date, most of this revenue will also fluctuate based on the price of Digital Assets. As such, any declines in the volume of Digital Asset transactions, the price of Digital Assets, or market liquidity for Digital Assets generally may result in lower net revenue to us.

The price of Digital Assets and associated demand for buying, selling, and trading Digital Assets has historically been subject to significant volatility. The price and trading volume of any Digital Assets is subject to significant uncertainty and volatility, depending on a number of factors, including without limitation:

There is no assurance that any supported Digital Asset will maintain its value or that there will be meaningful levels of trading activities. In the event that the price of Digital Assets or the demand for trading Digital Assets decline, our business, operating results, and financial condition would be adversely affected.

The future development and growth of Digital Assets is subject to a variety of factors that are difficult to predict and evaluate. If Digital Assets do not grow as we expect, our business, operating results, and financial condition could be adversely affected.

Virtual Currencies built on blockchain technology were only introduced in 2008 and remain in the early stages of development. In addition, different Digital Assets are designed for different purposes. Bitcoin, for instance, was designed to serve as a peer-to-peer electronic cash system, while Ethereum was designed to be a smart contract and decentralized application platform. Many other Digital Asset networks—ranging from cloud computing to tokenized securities networks—have only recently been established. The further growth and development of any Digital Assets and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer, and usage of Digital Assets represent a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate, including, without limitation:

Cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results, and financial condition.

Our business involves the collection, storage, processing, and transmission of confidential information, customer, employee, service provider, and other personal data, as well as information required to access customer assets. We have built our reputation on the premise that our platform offers customers a secure way to purchase, store, and transact in Digital Assets. As a result, any actual or perceived security breach of us or our third-party partners may, among others:

Further, any actual or perceived breach or cybersecurity attack directed at other financial institutions or Digital Asset companies, whether or not we are directly impacted, could lead to a general loss of customer confidence in the Digital Assets economy or in the use of technology to conduct financial transactions, which could negatively impact us, including the market perception of the effectiveness of our security measures and technology infrastructure.

An increasing number of organizations, including large merchants, businesses, technology companies, and financial institutions, as well as government institutions, have disclosed breaches of their information security systems, some of which have involved sophisticated and highly targeted attacks, including on their websites, mobile applications, and infrastructure.

Attacks upon systems across a variety of industries, including the Digital Asset industry, are increasing in their frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded, and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper, or illegal access to systems and information (including customers’ personal data and Digital Assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. Certain types of cyberattacks could harm us even if our systems are left undisturbed. For example, attacks may be designed to deceive employees and service providers into releasing control of our systems to a hacker, while others may aim to introduce computer viruses or malware into our systems with a view to stealing confidential or proprietary data. Additionally, certain threats are designed to remain dormant or undetectable until launched against a target and we may not be able to implement adequate preventative measures.

Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security breaches, effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, there can be no assurance that these security measures will provide absolute security or prevent breaches or attacks. We have experienced from time to time, and may experience in the future, breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities. Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems and facilities, as well as those of our customers, partners, and third-party service providers, through various means, including hacking, social engineering, phishing, and attempting to fraudulently induce individuals (including employees, service providers, and our customers) into disclosing usernames, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems and customers’ Digital Assets. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. Certain threat actors may be supported by significant financial and technological resources, making them even more sophisticated and difficult to detect. Further, there has been an increase in such activities as a result of the novel coronavirus, or COVID-19, pandemic. As a result, our costs and the resources we devote to protecting against these advanced threats and their consequences may continue to increase over time.

Although we maintain insurance coverage that we believe is adequate for the current stage of development of our business, it may be insufficient to protect us against all losses and costs stemming from system failures, security breaches, cyberattacks, and other types of unlawful activity, or any resulting disruptions from such events. Outages and disruptions of our platform, including any caused by cyberattacks, may harm our reputation and our business, operating results, and financial condition.

Risks Related to Eqonex’s Business Lines and Industry

One or more of Eqonex’s business lines may not produce sufficient cash flows to fund the capital requirements and expenditures necessary to run the business.

There can be no guarantee that Eqonex’s business lines, individually or together with our other business lines will be able to produce sufficient cash flows to fund the capital requirements and expenditures necessary to run the business. Furthermore, Eqonex may not have or may not be able to obtain the technical skills, expertise, or regulatory approvals needed to successfully or fully develop its business lines. While Eqonex has sought to retain and continues to competitively recruit experts, there may, from time to time, be a scarcity of management, technical, scientific, research and marketing personnel with appropriate training to develop and maintain development of its business lines. In addition, there are significant legal and regulatory considerations that will need to be addressed in order to develop and maintain its business lines and addressing such considerations will require significant time and resources. If Eqonex is not successful in its efforts to fully develop one or more of its business lines in a way that is compliant with all regulatory and legal requirements, and demonstrate to users the utility and value of such business, or there is not sufficient demand for the business line to be commercially viable, one or more business line may not be viable, which could have an adverse effect on the Eqonex’s overall business, financial condition and results of operations.

Digital Assets and distributed ledger technology may not be widely adopted.

Digital Assets are a new asset class that, as of yet, have not been widely adopted, particularly by institutional investors and corporate securities issuers. The majority of Eqonex’s business lines rely, or will rely, on the acceptance and use by such investors and issuers of Digital Assets at a scale to create demand for Eqonex’s products and services sufficient to make Eqonex’s business lines commercially viable. Though Eqonex believes that the anticipated benefits of Digital Assets will create such demand, there can be no assurance that this will occur, or if it does occur that it will be in the near term.

Furthermore, the growth of the distributed ledger industry in general, as well as the protocol technology on which Eqonex will rely, is subject to a high degree of uncertainty. The factors affecting the further development of these protocols and, therefore, Digital Assets, include, without limitation:

The distributed ledger industry as a whole has been characterized by rapid changes and innovations and is constantly evolving. Although it has experienced significant growth in recent years, the slowing or stopping of the development, general acceptance and adoption and usage of distributed ledger technology and Digital Assets may have a materially adverse effect on Eqonex’s business plans.

Eqonex’s business lines may require regulatory licenses and qualifications that Eqonex does not currently have and that may be costly and time-consuming to obtain and, even if obtained, may subsequently be revoked.

Eqonex’s business lines involve certain activities which require regulatory licenses and qualifications such as custody services, broker-dealer services, securities trading, asset management and capital market activities. These activities are subject to material, costly and constraining financial regulation in jurisdictions worldwide. The process of acquiring and maintaining these licenses and qualifications will be costly and time-consuming, will occupy material management attention and is not certain to be successful. Eqonex may not meet the requirements for such licenses or qualifications, including, for example, minimum capital requirements, or may fail to secure discretionary approval of relevant regulatory bodies. A failure or delay in receiving approval for a license or qualification, or approval that is more limited in scope than initially requested, or subsequently limited or rescinded, could have a significant and negative effect on Eqonex, including the risk that a competitor gains a first-mover advantage. The time with which it takes to receive regulatory approval may also be negatively impacted by COVID-19 due to its impact on regulator’s resources and the limited ability for in-person meetings.

In particular, Eqonex is or will be seeking the below licenses.

The law and regulation surrounding the operation of Eqonex’s businesses with respect to Digital Assets is unclear, uncertain, rapidly evolving and not assured to develop in a way that is favorable to Eqonex. The anticipated business activities of Eqonex may cause regulatory bodies to delay, or refuse to issue, licenses and qualifications to Eqonex that it would otherwise receive. For example, a regulatory authority may delay or refuse to issue a broker-dealer license to Eqonex due to concerns about its focus on digital securities as opposed to more traditional securities. There is a risk that Eqonex’s business could be outlawed in jurisdictions in which it seeks to do business, which could materially affect Eqonex’s ability to expand its business and become profitable.

When a decision to enter a jurisdiction is made, Eqonex may utilize local law firms to ensure it is informed of the local regulatory requirements needed to operate therein. Eqonex also maintains regular communications with the regulators in the jurisdictions in which it holds or wishes to seek licenses. In addition, to ensure that Eqonex maintains regulatory compliance, Eqonex has built internal capabilities to monitor regulatory changes as well as obtaining supplementary support from external experts. Eqonex’s business lines have developed a regulatory roadmap to identify additional relevant licenses and qualifications they will need to operate; however, this has been done for only a small number of jurisdictions and significant further investment will be needed. This may result in unplanned costs and/or delayed or cancelled launches into particular jurisdictions.

Eqonex’s senior management originate from multi-jurisdictional regulated financial service institutions. As such, Eqonex’s senior management have accumulated experience in operating within a regulated environment and understand the importance of compliance with regulations, including securities. However, Eqonex’s senior management do not have previous direct experience of dealing with regulatory requirements in relation to Digital Assets.

Eqonex may be unable to establish or maintain partnerships with entities to satisfy regulatory requirements.

To the extent it is unable or not cost-effective to procure the necessary licenses or qualifications to conduct its business in jurisdictions any of Eqonex’s business lines seek to enter, Eqonex plans to partner with existing entities that have such licenses or qualifications to enable it to offer its products and services. However, there can be no assurance that it will be able to do so, or that it will be able to do so now, in the future or at an acceptable price. Prospective partners may (i) not exist, (ii) be unwilling or unable to engage in activities involving distributed ledger technology, (iii) not offer terms that are acceptable to Eqonex, (iv) have a conflict of interest with one or more of Eqonex’s business lines that makes such a partnership impermissible, (v) be otherwise unable or unwilling to partner with Eqonex, or (vi) terminate their relationship with Eqonex. If Eqonex is not able to establish and maintain such partnerships, it may be unable to pursue its business in certain jurisdictions which could have a material adverse effect on its business, financial condition and results of operations.

Where Eqonex does not obtain licenses, and seeks to build partnerships with regulated firms such as Starmark Investment Management Limited in the United Kingdom, which provides regulatory coverage for the Capital Markets Business through an umbrella licensing scheme, a risk exists that a partner may lose its own regulatory status for reasons beyond Eqonex’s control, or a partner may choose to exit from a partnership that it establishes with Eqonex, either of which may leave Eqonex without regulatory cover to provide services within the market the partner supports.

Changes in law or regulation could subject Eqonex to further material, costly and constraining regulation, licensing qualifications and other requirements.

Legal or regulatory changes or interpretations of Eqonex’s existing and planned activities could require the licensing or qualification of Eqonex, or impose costly and contradictory regulatory burdens on Eqonex, outside of management’s current expectations. In addition, jurisdictions that do not currently require licensing or qualifications to conduct Eqonex’s existing and planned activities may adopt regulatory regimes that do require them. For example, in June 2019, the Financial Action Task Force adopted new guidance on the registration and licensing requirements that should be applicable to Digital Assets and entities that provide services for the holders and issuers of Digital Assets, and in November 2020, the Hong Kong Securities and Finance Commission issued a consultation paper regarding the proposed mandatory licensing for spot trading of Digital Assets. Among other things, this guidance urges countries which do not yet have regulatory systems in place to mitigate the issues presented by the potential misuse of Digital Assets to create them rapidly using a risk-based approach. Such additional requirements could cause Eqonex to incur additional expenses, which could materially and adversely affect its business, financial condition and results of operations. In addition, even where activities have been approved and obtained necessary licenses, a change in the legal framework may render such activities illegal or no longer economically sustainable.

Eqonex faces substantial litigation and regulatory risks.

As an enterprise whose material business lines include financial services, Eqonex depends to a significant extent on its relationships with its clients and its reputation for integrity and high-caliber professional services. As a result, if a client is not satisfied with Eqonex’s services or if there are allegations of improper conduct, including improper conduct by any of Eqonex’s partners, by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to Eqonex, or if there is negative publicity and press speculation about Eqonex, whether or not valid, it may harm Eqonex’s reputation and may be more damaging to Eqonex than to businesses in other, non-financial industries.

Many of Eqonex’s business lines are subject to significant regulation and oversight, including periodic examination by regulatory authorities. Eqonex could be the subject of inquiries, investigations, sanctions, cease and desist orders, terminations of licenses or qualifications, lawsuits and proceedings by counterparties, clients, other third parties and regulatory and other governmental agencies, which could lead to increased expenses or reputational damage. Responding to inquiries, investigations, audits, lawsuits and proceedings, regardless of the ultimate outcome of the matter, is time-consuming and expensive and can divert the attention of senior management. The outcome of such proceedings may be difficult to predict or estimate until late in the proceedings, which may last a number of years.

The risks described above may be greater for companies in the distributed ledger industry as it is relatively new and clients, counterparties and regulators are expected to need significant education to understand the mechanics of products and services that rely on distributed ledger technology.

Furthermore, while Eqonex maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts refundable. Even if Eqonex believes a claim is covered by insurance, insurers may dispute Eqonex’s entitlement for a variety of different reasons, which may affect the timing and, if the insurers prevail, the amount of Eqonex’s recovery. Any claims or litigation, even if fully indemnified or insured, could damage Eqonex’s reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

If Eqonex and/or any governmental agency believe that it has accepted capital contributions by, or is otherwise holdings assets of, any person or entity that is acting directly or indirectly in violation of any money laundering or corruption laws, rules, regulations, treaties, sanctions or other restrictions, or on behalf of any suspected terrorist or terrorist organization, suspected drug trafficker or senior foreign political figure(s) suspected in engaging in foreign corruption, Eqonex and/or such governmental agency may “freeze the assets” of such person or entity. Eqonex may also be required to report and remit or transfer those assets to a governmental agency. Any such action may harm Eqonex’s reputation and materially and adversely affect its business, financial condition and results of operations.

Some market participants may oppose the development of distributed ledger-based technology products and services like those central to Eqonex’s business lines, which could adversely affect Eqonex’s ability to do business.

Many participants in the financial industry (including certain regulators) and other industries may oppose the development of products and services that utilize distributed ledger technology. The market participants who may oppose such products and services may include entities with significantly greater resources, including financial resources and political influence, than Eqonex has. The ability of Eqonex to operate and achieve its commercial goals could be adversely affected by any actions of any such market participants that result in additional regulatory requirements or other activities that make it more difficult for Eqonex to operate.

Eqonex may not successfully develop technology to service its business lines.

Eqonex relies heavily on the use of technology that it has created or plans to create by itself or with other third-parties as much of the existing technology for the financial services business was not built to service Digital Assets, which require a unique set of considerations. If Eqonex’s technology solutions do not work as planned, or do not meet or continue to meet the level of quality required by Eqonex, its clients or its regulators, it may make transacting business less efficient, more expensive and potentially prone to errors, thereby reducing the positive effects Eqonex seeks to make available to its clients through the adoption of distributed ledger technology.

Eqonex may not be able to keep pace with rapidly changing technology and client or regulatory requirements.

Eqonex’s success depends on its ability to develop new products and services for its business lines, while improving the performance and cost-effectiveness of its existing products and services, in each case in ways that address current and anticipated client and regulatory requirements. Such success is dependent upon several factors, including functionality, competitive pricing, licensing and integration with existing and emerging technologies. The distributed ledger industry is characterized by rapid technological change, and new technologies could emerge that might enable Eqonex’s competitors to offer products and services with better combinations of price and performance, or that better address client requirements, than Eqonex’s products and services. Competitors may be able to respond more quickly and effectively than Eqonex can to new or changing opportunities, technologies, standards or client requirements.

Due to the significant lead time involved in bringing a new product or service to market, Eqonex is required to make a number of assumptions and estimates regarding the commercial feasibility of new products and services. As a result, it is possible that Eqonex may introduce a new product or service that uses technologies that have been displaced by the time of launch, addresses a market that no longer exists or is smaller than previously thought or otherwise is not competitive at the time of launch. The expenses or losses associated with an unsuccessful product or service development or launch, or a lack of market acceptance of Eqonex’s new products and services, could adversely affect Eqonex’s business, financial condition or results of operations.

Eqonex’s ability to attract new clients and increase revenue from existing clients also depends on its ability to deliver any enhanced or new products and services to its clients in a format where they can be easily and consistently deployed by most or all clients without significant client service. If Eqonex’s clients believe that deploying its products and services would be overly time-consuming, confusing or technically challenging, then Eqonex’s ability to grow its business would be substantially harmed.

Cybersecurity incidents and other systems and technology problems may materially and adversely affect Eqonex.

Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The distributed ledger industry is a particular target for cybersecurity incidents, which may occur through intentional or unintentional acts by individuals or groups having authorized or unauthorized access to Eqonex’s systems or Eqonex’s clients’ or counterparties’ information, or exchanges on which Eqonex trades, all of which may include confidential information. These individuals or groups include employees, third-party service providers, customers and hackers. The information and technology systems used by Eqonex and its service providers are vulnerable to unauthorized access, damage or interruption from, among other things: hacking, ransomware, malware and other computer viruses; denial of service attacks; network failures; computer and telecommunication failures; phishing attacks; infiltration by unauthorized persons; fraud; security breaches; usage errors by their respective professionals; power outages; terrorism; and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes. Recently, the virtual currency exchange industry has become a significant target for fraud. To date, Eqonex has only experienced phishing incidents, none of which have been material. While Eqonex will deploy a range of defenses, it is possible Eqonex could suffer an impact or disruption that could materially and adversely affect Eqonex. The security of the information and technology systems used by Eqonex and its service providers may continue to be subjected to cybersecurity threats that could result in material failures or disruptions in Eqonex’s business. If these systems are compromised, become inoperable for extended periods of time or cease to function properly, Eqonex or a service provider may have to make a significant investment to fix or replace them. As a company whose material business lines include financial services, Eqonex has and will continue to have access to sensitive, confidential information of clients and counterparties and, in certain business lines, access to such clients and counterparties’ assets, which makes the cybersecurity risks identified above more important than they may be to other non-financial services companies.

Concerns about Eqonex’s practices with regard to the collection use, disclosure, or safekeeping of confidential information, personal data, and assets, even if unfounded, could adversely affect its operating results. Furthermore, failures of Eqonex’s cybersecurity system could harm Eqonex’s reputation, subject it to legal claims and otherwise materially and adversely affect Eqonex’s business, financial condition and results of operations.

Eqonex may face the risk that one or more competitors have or will obtain patents covering technology critical to the operation of one or more of its business lines and that it may infringe on the intellectual property rights of others.

If one or more other persons, companies or organizations has or obtains a valid patent covering technology critical to the operation of one or more of Eqonex’s business lines, there can be no guarantee that such an entity would be willing to license such technology at acceptable prices or at all, which could have a material adverse effect on Eqonex’s business, financial condition and results of operations. Moreover, if for any reason Eqonex were to fail to comply with its obligations under an applicable agreement, it may be unable to operate, which would also have a material adverse effect on Eqonex’s business, financial condition and results of operations.

Due to the fundamentally open-source nature of distributed ledger technology, Eqonex may not always be able to determine that it is using or accessing protected information or software. For example, there could be issued patents of which Eqonex is not aware that its products infringe. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may currently be pending applications of which Eqonex is unaware that may later result in issued patents that its products infringe.

Eqonex could expend significant resources defending against patent infringement and other intellectual property right claims, which could require it to divert resources away from operations. Any damages Eqonex is required to pay or injunctions against its continued use of such intellectual property in resolution of such claims may cause a material adverse effect to its business, financial condition and results of operations.

Managing different business lines could present conflicts of interest.

Eqonex has built and continues to develop an ecosystem of products and services. While Eqonex will take steps to prevent or mitigate conflicts of interests, there are certain inherent and potential conflicts of interest in managing different business lines. Due to the broad scope of Eqonex’s current and anticipated business lines, potential conflicts of interest include situations where its services to a particular client, or Eqonex’s own investments or other interests, conflict, or are perceived to conflict, with the interests of another client, as well as situations where one or more of Eqonex’s business lines have access to material non-public information that may not be shared with its other business lines and situations where Eqonex may be an investor in an entity with which it also has an advisory or other relationship. Furthermore, the allocation of investment opportunities among its investors could also present a conflict of interest. In managing these different conflicts, fiduciary duty obligations may require Eqonex to resolve conflicts in favor of clients over itself or other third parties. Employees and executives may also have conflicts of interest in allocating their time and activity between the business lines. Appropriately identifying and dealing with conflicts of interest is complex and difficult, and Eqonex’s reputation could be damaged and the willingness of clients to enter into transactions with Eqonex may be affected if Eqonex fails, or appears to fail, to identify, disclose and deal appropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or regulatory enforcement actions. As a result, failures to appropriately identify and address potential conflicts of interest could materially adversely affect Eqonex’s business, financial condition and results of operations.

The regulation of Digital Assets and distributed ledger technology continues to evolve in every jurisdiction, and regulatory changes or actions may restrict the use of Digital Assets, the operation of distributed ledger technology that supports such Digital Assets and platforms that facilitate the trading of such Digital Assets.

As distributed ledger technology and Digital Assets have grown in popularity and in market size, governments, regulators and self-regulators (including law enforcement and national security agencies) around the world are examining the operations of distributed ledger technology and Digital Assets issuers, users, investors and platforms. To the extent that any government or quasi-governmental agency exerts regulatory authority over the Digital Asset industry in general, the issuance of Digital Assets, and trading and ownership of and transactions involving the purchase and sale or pledge of such Digital Assets, may be adversely affected, which could materially and adversely affect Eqonex’s business, financial condition and results of operations.

The prices of Digital Assets are extremely volatile. Fluctuations in the price of Digital Assets could materially and adversely affect Eqonex’s business.

The prices of Virtual Currencies, such as bitcoin and Ether, and other Digital Assets have historically been subject to dramatic fluctuations and are highly volatile. A decrease in the price of a single Digital Asset may cause volatility in the entire Digital Asset industry. For example, a security breach that affects purchaser or user confidence in bitcoin or ether may affect the industry as a whole. This volatility may adversely affect interest in and demand for the products and services Eqonex currently operates and seeks to offer, which would materially and adversely affect Eqonex’s business, financial condition and results of operations.

Distributed ledger networks, Digital Assets and the exchanges on which such assets are traded are dependent on internet infrastructure and susceptible to system failures, security risks and rapid technological change.

The success of distributed ledger technology-based products and services will depend on the continued development of a stable infrastructure, with the necessary speed, data capacity and security, and complementary products such as high-speed networking equipment for providing reliable internet access and services. Digital Assets have experienced, and are expected to continue to experience, significant growth in the number of users and amount of content. There is no assurance that the relevant public infrastructure will continue to be able to support the demands placed on it by this continued growth or that the performance or reliability of distributed ledger technology will not be adversely affected by this continued growth. There is also no assurance that the infrastructure or complementary products or services necessary to make Digital Assets a viable product for their intended use will be developed in a timely manner, or that such development will not result in the requirement of incurring substantial costs to adapt to changing technologies. The failure of these technologies or platforms or their development could materially and adversely affect Eqonex’s business, financial condition and results of operation.

Furthermore, Digital Assets are created, issued, transmitted, and stored according to protocols run by nodes within the blockchain network. It is possible these protocols have undiscovered flaws or could be subject to network scale attacks which could result in losses to Eqonex. Finally, advancements in quantum computing could break the cryptographic rules of protocols which support certain Digital Assets.

Malicious actors could manipulate distributed ledger networks and smart contract technology upon which Digital Assets rely and increase the vulnerability of the distributed ledger networks.

If a malicious actor, including a state-sponsored actor, is able to hack or otherwise exert unilateral control over a particular distributed ledger network, or the Digital Assets on such a network, that actor could attempt to divert assets from that distributed ledger or otherwise prevent the confirmation of transactions recorded on that distributed ledger. Such an event could materially and adversely affect Eqonex’s business. Digital Assets have been the subject of attempted manipulation by hackers to use them for malicious purposes. For example, misuses could occur if a malicious actor obtains a majority of the processing power controlling the Digital Asset validating activities and altering the distributed ledger on which Digital Asset transactions rely. Moreover, if the award for solving transaction blocks for a particular Digital Asset declines, and transaction fees are not sufficiently high, the incentive to continue validating distributed ledger transactions would decrease and could lead to a stoppage of validation activities. The collective processing power of that distributed ledger would be reduced, which would adversely affect the confirmation process for transactions by decreasing the speed of the adaptation and adjustment in the difficulty for transaction block solutions. Such slower adjustments would make the distributed ledger network more vulnerable to malicious actors’ obtaining control of the processing power over distributed ledger network processing.

The network contributors for certain Digital Assets could propose amendments to the network protocols and software for Digital Assets that, if accepted and authorized by the network for the Digital Assets, could adversely affect Eqonex.

The networks for certain Digital Assets are based on a protocol governing the peer-to-peer interactions between computers connected to each other within that network. The development team for a network (if any) might propose and implement amendments to a network’s source code through software upgrades altering the original protocol, including fundamental ideas such as the irreversibility of transactions and limitations on the validation of blockchain software distributed ledgers. Such changes to original protocols and software could materially and adversely affect Eqonex’s business.

Banks or other third-party services providers may decline to provide services to companies engaged in distributed ledger-related businesses, including Eqonex.

A number of companies that provide distributed ledger technology-related products and services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, a number of such companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to distributed ledger technology-related companies, including Eqonex, for a number of reasons, such as perceived compliance risks or costs. Similarly, continued general banking difficulties may decrease the utility or value of Digital Assets or harm public perception of those assets. In addition to banks, other third-party service providers including accountants, lawyers and insurance providers may also decline to provide services to companies engaged in distributed ledger technology-related businesses because of the perceived risk profile associated with such businesses or the lack of regulatory certainty. The failure of distributed ledger technology-related businesses to be banked or obtain services could materially and adversely affect Eqonex’s business, financial condition and results of operation.

The extent to which Digital Assets are used to fund criminal or terrorist enterprises or launder the proceeds of illegal activities could materially impact Eqonex’s business.

The potential, or perceived potential, for anonymity in transfers of Digital Assets, as well as the decentralized nature of distributed ledger networks, has led some terrorist groups and other criminals to solicit certain Digital Assets for capital raising purposes. As Digital Assets have grown in both popularity and market size, government authorities have been examining the operations of distributed ledger technology and Digital Assets, their users, investors and exchanges, concerning the use of Digital Assets for the purpose of laundering the proceeds of illegal activities or funding criminal or terrorist enterprises. In addition to the current market, new distributed ledger networks or similar technologies may be developed to provide more anonymity and less traceability.

The use of Digital Assets for illegal purposes, or the perception of such use, even if such use does not involve Eqonex’s services or products, could result in significant damage to Eqonex’s reputation, damage to the reputation of Digital Assets and a loss of confidence in the services provided by the distributed ledger technology community as a whole.

Political or economic crises may motivate large-scale sales of Digital Assets, which would result in a reduction in values and materially and adversely affect Eqonex.

As an alternative to fiat currencies that are backed by central governments, Virtual Currencies, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. For example, political or economic crises could motivate large-scale acquisitions or sales of Digital Assets either globally, regionally or locally. Large-scale sales of certain Digital Assets could result in a reduction in their value and could materially and adversely affect Eqonex’s business, financial condition and results of operations.

Economic, political and market conditions, both in Hong Kong, Singapore and worldwide, can adversely affect Eqonex’s business, results of operations and financial condition.

Eqonex’s business is influenced by a range of factors that are beyond its control and that it has no comparative advantage in forecasting. These include, among others:

Macroeconomic developments, including the impact of the United Kingdom’s vote to exit the European Union, known as Brexit, evolving trade policies between the U.S. and international trade partners, including the People’s Republic of China (the “PRC”) or the occurrence of similar events in other countries that lead to uncertainty or instability in economic, political or market conditions could negatively affect Eqonex’s business, operating results and financial conditions and/or any of its third-party service providers. Furthermore, any general weakening of, and related declining confidence in, the global economy or the curtailment of government or corporate spending could cause potential clients to delay, decrease or cancel purchases of Eqonex’s products and services and the adoption of distributed ledger technology in general.

While Eqonex shifted its incorporation from Hong Kong to Singapore in connection with the Business Combination, a material element of Eqonex’s operations is expected to remain in Hong Kong. Hong Kong has been governed by the basic law, which guarantees a high degree of autonomy from the PRC in certain matters until 2047. If the PRC were to exert its authority to alter the economic, political or legal structures or the existing social policy of Hong Kong, investor and business confidence in Hong Kong could be negatively affected, which in turn could negatively affect markets and business performance and have an adverse effect on Eqonex. There is uncertainty as to the political, economic and social status of Hong Kong. Hong Kong’s evolving relationship with the PRC’s central government in Beijing has been a source of political unrest that has periodically resulted in large-scale protests, including those that occurred in 2019 in response to an extradition bill proposed by the Hong Kong government, which was subsequently waived. These protests created disruptions for businesses operating in Hong Kong and have negatively impacted the overall economy however, the frequency and intensity of protests have declined since the passing of the Security Law.

Significant operations of Eqonex’s business are currently located in Hong Kong. It is possible that Eqonex may decide to relocate certain operations from Hong Kong to Singapore or another jurisdiction in the future when COVID 19 related travel restrictions are relaxed. In doing so, it is also possible that Eqonex may not be able to retain certain expert staff. If Eqonex loses the services of any member of management or other such key personnel as a result of relocating, it may not be able to find suitable or qualified replacements and may incur additional expenses to recruit and train new staff, which could materially disrupt Eqonex’s business and growth.

Eqonex’s business lines and its acceptance of currencies other than the U.S. Dollar will subject it to currency risk.

Nearly all of Eqonex’s business occurs, and is anticipated to occur in the medium term, outside of the U.S. As a result, some of Eqonex’s expenses are, and are anticipated to be, denominated in currencies other than the U.S. dollar. Because Eqonex’s financial statements are presented in U.S. dollars, it must translate non-U.S. dollar denominated revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. These fluctuations may materially impact the translation of Eqonex’s non-U.S. results of operations and financial condition.

Furthermore, increases or decreases in the value of the currencies Eqonex receives may affect its operating results and the value of its assets and liabilities.

Eqonex may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as terrorism, that could disrupt the business operations, and the business continuity and disaster recovery plans may not adequately protect it from a serious disaster.

Natural disasters or other catastrophic events may also cause damage or disruption to operations, international commerce, and the global economy, and could have an adverse effect on business, operating results, and financial condition. Business operations are subject to interruption by natural disasters, fire, power shortages, and other events beyond Eqonex’s control. In addition, Eqonex’s global operations expose it to risks associated with public health crises, such as pandemics and epidemics, which could harm the business and cause operating results to suffer. For example, the ongoing effects of the COVID-19 pandemic and/or the precautionary measures that we have adopted have resulted, and could continue to result, in difficulties or changes to customer support, or create operational or other challenges, any of which could adversely impact business and operating results. Further, acts of terrorism, labor activism or unrest, and other geo-political unrest could cause disruptions in the business or the businesses of partners or the economy as a whole. In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, Eqonex may be unable to continue operations and may endure system interruptions, reputational harm, delays in development of Eqonex’s platform(s), lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on future operating results.

The COVID-19 pandemic could have an adverse effect on business, operating results, and financial condition.

Eqonex is responding to the global outbreak of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments to protect the population. During 2020, Hong Kong, Singapore and governments around the world took a number of actions, including prohibiting residents from free travel, encouraging employees of enterprises to work from home, cancelling public activities, and closing corporate offices. In addition, as the outbreak continues to threaten global economies, it may continue to cause significant market volatility and declines in general economic activities. Some employees and service providers have transitioned to work-from-home and Eqonex is operating as a remote-first company in certain jurisdictions. This subjects Eqonex to heightened operational risks. For example, technologies in employees’ and service providers’ homes may not be as robust as in Eqonex’s offices and could cause the networks, information systems, applications, and other tools available to employees and service providers to be more limited or less reliable than in the offices. Further, the security systems in place at employees’ and service providers’ homes may be less secure than those used in the offices, and while Eqonex has implemented technical and administrative safeguards to help protect its systems as its employees and service providers work from home, Eqonex may be subject to increased cybersecurity risk, which could expose it to risks of data or financial loss, and could disrupt its business operations. There is no guarantee that the data security and privacy safeguards Eqonex has put in place will be completely effective or that it will not encounter risks associated with employees and service providers accessing company data and systems remotely. Eqonex also faces challenges due to the need to operate with the remote workforce and are addressing those challenges to minimize the impact on its ability to operate.

The transition to a remote-first company in certain jurisdictions may make it more difficult for Eqonex to preserve its corporate culture and its employees may have decreased opportunities to collaborate in meaningful ways. Further, Eqonex cannot guarantee that its transition to becoming a remote-first company in certain jurisdictions will not have a negative impact on employee morale and productivity. Any failure to preserve the corporate culture and foster collaboration could harm Eqonex’s future success, including its ability to retain and recruit personnel, innovate and operate effectively, and execute on its business strategy.

In addition, the continued spread of COVID-19 and the imposition of related public health measures have resulted in, and is expected to continue to result in, increased volatility and uncertainty in the Digital Assets economy. Eqonex also relies on third party service providers to perform certain functions. Any disruptions to a service providers’ business operations resulting from business restrictions, quarantines, or restrictions on the ability of personnel to perform their jobs could have an adverse impact on the service providers’ ability to provide services to Eqonex. The continued spread of COVID-19 and efforts to contain the virus could adversely impact Eqonex’s strategic business plans and growth strategy, reduce demand for its products and services, reduce the availability and productivity of its employees, service providers, and third-party resources, cause it to experience an increase in costs due to emergency measures, and otherwise adversely impact the business.

Risks Related to the Exchange Business

Regulatory authorities may never permit the Exchange to become operational.

The Exchange is operating under an exemption to provide payment services pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019. The exemption will remain in effect until MAS make a decision on the license application. If the license is not granted, the Exchange will no longer be able to operate. Singapore and numerous other regulatory authorities may need to permit the Exchange to maintain and expand operations. If any regulatory authority objected to the Exchange or to certain aspects of it, such regulatory authority could prevent the Exchange from ever becoming operational, or continuing to operate, in that jurisdiction. The regulatory landscape that Eqonex needs to navigate is complex, extensive and changing, and Eqonex may never be able to do so successfully.

The development of the Exchange poses financial, technological and regulatory challenges and Eqonex may not be able to successfully develop, market and launch the Exchange.

The Exchange Business intends to ultimately cover two distinct regulatory profiles, Virtual Currency and Digital Securities, with the Virtual Currency profile, already launched and operating under the Exemption. The development of the Exchange requires significant capital funding, expertise on the part of Eqonex’s management and time and effort in order to be successful. Eqonex may have to make changes to the specifications for any number of reasons or it may be unable to develop the Exchange in a way that realizes those specifications or any form of a functioning network. The Exchange, even if successfully developed and maintained, may not meet investor expectations. For example, there can be no assurance that the Exchange will provide less expensive or more efficient trading than is possible on currently available trading platforms for traditional assets (or even other Digital Asset exchanges). Furthermore, the Exchange may experience malfunctions or otherwise fail to be adequately developed or maintained, which may negatively impact the Exchange and the assets being traded on the Exchange.

Regulatory authorities may not permit the Exchange to list certain products.

Eqonex has, and intends to continue to develop multiple products and to make such products available on the Exchange. Regulatory authorities may not permit the Exchange to list certain products or may restrict the markets or demographics to which products can be offered (e.g. to restrict retail customer involvement). Such restrictions may adversely impact future revenues. Additionally, should products be inadvertently offered in jurisdictions where regulatory approval is required and where no such approval has been sought or received, regulatory action may be taken against Eqonex.

Eqonex’s offer of products on its exchange may be subject to substantial risk.

Digital Assets spot, futures, derivatives and securities trading are or may be deemed regulated financial instruments or fall under other regulatory frameworks in many jurisdictions. Eqonex may not have applied for appropriate license and may not be able to offer, or continue offering, such products.

Due to their novel and specialized nature, Digital Assets futures, derivatives and securities substantially increase the risk of losses for Eqonex and for Eqonex’s clients and customers which in turn increases the risk of litigation against Eqonex. Eqonex’s risk mitigation strategies, if any, may not be adequate or sufficient.

Eqonex’s exchange operations may be subject to credit risk.

Credit risk is the risk that a borrower or a counterparty will be unable or unwilling to satisfy payment or delivery obligations when due and the related risk that the transaction may not happen, or the value of a transaction may decline because of concerns about the borrower’s or the counterparty’s ability to make such payments. In addition to the risk of a borrower declining to perform on an obligation under the loan, Eqonex is exposed to the risk that third parties, including transaction counterparties, exchanges, custodians, administrators and other financial intermediaries that may owe Eqonex money or other assets will not perform their obligations. Any of these parties might default on their obligations to Eqonex because of bankruptcy, lack of liquidity, dispute, operational failure or other reasons, in which event Eqonex may suffer unexpected losses. In addition to the credit risk on its own exchange, to the extent Eqonex relies on third parties that specialize in Digital Asset futures and derivatives, it is exposed to the credit risk of those third parties.

The Exchange may not be widely adopted and may have limited users.

It is possible that the Exchange will not be used by a large number of market participants or that there will be limited public interest in the continued creation and development of Digital Asset exchanges. Such a lack of use or interest could negatively impact the volumes of the Exchange.

Alternative Digital Asset exchanges may be established that compete with or are more widely used than the Exchange.

It is possible that Digital Asset exchanges exist or could be established that utilize the same or similar protocols as those underlying the Exchange or that facilitate services that are materially similar to the services provided by the Exchange. The Exchange may face competition from any such alternative networks, which could negatively impact the Exchange and have a material adverse effect on Eqonex’s business, financial condition and results of operations.

There are already multiple Digital Asset exchanges that the Exchange will compete with. If the Exchange is unable to offer features that differentiate it from such competitors, or such competitors create pricing pressure that results in lower-than-anticipated revenues, the Exchange may not be viable, which could have a material adverse effect on Eqonex’s business, financial condition and results of operations.

The Exchange, and any distributed ledger technology on which they rely, may be the target of cyber-attacks or may contain exploitable flaws in its underlying code, which may result in security breaches and the loss or theft of Digital Assets that trade on the Exchange. If such attacks occur or security is compromised, this could expose Eqonex to liability and reputational harm, could seriously curtail the utilization of Digital Assets, cause a decline in the market price of the affected Digital Assets and result in claims against Eqonex.

The Exchange, the structural foundation, and the software applications and other interfaces or applications upon which it relies or will rely (including distributed ledger technology), are unproven, and there can be no assurances that the Exchange and the creation, transfer or storage of Digital Assets will be uninterrupted or fully secure, which may result in impermissible transfers, a complete loss of investors’ Digital Assets on those systems or an unwillingness of market participants to access, adopt and utilize Digital Assets or the Exchange. Further, the Exchange and any technology, including distributed ledger technology, on which they rely may also be the target of cyber-attacks seeking to identify and exploit weaknesses, which may result in the loss or theft of Digital Assets, which, in turn, may materially and adversely affect the adoption and success of the Exchange and Eqonex. Any of these risks could have a material adverse effect on Eqonex’s business, financial condition and results of operations.

The unregulated nature and lack of transparency surrounding the operations of some Digital Asset exchanges may cause the marketplace to lose confidence in such exchanges.

Digital Asset exchanges are relatively new and, in some cases, unregulated. Furthermore, while some exchanges provide information regarding their ownership structure, management teams, corporate practices and regulatory compliance, many other exchanges do not. As a result, the marketplace may lose confidence in the less transparent or unregulated exchanges, including prominent exchanges that handle a significant volume of trading in Digital Assets. In recent years, there have been a number of Digital Asset exchanges that have closed because of fraud, business failure or security breaches. Additionally, larger Digital Asset exchanges have been targets for hackers and malware and may be targets of regulatory enforcement actions. A lack of stability in these exchange markets and the temporary or permanent closure of such exchanges may reduce confidence in the Digital Asset marketplace in general and result in greater volatility in the price of Digital Assets. These potential consequences could materially and adversely affect the adoption and success of the Exchange.

Eqonex’s utility token, EQO, may not drive interest to the exchange and the price of the coin in secondary trading may perform poorly.

EQO may not be successful in driving additional interest and volume to the Exchange and demand for the coin in secondary trading may result in the price of EQO performing poorly, resulting in losses for some owners of EQO and cause reputational damage for Eqonex. Utility tokens, such as EQO, are each unique in their structure and benefits that accrue to owners of the token.

Eqonex believes, based on legal advice, that EQO is not considered a financial security. However, regulators may take a view in the future that EQO is considered a financial security, which will impact the way the token is able to be issued and traded on the Exchange. See Note 40 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Risks Related to Digivault

Development of the Custody Business poses financial, technological and regulatory challenges and Eqonex may not be able to successfully develop and market the custody solutions.

The continued development of the custody solutions, known as Kelvin and Helios, which have now both launched, requires significant capital funding, expertise on the part of Eqonex’s management and time and effort in order to be successful. Digivault may have to make changes to the specifications of the custody solutions for any number of reasons and it may be unable to further develop the service in a way that realizes those specifications. The custody solutions, even if successfully developed and maintained, may not meet investor expectations. For example, there can be no assurance that the custody solutions will provide less expensive or more efficient services than are currently available for traditional assets (or even other Digital Assets). Furthermore, the custody solutions may experience malfunctions or otherwise fail to be adequately developed or maintained, which may negatively impact the Digital Assets being held.

There can be no assurance that Digivault by itself or together with Eqonex’s other business lines will be able to produce sufficient cash flows to fund the ongoing capital requirements and expenditures necessary to run the custody solutions. Digivault may not have or may not be able to obtain the technical skills, expertise, or regulatory approvals needed to successfully further develop the custody solutions. While Eqonex has sought to retain and continues to competitively recruit experts, there may, from time to time, be a scarcity of management, technical, scientific, research and marketing personnel with appropriate training to develop and maintain the custody solutions. In addition, there are significant legal and regulatory considerations that will need to be addressed in order to develop and maintain the custody solutions, and addressing such considerations will require significant time and resources. Despite launching both Kelvin and Helios, there can be no assurance that Digivault will be able to develop the custody solutions in such a way as to fully achieve its goals and satisfy the complex regulatory requirements that are applicable to them and acquire the necessary licenses to operate. If Eqonex is not successful in its efforts to develop and maintain the custody solutions in ways that are compliant with all regulatory and legal requirements, and demonstrate to users the utility and value of such a service, or if there is not sufficient demand for the custody solutions for them to be commercially viable, Digivault may not be feasible, which could have a material adverse effect on Eqonex’s business, financial condition and results of operations.

Numerous regulatory authorities may never permit the custody solutions to become operational.

Numerous regulatory authorities may need to permit the custody solutions to operate in different jurisdictions. If any regulatory authority objected to the custody solutions or to certain aspects of them, such regulatory authority could prevent them from ever becoming operational, or continuing to operate, in that jurisdiction. The regulatory landscape that Eqonex needs to navigate in order to run a viable Custody Business is complex, extensive and changing and Digivault may never be able to do so successfully. Any such regulatory issues including fines or injunctions from regulators, could have a material adverse impact on Eqonex’s business, financial condition and results of operations.

The custody solutions may not be widely adopted and may have limited users.

It is possible that the custody solutions will not be used by a large number of holders of Digital Assets or that there will be limited public interest in the continued creation and development of Digital Asset custody services. Such a lack of use or interest may result in insufficient demand for the custody solutions to be commercially viable, which could have an adverse effect on Eqonex’s business, financial condition and results of operation.

The custody solutions, and any distributed ledger technology on which they rely, may be the target of cyber-attacks or may contain exploitable flaws in their underlying code, which may result in security breaches and the loss or theft of Digital Assets that are held or deposited. If such attacks occur or Digivault’s security is compromised, Digivault could be exposed to liability and reputational harm, and such attacks could seriously curtail the utilization of Digital Assets and cause a decline in the market price of the affected Digital Assets which could result in claims against Digivault.

The custody solutions, their structural foundation, and the software applications and other interfaces or applications upon which they rely (including distributed ledger technology), are unproven, and there can be no assurances that the custody solutions are or will be fully secure, which may result in a complete loss of investors’ Digital Assets and an unwillingness of market participants to access, adopt and utilize Digital Assets or the custody solutions. Examples of the above include, but are not limited to:

While Digivault has taken, and will continue to take, steps to ensure that the custody solutions are secure and protected against such incidents, no assurance can be given that the custody solutions are or will be fully secure and protected from attack, and any failure in this regard could materially and adversely affect Eqonex’s business, financial condition and results of operations.

There can be no guarantee that Digivault will be able to acquire or maintain necessary insurance coverage or that it will be able to offer insurance to its clients.

The failure of Digivault to secure or maintain insurance cover may have an adverse effect on its ability to attract clients and hence reduce its revenue generating abilities.

Risks Related to the Asset Management Business

Changes in the value of Eqonex’s assets under management (“AUM”) may cause revenue and earnings to decline.

The asset management business (the “Asset Management Business”) revenue is expected to be primarily composed of fees based on a percentage of the value of AUM and, in some cases, performance fees which are normally expressed as a percentage of returns to the client. Numerous factors, including price movements in the assets in the markets in which Eqonex manages assets, could cause:

The occurrence of any of these events may cause Eqonex’s AUM, revenue and earnings, if any, to decline and may negatively impact the success of the Asset Management Business.

The Asset Management Business is highly regulated and regulators may apply or interpret these regulations with respect to Digital Assets in novel and unexpected ways.

Asset management is a highly regulated business subject to numerous legal and regulatory requirements. These regulations are intended to protect customers whose assets are under management and, as such, may limit Eqonex’s ability to develop, expand or carry out its asset management business in the intended manner. Furthermore, the funds in which Eqonex invests will be subject to regulatory regimes that are not clear or are not yet developed. To the extent that there is any ambiguity as to whether an asset under the management of a fund in which Eqonex invests is deemed a security, the applicability of many regulations to such fund, will not be clear and could indirectly adversely affect the Asset Management Business. Furthermore, Eqonex must address conflicts of interest, as well as the perception of conflicts of interest, between itself (including the other business lines of Eqonex) and its clients and funds. In particular, Eqonex will be required to act in the best interest of its clients and funds, which may include allocating opportunities to its clients and funds rather than to its own principal business lines. In addition, regulators have substantial discretion in determining what is in the best interest of a client of a fund and have increased their scrutiny of potential conflicts. Appropriately dealing with conflicts of interest is complex and if Eqonex fails, or appears to fail, to deal appropriately with any of these conflicts of interest, it may face reputational damage, litigation, regulatory proceedings, or penalties, fines or sanctions, any of which may have a material and negative impact on Eqonex’s business, financial condition and results of operations. In addition, to the extent that Eqonex is required to obtain client or investor consent in connection with any potential conflict, any failure or delay in obtaining such consent may have a material and negative impact on Eqonex’s ability to take advantage of certain business opportunities.

The Asset Management Business’ investments in other investment vehicles may be subject to substantial risk.

On behalf of itself and its managed funds, the Asset Management Business may make direct or indirect investments in pooled investment vehicles, which may expose the Asset Management Business to all of the risks of those vehicles’ investments. The values of pooled investment vehicles are subject to change as the values of their respective assets fluctuate. To the extent that the Asset Management Business invests in managed pooled investment vehicles, the performance of the Asset Management Business’ investments in such vehicles will be dependent on the investment and research abilities of persons other than the Asset Management Business. The securities offered by such vehicles typically are not registered under applicable securities laws and are offered in transactions that are exempt from registration.

The Digital Assets funds in which the Asset Management Business invests are by their nature small and unproven.

Given that the Asset Management Business may invest in funds with little or no track record, there is a risk that such funds may not generate the returns anticipated by the Asset Management Business and may even result in the complete loss of the investment allocated to such funds.

Risks Related to the Trading Business

Short sales of Digital Assets may be especially risky.

Eqonex may make short sales of Digital Assets. In such a short sale, Eqonex would sell Digital Assets that it does not own, typically borrowed from a third party. Borrowing and lending markets for Digital Assets are currently in an early stage and may take time to become as developed and stable as those for securities or other established assets, which exposes Eqonex to risks.

Because Eqonex would remain liable to return any Digital Assets that it borrowed, Eqonex would be required to purchase an equivalent amount of Digital Assets prior to the date on which delivery to the third party is required. Eqonex will incur a loss as a result of a short sale if the price of the Digital Assets increases between the date of the short sale and the date on which Eqonex replaces the borrowed Digital Assets. The amount of any loss will be increased by the amount of the premium or interest that Eqonex may be required to pay in connection with a short sale. Short selling exposes Eqonex to unlimited risk with respect to the borrowed Digital Assets because of the lack of an upper limit on the prices to which those Digital Assets can rise. Purchasing Digital Assets to close out a short position can itself cause the price of the Digital Assets to rise further, thereby exacerbating any losses. Under adverse market conditions, Eqonex may have difficulty purchasing Digital Assets to meet its short sale delivery obligations, and may have to sell other Digital Assets to raise the necessary capital at a time when it would be unfavorable to do so. If a request for return of borrowed assets occurs at a time when other short sellers are receiving similar requests, a “short squeeze” can occur, and Eqonex may be compelled to replace borrowed Digital Assets previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess of the proceeds received in originally selling the assets short. In addition, Eqonex may have difficulty purchasing assets to meet its delivery obligations if the assets sold short by Eqonex have a limited daily trading volume or limited market capitalization. Short sales by Eqonex and “short” derivative positions are forms of investment leverage, and the amount of Eqonex’s potential loss is theoretically unlimited.

Eqonex’s trades in options may be subject to substantial risk.

Eqonex may trade in options on Digital or non-Digital Assets. Purchasing and writing put and call options are highly specialized activities that entail greater-than-ordinary investment risks. An investment in an option may be subject to greater fluctuation than an investment in the underlying asset. An uncovered call writer’s loss is theoretically unlimited. The ability to trade in or exercise options may be restricted in the event that trading in the underlying asset becomes restricted. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of over-the-counter options (options not traded on exchanges) are generally established through negotiation with the other party to the option contract. While this type of arrangement allows greater flexibility to tailor an option, over-the-counter options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded. As of this writing, the availability of exchange-traded and over-the-counter options on Digital Assets is limited, so terms may be unfavorable in comparison to those available for more firmly established types of options.

Eqonex’s trades in derivatives may be subject to substantial risk.

Eqonex may trade in derivatives of Digital Assets. Derivatives are financial instruments, the value of which is based on the value of one or more reference assets or indicators, such as a security, currency, interest rate or index. Eqonex’s use of derivatives may involve risks different from, and possibly greater than, the risks associated with investing directly in securities and other more traditional investments. Moreover, although the value of a derivative is based on an underlying asset or indicator, a derivative typically does not carry the same rights as would be the case if Eqonex invested directly in the underlying asset.

Derivatives are subject to a number of risks, such as potential changes in value in response to market developments, and the risk that a derivative transaction may not have the effect that Eqonex anticipated. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of a derivative may not achieve the desired correlation with the underlying asset or indicator. Derivative transactions may be highly volatile, and Eqonex could lose more than the amount it invests. Moreover, derivative transactions permit Eqonex to create investment leverage, which may exacerbate any losses on these positions. A liquid secondary market may not always exist for Eqonex’s derivative positions at any time, and Eqonex may not be able to initiate or liquidate a derivative position at an advantageous time or price, which may result in significant losses.

In addition, derivative products are specialized instruments that require investment techniques and risk analyses that differ from those associated with direct investments. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself. In particular, the complexity of derivatives requires the maintenance of adequate controls to monitor the transactions entered into and the ability to assess the risk that a derivative adds to Eqonex’s portfolio.

Eqonex’s trades in currencies may be subject to substantial risk.

Eqonex may trade currencies in the interbank market, a global network of commercial banking institutions that make markets in foreign currencies. There is no limitation on daily price moves of contracts traded through banks and dealers. Banks and dealers may require Eqonex to deposit margin with respect to such trading. Banks and dealers are not required to continue to make markets in currencies.

There have been periods during which certain banks have refused to quote prices for currency contracts or have quoted prices with an unusually wide bid-ask spread. Arrangements to trade currency contracts may be made with only one or a few banks, and liquidity problems might therefore be greater than if such arrangements were made with numerous banks. The imposition of credit controls by government authorities might limit such trading to less than that which Eqonex would otherwise undertake. In respect of such trading, Eqonex is subject to the risk of bank failure or the inability of, or refusal by, a bank to perform with respect to such contracts. Most, if not all, of these contracts are directly affected by changes in interest rates. The effects of governmental intervention may also be particularly significant at certain times in the interbank market.

Eqonex’s trading transactions may be subject to credit risk.

Credit risk is the risk that an issuer of a security or a counterparty will be unable or unwilling to satisfy payment or delivery obligations when due and the related risk that the value of a trade may decline because of concerns about the issuer’s or the counterparty’s ability to make such payments. In addition to the risk of an issuer of a security in which Eqonex trades failing or declining to perform on an obligation under the security, Eqonex is exposed to the risk that third parties, including trading counterparties, exchanges, custodians, administrators and other financial intermediaries that may owe Eqonex money, securities or other assets will not perform their obligations. Any of these parties might default on their obligations to Eqonex because of bankruptcy, lack of liquidity, dispute, operational failure or other reasons, in which event Eqonex may lose all or substantially all of the value of any such trading transaction. To the extent Eqonex trades on exchanges that specialize in Digital Asset futures and derivatives, it is exposed to the credit risk of that exchange.

Eqonex is not obligated to hedge its exposures, and, if it does, hedging transactions may be ineffective or reduce Eqonex’s overall performance.

Eqonex is not obligated to, and often times may not, hedge its exposures. However, from time to time, it may use a variety of financial instruments and derivatives, such as options, swaps and forward contracts, for risk management purposes, including to: protect against possible changes in the market value of Eqonex’s investment or trading assets resulting from fluctuations in the securities markets and changes in interest rates; protect Eqonex’s unrealized gains in the value of its investments or trading assets; facilitate the sale of any such assets; enhance or preserve returns, spreads or gains on any trade or investment; hedge the interest-rate or currency-exchange risk on any of Eqonex’s liabilities or assets; protect against any increase in the price of any assets that Eqonex anticipates purchasing at a later date; or to any other end that Eqonex deems appropriate. The success of any hedging activities by Eqonex will depend, in part, on its ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the assets being hedged. Since the characteristics of many assets change as markets change or time passes, the success of Eqonex’s hedging strategy will also be subject to its ability to continually recalculate, readjust and execute hedges in an efficient and timely manner. In addition, while Eqonex may enter into hedging transactions to seek to reduce risk, such transactions may actually increase risk or result in a poorer overall performance for Eqonex than if it had not engaged in such hedging transactions.

Eqonex may make, or otherwise be subject to, trade errors.

Errors may occur with respect to trades executed by Access Trading or by or on behalf of Eqonex. Trade errors can result from a variety of situations, including, for example, when the wrong asset is purchased or sold or when the wrong quantity is purchased or sold. Trade errors frequently result in losses, which could be material. To the extent that an error is caused by a third party, Eqonex may seek to recover any losses associated with the error, although there may be contractual or other limitations on any third party’s liability with respect to such error.

Eqonex’s trading orders may not be executed in a timely matter.

Eqonex’s trading and risk management strategies may depend on the ability to establish and maintain an overall market position in a combination of financial instruments. Eqonex’s trading orders may not be executed in a timely and efficient manner because of various circumstances, including, for example, trading volume surges or systems failures attributable to Eqonex or its counterparties, brokers, dealers, agents or other service providers. In such an event, Eqonex might only be able to acquire or dispose of some, but not all, of the components of its positions, or if the overall positions were to need adjustments, Eqonex might not be able to make such adjustments. As a result, Eqonex would not be able to achieve its desired market position, which may result in a loss. In addition, Eqonex can be expected to rely heavily on electronic execution systems (and may rely on new systems and technology in the future), which may be subject to certain systemic limitations or mistakes, causing the interruption of trading orders made by Eqonex.

Eqonex is exposed to losses due to lack of perfect information.

As a facilitation trader in Digital Assets, Eqonex may trade in a variety of assets with a number of different counterparties. Eqonex may at times trade with others who have information that is more accurate or complete than Eqonex’s, and as a result Eqonex may accumulate unfavorable positions at unfavorable prices preceding large price movements in a given instrument. If the frequency or magnitude of these events increases, Eqonex’s losses would likely increase correspondingly, which could have a material and adverse effect on Eqonex.

Access Trading is exposed to failure of technology partners.

Access Trading relies on other technology providers, namely FIS and Itiviti, to provide certain services as part of the product. Should these services no longer be available, for whatever reason, Access Trading may no longer be able to service those customers under contract.

Risks Related to the Capital Markets Business

Eqonex may be unable to establish issuer and investor networks necessary to successfully execute offerings.

The Capital Markets Business has and is being developed to assist issuers seeking to access global capital markets through issuing digital securities. To this end, the Capital Markets Business will advise, issue and distribute offerings of digital securities from its clients to investors.

To be successful, Eqonex will have to source offerings from clients and there can be no assurance that it will be able to do so. Thus far, there have been limited issuers willing to explore the possibility of making use of distributed ledger technology for their securities offerings. Furthermore, it will be important that the offerings Eqonex assists on offer attractive terms and trustworthy clients, both to be able to execute the transactions and receive payments and to demonstrate the ability to use digital securities on high quality offerings that will be attractive to larger market participants.

Furthermore, Eqonex will have to source investors to participate in offerings. There is still significant education required for investors on the potential of digital securities. There can be no assurance that, even if Eqonex sources high quality offerings from issuers, it can source investors, particularly institutional investors, many of which have investment mandates that do not include digital securities, to purchase the digital securities offered.

If Eqonex is not able to source either attractive offerings and/or investors to participate in them, it could have a material adverse effect on its business, results of operation and financial condition.

The Capital Markets Business is highly dependent on the closing of offerings to produce revenue.

Placement agents, brokers, underwriters and other participants and advisors to issuers in the capital markets industry generally receive payment as a percentage of the total capital raised in an offering. Such fees are where the Capital Markets Business expects to make the majority of its revenue. As a result, successfully hitting revenue targets is highly dependent on a very small number of transactions closing, particularly in the near term as the Capital Markets Business is in its early stages. Failure to close offerings and receive fees could have a material adverse effect on Eqonex’s business, results of operation and financial condition.

The development of digital securities poses technological and regulatory challenges and Eqonex may not be able to successfully develop, market and launch such tokens.

The development of digital securities requires significant technical expertise on the part of Eqonex or its sub-contractors in order to be operational and secure. Eqonex may not have or may not be able to obtain the technical skills, expertise, or regulatory approvals needed to successfully create or market digital securities. Even if successfully developed and created, digital securities may not meet investor expectations. Furthermore, digital securities may experience technical failures or fail to fulfil their primary goal.

Digital securities may not be widely adopted and may have limited users.

It is possible that digital securities will not be used by a large number of issuers, broker-dealers or holders or that there will be limited public interest in the continued creation and development of digital securities. Such a lack of use or interest could negatively impact the Capital Markets Business.

Specific legal and regulatory risks exist in the provision of advice and assistance in regard to the issuance and distribution of digital securities that may give rise to claims against Eqonex.

Providing advice and assistance in regard to the issuance and distribution of digital securities raises legal and regulatory risk in each of the jurisdictions that Eqonex seeks to do business. The legal and regulatory landscape relating to offerings of digital securities is uncertain and subject to both change and inconsistencies. Such a challenging landscape could result in Eqonex providing advice and service in jurisdictions where it has no regulatory coverage to do so. Furthermore, digital securities may be distributed in jurisdictions or to investors that are not permitted to receive such digital securities pursuant to local laws.

Eqonex expects the key markets for its Capital Markets Business will include the following (with the related license that will be required to operate):

If licenses are not obtained for the Capital Markets Business to provide its services in these jurisdictions, Eqonex will seek to partner with local firms.

Eqonex does not intend to effect any transactions in, nor induce or attempt to induce the purchase or sale of any security with any U.S. persons without ensuring that it is acting in compliance with U.S. laws relating to the offer and sale of securities. To the extent that in the future Eqonex seeks to effect any transactions in, or induce or attempt to induce the purchase or sale of any security with any U.S. person, Eqonex will either seek to register as a U.S. broker-dealer as required by Section 15(b) of the Exchange Act, or partner with a U.S. broker-dealer.

Risks Related to the Lending Business

The Lending Business is not currently operational and may never become operational.

The Lending Business is not currently operational and may never become operational. In June 2021 Eqonex invested $0.9 million in the purchase of a perpetual software license to provide technology to operate the Lending Business which may never result in a positive return. The Investment Products Business is expected to launch in the third quarter of 2021. Eqonex can make no assurance that the Lending Business will be successful or that Eqonex will have sufficient capital and other resources to support the business.

Regulatory authorities may not permit, or may limit the ability of, Eqonex to facilitate borrowing or lending

Eqonex may need the approval of various regulatory authorities to permit Eqonex to engage in borrowing and / or lending activities. If any regulatory authority refuses approval to Eqonex to engage in such activities then, such authority could prevent the Eqonex Lending from ever becoming active or could limit the business to operating within a narrow scope and thereby not reach its full potential. The regulatory landscape that Eqonex needs to navigate in order to facilitate the Eqonex Lending is extensive and changing, and Eqonex may not be able to successfully activate this business without required approvals.

Furthermore, laws and regulations may change over time. Therefore, even if Eqonex were to acquire necessary approvals or licenses, an ongoing threat to Eqonex’s business would remain that such permission to operate could be subsequently revoked or materially altered over time, which could have a material adverse effect on the Eqonex Lending.

Competition will likely increase in borrowing and lending for Digital Assets.

While the Digital Asset industry is at an early stage, there are already a number of providers of borrowing and lending for Digital Assets. These providers create competition which is likely to create downward pressure on margins and / or worsen the risk profile of trades. Further competition could also arise as traditional investment banks, who may be active in borrowing and lending for stocks and other securities presently, may seek to expand their business into Digital Assets. Large financial institutions such as investment banks, have considerable resources, technology and distribution channels to access clients which could threaten Eqonex’s success in this area.

Eqonex may be unable to establish significant demand or supply for borrowing and lending in order to make the business viable.

A material component of the viability of the Eqonex Lending will be the willingness of clients to engage in borrowing and lending activity with Eqonex. In addition to the competitive threats mentioned, this could be impacted by a general inability to attract a sufficient number of customers seeking to engage in this activity. Furthermore, this activity may require not just sufficient borrowers or lenders, but a sufficient balance of borrowers and lenders to sustain a viable business model.

Failure to accurately document transactions, terms and covenants may give risk to significant legal risks.

Clients of the Eqonex Lending may deal with Eqonex acting, potentially, as either principal or agent. In either case Eqonex is likely to have a material role in designing and executing the legal terms of transactions. Transactions will need to specify terms and conditions and may be relatively standardized or bespoke, which can lead to even higher litigation risk. Additionally, Eqonex Lending may involve the offering of leverage. Providing leverage for traded products can lead to losses being magnified. Clients with magnified losses may be more likely than other clients to resort to litigation.

Digital Assets are extremely volatile and are subject to market risks

Digital Assets are extremely volatile and where the Eqonex Lending involves the provision of leverage for the purposes of trading, clients’ market risk may be magnified; this can in turn result in credit risk for Eqonex where a client’s market risk losses exceed the collateral provided by the client. Also, where Eqonex performs a role as agent, seeking to effectively match borrowers and lenders on the same terms, it may act as principal holding positions for short periods in the course of matching lenders and borrowers. In any of these cases, Eqonex could be exposed to market risks and this would be highlighted in cases of extreme market turbulence and large sudden moves in digital asset prices.

The Lending Business is subject to substantial operational, counterparty and collateral risks

The Lending Business’ transactions flows involve multiple process steps, systems and counterparties and are subject to operational risks throughout their lifecycle. These may include human error, failures in process or systems and other unforeseen external events. While operational controls are built into all elements of the business it may not be possible to completely eliminate the possibility of such events leading to significant operational losses.

Even where the Lending Business is collateralized to manage credit risk, the business involves collateral flows and margins. Borrowers of Digital Assets are often required to provide collateral and lenders of Digital Assets often need their loaned assets to be effectively safeguarded and managed. Collateral flows are not limited to initial collateral, but collateral requirements are likely to change over time. Initial collateral may prove to be insufficient and could lead to losses for Eqonex. Variations in collateral may need to occur during the life of a transaction. To ensure this operates effectively to mitigate risk, appropriate technology and systems will need to be utilized. Such technology could fail and / or borrowers may seek to obstruct Eqonex in accessing the required collateral. Any shortfall in collateral, whether the fault of the client or the fault of Eqonex, could lead to material losses and detrimental client outcomes. If collateral posted is of a different nature to the asset underlying the transaction, then this could further give rise to potential mismatches and shortfalls in collateral value.

Operational Risks

Borrowing and lending transactions flows involve multiple process steps, systems and counterparties and are subject to operational risks throughout their lifecycle. These may include human error, failures in process or systems and other unforeseen external events. While operational controls are built into all elements of the business it may not be possible to completely eliminate the possibility of such events leading to significant operational losses.

Risks Related to the Investment Products Business

The Investment Products Business is not currently operational and may never become operational.

The Investment Products Business is not currently operational and may never become operational. Eqonex has invested in the region of $0.8 million to date into the Investment Products Business which may never result in a positive return. The Investment Products business is expected to launch in the third quarter of 2021. Eqonex can make no assurance that the Investment Products Business will be successful or that Eqonex will have sufficient capital and other resources to support the business.

Regulatory authorities may never permit, or severely limit the ability of, Eqonex to issue investment products.

Numerous regulatory authorities may need to permit Eqonex to issue investment products. If any regulatory authority, or other authority whose permission is required, such as a stock exchange listing authority, objected to the investment products or to certain aspects of them, such regulatory authority could prevent the investment products from ever becoming issued, or if permitted to rescind such permission, in that jurisdiction. The regulatory landscape that Eqonex needs to navigate in order to provide investment products is complex, extensive and changing, and Eqonex may never be able to do so successfully.

Furthermore, laws and regulations may change over time. Therefore, even if Eqonex were to acquire necessary approvals or licenses, an ongoing threat to Eqonex’s business would remain that such permission to operate could be subsequently revoked or materially altered over time, which could have a material adverse effect on the Investment Products Business and its customers.

Competition will likely increase in investment products referencing Digital Assets.

While the Digital Asset industry is at an early stage, there are examples in several countries of securitized products or collective investment schemes being created in order to provide exposure to Digital Assets. These, as well as those companies who provide access to Digital Asset exchanges, including several significant exchanges, present competition to the Investment Products Business. Such competition is likely to grow as new entrants emerge, including large financial institutions such as investment banks, which have greater resources, technology and distribution channels than Eqonex. Such increased competition could result in, among other things, the Investment Products Business losing market share, the emergence of superior products and to compression of margins, any of which could have a material and adverse effect on the Investment Products Business’ business, financial condition and results of operations.

Eqonex may be unable to establish distributor networks necessary to successfully grow the business.

A material component of the sales strategy of the Investment Products Business involves reaching and maintaining agreements with distributors. There can be no guarantee that such distribution agreements will be executed and there is a risk that distributors reject Eqonex’s proposals and/or do not wish to engage in the distribution of products linked to Digital Assets.

The failure to accurately describe investment products may lead to financial and regulatory exposure.

The business plan of the Investment Products Business will seek clients of varying expertise, including retail clients, to whom the greatest duty of care may be owed and to whom the greatest regulatory protection may be given. If an investment product is not described accurately or completely, either in print or orally, investors may not be able to make an informed decision as to the risk profile of the investment product, which may result in litigation, regulatory fines, investigations and restitution. Even if such inaccurate disclosure is alleged but not proven, the Investment Products Business and Eqonex may face significant reputational damage as a result. Any of the above may have a material adverse effect on the business, financial condition and operations results of Eqonex.

The Investment Products Business is subject to technology failure.

The Investment Products Business will utilize and rely on technology, and such technology is potentially subject to failure and errors. Applications are expected to be used to price products and if pricing models were inaccurate, products could be issued at prices considerably different to fair value, resulting in a loss to Eqonex and/or potential harm to investors which could cause financial restitution to clients and potential regulatory sanctions and fines. There is also a risk for subsequent valuations of products being potentially inaccurate and/or a mis-estimation of the way in which such products should be risk managed and hedged. Furthermore, the Investment Products Business intends to list products on various exchanges and some exchanges may require external market making to ensure there is liquidity available to investors. Eqonex could be in breach of various regulations and face fines as well as potentially having to compensate investors who may have suffered as a result. Such market making activities would also include the issuance of new securities which requires automation and cohesive technology required to create the product and to automatically execute the underlying exposure in the correct way, which, if erroneous, could cause Eqonex to be either under or over hedged in such a product and to potentially face resulting losses.

Risks Related to Taxation

The tax treatment of Digital Assets is unclear.

The treatment of Digital Assets under the tax laws of the jurisdictions in which Eqonex does business is unclear. The operations and dealings of Eqonex, in or in connection with Digital Assets, could be subject to adverse tax consequences in one or more jurisdictions, including as a result of development of the legal regimes surrounding Digital Assets, and Eqonex’s operating results could be adversely affected thereby.

Eqonex may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of Eqonex’s ordinary shares.

Eqonex would be classified as a passive foreign investment company (“PFIC”) for any taxable year if, after the application of certain look-through rules, either: (i) 75% or more of gross income for such year is “passive income” (as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended), or (ii) 50% or more of the value of assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. Whether Eqonex is a PFIC is a factual determination that must be made annually based on the total income for the year and the value of the assets throughout the year. The amount of “passive income” relative to the amount of other income that Eqonex will earn for the 2021 taxable year and future years is difficult to estimate. Moreover, the value of assets for purposes of the PFIC determination may be determined by reference to the public price of ordinary shares, which could fluctuate significantly. Therefore, there can be no assurance that Eqonex will not be classified as a PFIC for the 2021 taxable year or in the future. Certain adverse U.S. federal income tax consequences could apply to a U.S. Holder (as defined in “Taxation—U.S. Federal Income Tax Considerations”) if Eqonex is treated as a PFIC for any taxable year during which such U.S. Holder holds Eqonex ordinary shares.

Risks Related to Being a Public Company

Eqonex has limited experience operating as a public company and fulfilling its obligations as a U.S. reporting company may be expensive and time consuming.

The Company’s executive officers have no past experience in operating a U.S. public company, which makes their ability to comply with applicable laws, rules and regulations uncertain. The Company’s failure to comply with all laws, rules and regulations applicable to U.S. public companies could subject Eqonex or its management to regulatory scrutiny or sanction, which could harm the Company’s reputation and share price.

As a public company Eqonex will incur significant legal, accounting, and other expenses that it did not incur as a private company. Eqonex is subject to reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the rules subsequently implemented by the SEC, the rules and regulations of the listing standards of The Nasdaq Stock Market LLC, or Nasdaq, and other applicable securities rules and regulations. Stockholder activism, the current political and social environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which will likely result in additional compliance costs and could impact the manner in which Eqonex operates its business in ways Eqonex cannot currently anticipate. Compliance with these rules and regulations may strain Eqonex’s financial and management systems, internal controls, and employees. The Exchange Act requires, among other things, that Eqonex files annual, quarterly, and current reports with respect to its business and operating results. Moreover, the Sarbanes-Oxley Act requires, among other things, that Eqonex maintains effective disclosure controls and procedures, and internal control, over financial reporting. In order to maintain and, if required, improve disclosure controls and procedures, and internal control over, financial reporting to meet this standard, significant resources and management oversight may be required. If Eqonex encounters material weaknesses or deficiencies in internal control over financial reporting, Eqonex may not detect errors on a timely basis and its consolidated financial statements may be materially misstated. Effective internal control is necessary for Eqonex to produce reliable financial reports and is important to prevent fraud.

Eqonex expects its independent registered public accounting firm will be required to formally attest to the effectiveness of internal control over financial reporting commencing with its second annual report on Form 10-K. Eqonex expects to incur significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, Eqonex’s management attention may be diverted from other business concerns, which could harm the business, operating results, and financial condition. Although Eqonex has already hired additional employees to assist in complying with these requirements, its finance team is small and it may need to hire more employees in the future, or engage outside consultants, which will increase operating expenses.

Eqonex also expects that being a public company and complying with applicable rules and regulations will make it more expensive for it to obtain director and officer liability insurance, and Eqonex may be required to incur substantially higher costs to obtain and maintain the same or similar coverage. These factors could also make it more difficult for Eqonex to attract and retain qualified members of its board of directors and qualified executive officers.

As a foreign private issuer (“FPI”), Eqonex is exempt from a number of rules under U.S. securities laws and is permitted to file less information with the SEC than U.S. public companies.

Eqonex is an FPI, as defined in the SEC rules and regulations, and, consequently, it is not subject to all the disclosure requirements applicable to companies organized within the United States, including certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, Eqonex’s officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of the Company’s securities. Moreover, Eqonex is not required to file periodic reports and financial statements with the SEC as frequently or promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning Eqonex than there is for U.S. public companies.

Eqonex is not subject to certain Nasdaq corporate governance rules applicable to U.S. listed companies.

Eqonex is entitled to rely on a provision in Nasdaq’s corporate governance rules that allows the Company to follow Singapore corporate law with regards to certain aspects of corporate governance. This allows the Company to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on Nasdaq.

In addition, Eqonex’s Audit Committee is not subject to additional Nasdaq requirements applicable to listed U.S. companies, including an affirmative determination that all members of the audit committee are “independent,” using more stringent criteria than those applicable to the Company as an FPI.

Risks Related to Eqonex’s Securities

Eqonex may not be able to maintain the listing of its ordinary shares on Nasdaq.

Eqonex’s ordinary shares are listed on Nasdaq. If it violates Nasdaq listing requirements, its ordinary shares may be delisted. If it faisl to meet any of Nasdaq’s listing standards, its ordinary shares may be delisted. In addition, the board of directors may determine that the cost of maintaining the listing on a national securities exchange outweighs the benefits of such listing. A delisting of Eqonex’s ordinary shares may materially impair shareholders’ ability to buy and sell our ordinary shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, Eqonex ordinary shares. The delisting of ordinary shares could significantly impair Eqonex’s ability to raise capital and the value of your investment.

If securities industry analysts do not publish research reports on Eqonex, or publish unfavorable reports on Eqonex, then the market price and market trading volume of Eqonex’s ordinary shares could be negatively affected.

Any trading market for Eqonex ordinary shares may be influenced in part by any research reports that securities industry analysts publish about Eqonex. Eqonex does not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of Eqonex, the market price and market trading volume of Eqonex ordinary shares could be negatively affected. In the event Eqonex is covered by analysts, and one or more of such analysts downgrade Eqonex shares, or otherwise reports on Eqonex unfavorably, or discontinues coverage of Eqonex, the market price and market trading volume of Eqonex ordinary shares could be negatively affected.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions against Eqonex or its management named in the prospectus based on foreign laws.

Eqonex is incorporated under the laws of Singapore. Eqonex conducts its operations outside the United States and substantially all of our assets are located outside the United States. In addition, a majority of Eqonex’s directors and executive officers and the experts named in this prospectus reside outside the United States, and a significant amount of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against Eqonex or against them in the United States in the event you believe your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of Singapore or other relevant jurisdiction may render you unable to enforce a judgment against Eqonex assets or the assets of its directors and officers.

Future issuance of Eqonex ordinary shares could dilute the interests of existing shareholders

Eqonex may issue additional ordinary shares in the future. The issuance of a substantial number of ordinary shares could have the effect of substantially diluting the interests of Eqonex shareholders. In addition, the sale of a substantial amount of ordinary shares in the public market, in the initial issuance, in a situation in which Eqonex acquires a company, a business or an asset and the acquired company or the owner of the business or asset receives ordinary shares as consideration and the acquired company or the owner of the business or asset subsequently sells its ordinary shares, or by investors who acquired such ordinary shares in a private placement, could have an adverse effect on the market price of Eqonex’s ordinary shares.

Future issuances of debt securities, which would rank senior to Eqonex ordinary shares upon our bankruptcy or liquidation, and future issuances of preferred shares, which could rank senior to Eqonex ordinary shares for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in Eqonex ordinary shares.

In the future, Eqonex may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of Eqonex debt securities, and lenders with respect to other borrowings Eqonex may make, would receive distributions of Eqonex available assets prior to any distributions being made to holders of our ordinary shares. Moreover, if Eqonex issues preferred shares, the holders of such preferred shares could be entitled to preferences over holders of ordinary shares in respect of the payment of dividends and the payment of liquidating distributions. Because Eqonex’s decision to issue debt or preferred shares in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond Eqonex’s control, Eqonex cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of Eqonex’s ordinary shares must bear the risk that any future offerings Eqonex conducts or borrowings Eqonex makes may adversely affect the level of return, if any, they may be able to achieve from an investment in Eqonex ordinary shares.

The trading price of Eqonex’s ordinary shares may be volatile, which could result in substantial losses to investors.

The trading price of Eqonex’s ordinary shares is likely to be volatile and could fluctuate widely due to factors beyond Eqonex’s control. This may happen due to broad market and industry factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed companies based in Singapore. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of other Singapore companies’ securities after their offerings may affect the attitudes of investors towards Singapore-based, U.S.-listed companies, which consequently may affect the trading performance of Eqonex ordinary shares regardless of its actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure, or matters of other Singapore companies may also negatively affect the attitudes of investors towards Singapore companies in general, including Eqonex, regardless of whether it has conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are not related to Eqonex’s operating performance, which may materially and adversely affect the trading price of its ordinary shares.

In addition to the above factors, the price and trading volume of Eqonex’s ordinary shares may be highly volatile due to multiple factors, including the following:

Any of these factors may result in large and sudden changes in the volume and price at which Eqonex ordinary shares will trade. In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If Eqonex were involved in a class action suit, it could divert a significant amount of its management’s attention and other resources from its business and operations and require it to incur significant expenses to defend the suit, which could harm Eqonex’s results of operations. Any such class action suit, whether or not successful, could harm Eqonex’s reputation and restrict its ability to raise capital in the future. In addition, if a claim is successfully made against Eqonex, jt may be required to pay significant damages, which could have a material adverse effect on its financial condition and results of operations.

Short sellers of Eqonex’s ordinary shares may be manipulative and may drive down the market price of its ordinary shares.

Short sellers of Eqonex stock may be manipulative and may attempt to drive down the market price of Eqonex’s ordinary shares. Short selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention of buying identical securities at a later date to return to the lender. A short seller hopes to profit from a decline in the value of the securities, as the short seller expects to pay less in the covering purchase than it received in the sale. It is therefore in the short seller’s interest for the price of the stock to decline, and some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, often involving deliberate misrepresentations of the issuer’s business prospects and similar matters calculated to create negative market momentum.

As a public entity in a highly digital world, Eqonex has been and in the future may be the subject of concerted efforts by profiteering short sellers to spread misinformation and misrepresentations in order to gain an illegal market advantage. In addition, the publication of intentional misinformation may also result in lawsuits, the uncertainty and expense of which could adversely impact Eqonex’s business, financial condition, and reputation.

While utilizing all available tools to defend itself and its assets against these short seller efforts, there is limited regulatory control, making such efforts an ongoing concern for any public company. While Eqonex moves forward in its business development strategies in good faith, there are no assurances that Eqonex will not face more of these short sellers’ efforts or similar tactics by bad actors in the future, and the market price of its common stock may decline as a result of their actions or the action of other short sellers.

General Risks

If Eqonex is unable to successfully identify, hire and retain skilled individuals, it will not be able to implement its growth strategy successfully.

Eqonex’s growth strategy is based, in part, on its ability to attract and retain highly skilled senior financial service professionals and software engineers. To date, Eqonex has been able to locate and engage such employees; however, because of competition from other firms, Eqonex may face difficulties in recruiting and retaining professionals of a caliber consistent with its business strategy in the future. If Eqonex is unable to successfully identify and retain qualified professionals, it could materially and adversely affect Eqonex’s business, financial condition and results of operations.

Eqonex’s employee retention plans may not be sufficient to retain key employees, including as it relates to equity compensation plans in place now and in the future.

Competition, including from new market entrants in the future, may cause Eqonex’s revenue and earnings to decline.

Eqonex has entered and is entering into multiple business lines that have traditionally been dominated by large businesses that have access to substantially greater resources than Eqonex. Many of these businesses and other competitors have significant competitive advantages, including longer operating histories, the ability to leverage their sales efforts and marketing expenditures across a broader portfolio of services, greater global presence, more established third-party relationships, greater brand recognition, greater financial strength, greater numbers of company and investor clients, larger research and development teams, larger marketing budgets and other advantages over Eqonex.

While Eqonex believes its focus on providing products and services that take advantage of distributed ledger technology differentiates it from many such competitors, many of its business lines have relatively low barriers to entry and Eqonex anticipates that such barriers to entry will become lower in the future. Eqonex currently expects that, as Digital Assets become more mainstream, additional competitors, potentially in large numbers, may begin to provide equivalent products and services. A number of investment banks have already participated in the issuance of Digital Assets and are continuing to grow their expertise. In addition, the introduction of new technologies, as well as regulatory changes, may significantly alter the competitive landscape for Eqonex’s business lines. This could lead to fee compression or require Eqonex to spend more to modify or adapt its offerings to attract and retain customers and remain competitive with the products and services offered by new competitors in the industry. Increased competition on the basis of any of these factors, including competition leading to fee reductions, could materially and negatively impact Eqonex’s business, financial condition and results of operations.

Eqonex’s business lines rely on vendors and third-party service providers.

Eqonex’s operations could be interrupted or disrupted if Eqonex’s vendors and third-party service providers, or even the vendors of such vendors and third-party service providers, experience operational or other systems difficulties, terminate their service, fail to comply with regulations, raise their prices or dispute key intellectual property rights sold or licensed to, or developed for, Eqonex. Eqonex may also suffer the consequences of such vendors and third-party providers’ mistakes. Eqonex outsources some of its operational activities and accordingly depends on relationships with many vendors and third-party service providers. For example, Eqonex relies on vendors and third parties for certain services, including know-your-customer (“KYC”) and anti-money laundering (“AML”) background checks, and systems development and maintenance. The failure or capacity restraints of vendors and third-party services, a cybersecurity breach involving any third-party service providers or the termination or change in terms or price of a vendors and third-party software license or service agreement on which Eqonex relies could interrupt Eqonex’s operations. Replacing vendors and third-party service providers or addressing other issues with Eqonex’s vendors and third-party service providers could entail significant delay, expense and disruption of service. As a result, if these vendors and third-party service providers experience difficulties, are subject to cybersecurity breaches, terminate their services, dispute the terms intellectual property agreements, or raise their prices, and Eqonex is unable to replace them with other vendors and service providers, particularly on a timely basis, Eqonex’s operations could be interrupted. If an interruption were to continue for a significant period, Eqonex’s business, financial condition and results of operations could be adversely affected. Even if Eqonex can replace vendors and third-party providers, it may be at a higher cost to Eqonex, which could also adversely affect Eqonex’s business, financial condition and results of operations.

Finally, notwithstanding Eqonex’s efforts to implement and enforce strong policies and practices regarding third-party service providers, Eqonex may not successfully detect and prevent fraud, incompetence or theft by its third-party service providers, which could adversely affect Eqonex’s business, financial condition and results of operations.

Competitors will likely attempt to imitate Eqonex’s services, products and technology. If Eqonex is unable to protect or preserve its proprietary rights, its business may be harmed.

As Eqonex’s business continues to expand, its competitors will likely imitate its products, services, and technology, which could harm Eqonex’s business. Only a portion of the intellectual property used in the operation of Eqonex’s business lines is patentable, and therefore it will rely significantly on trade secrets, trade and service marks and copyright. Eqonex also relies on trade secret protection and confidentiality agreements with its employees, consultants, suppliers, third-party service providers, and others to protect its intellectual property and proprietary rights. Nevertheless, the steps Eqonex takes to protect its intellectual property and proprietary rights against infringement or other violation may be inadequate and it may experience difficulty in effectively limiting the unauthorized use of its patents, trade secrets, trade and service marks, copyright and other intellectual property and proprietary rights worldwide. Eqonex also cannot guarantee that others will not independently develop technology with the same or similar function to any proprietary technology it relies on to conduct its business and differentiate itself from competitors.

Eqonex could incur significant costs and management distraction in pursuing claims to enforce its intellectual property and proprietary rights through litigation, and defending any alleged counterclaims. If Eqonex is unable to protect or preserve the value of its patents, trade secrets, trade and service marks, copyright, or other intellectual property and proprietary rights for any reason, its brand and reputation could be damaged and its business, financial condition and results of operations could be materially adversely affected.

Eqonex could be the victim of employee misconduct.

In recent years, there have been a number of highly publicized cases involving fraud, conflicts of interest, or other misconduct by employees, and there is a risk that an employee of, or contractor to, Eqonex or any of its affiliates could engage in misconduct that adversely affects Eqonex’s business. It is not always possible to deter such misconduct, and the precautions Eqonex takes to detect and prevent such misconduct may not be effective in all cases. Misconduct by an employee of, or contractor to, Eqonex or any of its affiliates, or even unsubstantiated allegations of such misconduct, could result in direct financial harm to Eqonex.

Eqonex’s loss of access to its private keys or its experience of a data loss relating to its Digital Asset investments could adversely affect Eqonex.

Certain Digital Assets are controllable only by the possessor of the private key or keys relating to the “digital wallet” in which the Digital Assets is held. Private keys must be safeguarded and kept private in order to prevent a third party from accessing the Digital Assets while held in such wallet. To the extent a private key is lost, destroyed or otherwise compromised by Eqonex or another digital party and no backup of the private key is accessible, Eqonex will be unable to access the Digital Assets held in the related digital wallet. Any loss of private keys relating to digital wallets used to store Eqonex’s Digital Assets could adversely affect its business, financial condition and results of operations.

In addition, if Eqonex’s Digital Assets are lost, stolen or destroyed under circumstances rendering a party liable to Eqonex, the responsible party may not have the financial resources sufficient to satisfy Eqonex’s claims.

Eqonex may not be able to effectively manage its growth.

As Eqonex grows its business, its employee headcount and the scope and complexity of its business lines may increase dramatically. Consequently, if Eqonex’s business grows at a rapid pace, it may experience difficulties maintaining this growth and building the appropriate processes and controls. Growth may increase the strain on resources, cause operating difficulties, including difficulties in sourcing, logistics, maintaining internal controls, marketing, designing products and services and meeting customer needs.

In addition, Eqonex currently operates and is seeking to run many business lines and, while these business lines are anticipated to be complimentary, there can be no assurance that Eqonex will be able to effectively deliver internal or external resources effectively to each business line as and when needed, particularly when multiple business lines are experiencing high levels of need at the same time. Finally, many of Eqonex’s business lines are interlinked. For example, the Capital Markets Business is expected to be closely related to Digivault and the Exchange Business. Delays or the inability to roll out products in one business line may pose corresponding issues in other business lines.

If Eqonex does not adapt to meet these challenges, it could have a material adverse effect on its business, financial condition and results of operations.

Operational risk may materially and adversely affect Eqonex’s performance and results.

Operational risk is the risk of an adverse outcome resulting from inadequate or failed internal processes, people, systems or external events. Eqonex’s exposure to operational risk arises from routine processing errors, as well as extraordinary incidents, such as major systems failures or legal and regulatory matters. Because Eqonex’s business lines are reliant on both technology and human expertise and execution, Eqonex is exposed to material operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of third-party service providers, counterparties or other third parties, failed or inadequate processes, design flaws and technology or system failures and malfunctions.

Operational errors or significant operational delays could have a materially negative impact on Eqonex’s ability to conduct its business or service its clients, which could adversely affect results of operations due to potentially higher expenses and lower revenues, create liability for Eqonex or its clients or negatively impact its reputation. Recurring operational issues may also raise concerns among regulators regarding Eqonex’s governance and control environment.

Eqonex may not be effective in mitigating risk.

Eqonex has established, and continues to develop, risk management and oversight policies and procedures to provide a sound operational environment for the types of risk to which it is subject, including operational risk, credit risk, market risk and liquidity risk. However, as with any risk management framework, there are inherent limitations to Eqonex’s current and future risk management strategies, including risks that it has not appropriately anticipated or identified and that certain policies may be insufficient when used in connection with Digital Assets. Accurate and timely enterprise-wide risk information is necessary to enhance management’s decision-making in times of crisis. If Eqonex’s risk management framework proves ineffective or if Eqonex’s enterprise-wide management information is incomplete or inaccurate, it could suffer unexpected losses or fail to generate the expected revenue, which could materially and adversely affect its business, financial condition and results of operations.

CAPITALIZATION AND INDEBTEDNESS

The following table sets forth the capitalization and indebtedness of the Company using the audited balance sheet as at March 31, 2021.

USE OF PROCEEDS

All of the Registrable Securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2021

You should read the following discussion of our financial condition and results of operations in conjunction with its consolidated financial statements and the related notes included elsewhere in this prospectus. The discussion in this prospectus contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as applying to all related forward-looking statements wherever they appear in this prospectus. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly those set forth in the section entitled “Risk Factors.”

Operating Results

Results of Operations

Revenue

Revenue from continuing operations for the year ended March 31, 2021 decreased to $0.3 million from $0.5 million for the year ended March 31, 2020 and from $1.0 million for the year ended March 31, 2019.

The decrease in revenues year on year can primarily be attributed to a change in focus of the Capital Markets Business from ICOs to digital security focused transactions. In prior years, Eqonex provided services for clients to raise capital via non-regulated offerings. The business has pivoted to provide the issuance of regulated products which has resulted in a current reduction of revenue but with potential larger opportunities in the future.

During the reporting period, Eqonex has also focused on developing its other business lines to drive future revenue growth.

Following the public launch of the EQONEX Exchange in July 2020, Eqonex initially focused on attracting customers to the platform and growing trading volumes. In order to achieve this, Eqonex offered fee, and other, incentives to both retail and institutional participants. The result of these initiatives saw volumes rise to an average daily trading for March 2021 of $15.9 million.

Revenues from trading were primarily from OTC trades in the year ended March 31, 2021. During the year ended March 31, 2020 trading revenues were primarily generated from proprietary trading. The proprietary trading business was ceased prior to the public launch of the Exchange.

Digivault, the Custody Business was integrated with EQONEX towards the end of the fiscal year March 31, 2021. While serving another Group business does not generate revenues on a consolidated basis, it does save costs from engaging with alternative third party solutions.

The Asset Management business, for the majority of the year ended March 31, 2021 offered a zero fee structure to the seed investors of the Fund of Hedge Funds offering. Since January 2021, the business has been raising additional capital which generates both management and performance fees. The revenues associated with the Asset Management business in prior years related to those generated from Bletchley Park Asset Management Jersey (BPAMJ). The funds associated with BPAMJ were liquidated during the year ended March 31, 2021 which resulted in a reduction in revenue.

General and Administrative Expenses from Continuing Operations

General and administrative expenses increased by $22.0 million to $64.9 million for the year ended March 31, 2021 and increased from $18.9 million for the year ended March 31, 2019. This increase was due, in part, to a non-cash IFRS 2 expense in relation to a modification to the employee share option plan first established by Diginex Hong Kong in 2017. The share options become fully vested in December 2021. Other key drivers to the increase in cost base relate to expenses incurred to complete the Transaction with 8i Enterprises in September 2020 and costs associated with being a publicly listed company that were not incurred in prior years. In addition, we continued to invest in the build out and launch of the business lines which incurred increased costs in areas such as legal, as we sought regulatory clarity in various jurisdictions, together with advertising and promotional costs as we invested in initiatives to attract customers to the Exchange. Technology costs related to the build and hosting of the IT infrastructure also increased during the year.

Employee Benefits

Employee related expenses increased by $18.3 million to $44.4 million for the year ended March 31, 2021 and from $8.5 million for the year ended March 31, 2019. Since hiring its first employees, Diginex Hong Kong created a share option plan as a means of attracting employees to the Group on lower than market rate salaries to preserve cash. During the year ended March 31, 2020 there were two modifications to the plan, first to reduce the strike price from $0.10 to zero and the second, to increase the size of the pool from 15% of issued ordinary share capital of Diginex Hong Kong to 20%. The modifications led to $9.7 million of costs recognized in the consolidated statement of profit or loss in the year ended March 31, 2020. The options were to vest in three years from commencement of employment. At September 30, 2020, the date of the Transaction, the Diginex Hong Kong share option plan was replaced by a share option plan issued by the Company. The replacement plan modified the vesting date for all options previously issued to December 30, 2021, this resulted in an accelerated $1.3m charge. The continued expense recognition of the share options plan based on expected vesting resulted in a charge to the statement of profit or loss account of $26.9 million during the year ended March 31, 2021, an increase of $17.2 million when compared to the year ended March 31, 2020. See Note 25 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Salaries and benefits in kind between March 31, 2021 and 2020 increased marginally by $0.5 million to $14.9 million. Over the same period the headcount for the Group rose from 137 to 157.

Salaries and benefits in kind between March 31, 2020 and 2019 increased by $6.6 million to $14.4 million. Over the same period the headcount for the Group rose from 92 to 137.

Amortization of Intangible Assets

Following the launch of the Exchange and Digivault, the Group commenced amortizing the capitalized costs associated with the acquisition and development of software for the Exchange and those capitalized for Digivault. Such costs are amortized over a five-year period on a straight line basis.

Depreciation of Right of Use Assets

In the year ended March 31, 2021, leases under IFRS 16 were categorized as right of use assets and related to the office leases in Hong Kong for the whole year and the offices in Singapore and Vietnam for part of the year, following the commitment of new leases in these jurisdictions during the year. The depreciation expense for right of use assets remained flat at $2.0 million compared to the year ended March 31, 2020.

The year ended March 31, 2020 included offices in both Hong Kong and Jersey. However, during the year ended March 31, 2021 the Jersey office lease was restructured to shorten the lease term and as a result the lease has been recategorized in the year ended March 31, 2021 from a right of use asset to an operating lease expense. The Hong Kong lease expired on June 15, 2021 and a new lease has been entered into at an alternative premise in Hong Kong.

In the year ended March 31, 2019, offices in Japan, United Kingdom and Germany were also capitalized under IFRS 16 but in the year ended March 31, 2020, we elected a simplified approach for these short-term leases and recognized the rental expense of the remaining lease period on a straight-line basis. This approach was also adopted for serviced offices in the USA, Singapore and Vietnam during the years ended March 31, 2021 and 2020. The impact of the recategorization was offset by the cost associated with the Hong Kong office as the year ended March 31, 2020 included a full 12 months of cost while the prior year only included a charge for 8 months. The office in the USA was included as part of the Solutions Business sale in May 2020. See Note 14 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Depreciation of Property, Plant and Equipment

Depreciation of property, plant and equipment for the year ended March 31, 2021 remained flat compared to the year ended March 31, 2020 at $0.8 million and increased from $0.6 million for the year ended March 31, 2019. The cost is driven by depreciation of the capital expenditure on leasehold improvements related to the Hong Kong office, which are depreciated over 36 months. The lease expired in June 2021, and as a result, the leasehold improvement costs of that office will be fully depreciated. See Note 13 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Auditor’s Remuneration

Audit fees increased to $0.7 million for the year ended March 31, 2021 compared to $0.3 million and $0.1 million for the years ended March 31, 2020 and March 31, 2019 respectively. The increase primarily resulted from a one-time charge of $0.3 million related to 8i Enterprises and the Transaction, and other audit related fees incurred in relation to SEC regulatory filings.

Legal and Professional Fees

Eqonex incurred legal and professional fees of $5.0 million which was a decrease of $1.5 million from the $6.5 million expensed in the year ended March 31, 2020 and $0.4 million higher than costs incurred in the year ended March 31, 2019 of $4.6 million. The decrease in costs between March 31, 2020 and 2021 was driven, in part, by a reduction in legal fees in relation to the Transaction with additional fees being incurred in the year ended March 31, 2020. This cost reduction from March 31, 2020 to March 31, 2021 was partly offset by the cost of D&O insurance taken upon listing. The increase in costs from March 31, 2019 to March 31, 2020 was predominately due to legal fees in associated with the Transaction.

Marketing and Promotions

Eqonex marketing and promotional related costs of $3.2 million for the year ended March 31, 2021 increased by $2.5 million when compared to March 31, 2020 and by $2.6 million compared to the year ended March 31, 2019.

Increased costs related to marketing and promotions incurred during the year ended March 31, 2021 which were driven by the introduction of promotions for the Exchange to attract clients and volumes as well as costs related to commercial agreements with market makers that engaged with the Exchange. The purpose of engaging with market makers is to create liquidity on the Exchange with the goal being that such liquidity will attract more clients to trade on the Exchange, hence increasing trading volumes and revenue.

Expensed Software Development

Expensed software development costs totaled $0.7 million for the year ended March 31, 2021, which was a decrease of $2.6 million compared to the year ended March 31, 2020. There were no expensed software development costs incurred during the year ended March 31, 2019. The costs incurred during the years ended March 31, 2021 and 2020 were costs associated with building the Exchange which did not qualify as capitalized costs per IAS 38.

Technology

Technology costs increased to $4.6 million for the year ended March 31, 2021 compared to $1.1 million and $0.3 million for the years ended March 31, 2020 and 2019, respectively. The increase consists primarily of services engaged in to host servers key to the ongoing operation of the Group’s business lines.

Other

Other expenses were $1.3 million for the year end March 31, 2021, which decreased by $0.6 million compared to the year ended March 31, 2020 and by $1.1 million compared to the year ended March 31, 2019. The decrease was, in part, due to lower travel and entertainment costs as a result of the COVID-19 pandemic.

Other losses and expenses, net

Eqonex recognized total other losses of $64.4 million for the year ended March 31, 2021 which compared to total other losses of $1.7 million and total other losses of $2.9 million for the years ended March 31, 2020 and 2019, respectively. The losses incurred in the year ended March 31, 2021 were primarily due to the issue of shares and warrants to former 8i Enterprises shareholders on completion of the Transaction and the fair value of earn-out shares that were introduced as a condition of the Transaction. The earnouts vest on the achievement of predefined milestones. This loss was partially offset by a fair value gain on the private warrants issued in January 2021. The change in total other losses in the year ended March 31, 2020 compared to the year ended March 31, 2019 was mainly driven by the loss on the sale of the remaining Madison stock which was originally received as part consideration for the sale of Diginex High Performance Computing limited (“DHPC”) which was partially offset by a fair value gain on the 49% holding of DHPC. In addition, in the ended March 31, 2019 the Group recognized a fair value reduction on the cost of unlisted investments acquired.

Transaction Expenses

The execution of the Transaction resulted in the issuance of shares and warrants in the Company to former share and warrant holders of 8i Enterprises. The shares and warrants were valued at $65.2 million. Upon completion of the Transaction, Eqonex consolidated the net assets of 8i Enterprises of $21.2 million resulting in a $44.0 million cost of Transaction. This is a one-off cost and does not involve cash.

Earnout Share Awards

Under the terms of the Transaction, former Diginex Hong Kong shareholders are entitled to an additional 12 million shares if certain share price milestones are achieved over a four-year period post the Transaction date. The earnout was valued using a Monte Carlo simulation model which resulted in a fair value cost of $32.1 million. The first earnout milestone was achieved in January 2021 and 3 million shares were issued together with 30,000 shares to a service provider who is entitled to 1% of the shares issued in the earnout. The achievement of the first earnout did not have any impact to the statement of profit or loss with the fair value of the earnout being recategorized from share based payment reserve to share capital on the statement of financial position

Net Fair Value Gains of Financial Liabilities at Fair Value Through Profit and Loss

In January 2021, the Company raised capital via a private placement and issued shares and private warrants. The private warrants were valued upon issue using the Black-Scholes model at $16.6 million. At March 31, 2021, the private warrants were fair valued for reporting purposes using the same model. The resulting valuation was $5.2 million, which concluded in a $11.4 million gain being recognized in the consolidated statement of profit or loss. See Note 26 to our consolidated financial statements included elsewhere in this Form F-1 for more information.

Net Loss on Sale of Financial Assets at Fair Value through Profit or Loss & Gain on Fair Value on equity method investment

In July 2018, following the divestment of 51% of DHPC, the remaining 49% investment was revalued under the guidance of IFRS 10 to $43.8 million, of which $42.6 million was booked to the profit and loss as a gain. During the remainder of the year ended March 31, 2019, Eqonex’s share of losses from the retained 49% investment amounted to $12.3 million and at March 31, 2019 DHPC had net liabilities. Together, these factors resulted in Eqonex fair valuing the investment to zero and recording a fair value loss of $31.5 million. The overall net gain on DHPC (equity method investment) amounted to $11.0 million. See Notes 9 and 37 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

In October 2018, Eqonex sold a significant portion of the Madison Holdings Group Limited (“Madison”) stock received as part consideration for the divestment in DHPC, which resulted in a realized loss on sale of a financial assets of $11.7 million. The balance of Madison shares was sold in the year ended March 31, 2020 realizing a loss of $0.2 million. See Note 6 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Net fair value losses on financial assets at fair value through profit or loss

During 2019 and 2020, Eqonex invested in a collection of startups at various stages of maturity. As at March 31, 2021, 2020 and 2019, these investments incurred fair value losses of $0.1 million, $1.5 million and $2.6 million, respectively.

Impairment Reversal (Losses) on Financial Assets

A minimal reversal on an impairment loss on financial assets booked in a prior period was recognized during the year ended March 31, 2021 in relation to the previously impaired loan to DHPC. $11.2 million of impairment losses on financial assets were recognized in the year ended March 31, 2020 compared to $5.6 million in the year ended March 31, 2019.

During the year ended March 31, 2019, Eqonex advanced a loan of $15.0 million for the purchase of high-performance computing equipment for DHPC and $2.0 million for working capital purposes, of which $2.0 million was repaid. The net loan receivable was repayable from the cash profits of DHPC. In accordance with IFRS 9, a detailed expected credit loss model based on various scenarios of the future success of DHPC was carried out and the results analyzed. The outcome of the modelling led to an impairment of $4.8 million on the outstanding loan receivable at the year ended March 31, 2019 and a further $10.6 million impairment in the year ended March 31, 2020 following an additional loan advance of $2 million, working capital advance of $0.2 million and a repayment of $0.8 million during the year ended March 31, 2020. On March 31, 2020, there was an unimpaired balance outstanding of $1 million. The outstanding balance was fully collected by April 2021. See Note 19 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Other impairments to loans, advances and trade receivables during the years ending March 31, 2020 and March 31, 2019 resulted in additional impairment charges of $0.6 million and $0.8 million, respectively.

Impairment of Goodwill

No goodwill has been recognized in either of the years ended March 31, 2021 or 2020. Eqonex did however recognize goodwill of $0.5 million on the acquisition of Altairian Capital Holdings Limited in December 2018. At March 31, 2019, Eqonex reviewed the cash generating ability of the business and based on economic factors, management determined that there was no measurable future cash generation from this business and the goodwill was impaired in full. At March 31, 2021 and 2020, management reassessed the impairment and noted no changes.

Finance Costs

Eqonex incurred finance costs for the year ended March 31, 2021 of $2.3 million compared to $1.9 million and $1.1 million for the years ended March 31, 2020 and 2019, respectively.

During the year ended March 31, 2021, $1.2 million of the finance charges related to the cost of the private placement capital raise that was associated with the issuance of private warrants. The total cost of the raise was $2.9 million with $1.7 million offset against share capital issued and the balance recognized in the statement of profit or loss. The private warrants have been recognized as a liability rather than an equity instrument.

In May 2020, Eqonex issued a convertible bond with a 10% annual coupon, raising $25 million. The bond has a mandatory conversion into shares of Diginex Hong Kong prior to a listing. The bond and accrued interest of $0.5 million were converted on September 21, 2020.

Eqonex had a $20 million credit facility in place with Pelham Limited which was terminated in September 2020. The facility accrued interest at 12.5% per annum which resulted in a charge of $0.3 million for the year ended March 31, 2021 and $1.3 million and $0.3 million for the years ended March 31, 2020 and 2019, respectively.

In the year ended March 31, 2019, Eqonex took out two short-term loans from shareholders to manage near term liquidity needs. The finance costs related to these loans plus drawn down fees amounted to $0.2 million. Eqonex also entered into a short-term bank loan in 2019 that cost $0.2 million in finance charges.

Interest arising from operating lease liabilities is also booked to the profit and loss statement in line with IFRS 16 reporting. The resulting finance charge from IFRS 16 amounted to $0.2 million in 2021, $0.5 million in 2020 and $0.4 million in 2019.

Eqonex also issued a loan note in September 2019, the loan note had a 12-month maturity and a 15% interest charge. A notional amount of $0.7 million was raised and was fully redeemed early on June 1, 2020. Interest of $0.1 million was charged for the year ended March 31, 2020 with a minimal residual amount charged during the year ended March 31, 2021.

Share of Loss of an Associate

Eqonex has not recognized a share of loss of an associate in either of the years ended March 31, 2021 or 2020. During the year ended March 31, 2019 Eqonex recognized a share of loss of an associate of $12.3 million. As previously discussed, this was Eqonex’s share of the reported losses of DHPC following the sale of 51% of the business. During the year ended March 31, 2020, DHPC’s business became non-operational and as the investment had been fully impaired in the prior year, there have been no further losses booked in the years ended March 31, 2020 or 2021 under the guidance of IAS 28.

Income Tax

During the year ended March 31, 2021, Digivault Limited, a UK subsidiary of the Group, received a tax credit for research and development of $0.5 million.

The operating activities of the Group in the years ended March 31, 2021, 2020 and 2019 did not generate a taxable charge due to operating losses incurred. Although Eqonex reported a profit in the year ended March 31, 2019 following the sale of DHPC, it did not pay taxes on the sale because there is no capital gains tax under the tax laws of Hong Kong.

Although Eqonex has or had active operations in United Kingdom, Jersey, Japan, Switzerland, Dubai, USA, Singapore, Vietnam and Germany during the reporting periods, the majority of its operations have been in Hong Kong. Eqonex’s entities in Hong Kong are subject to Hong Kong profits tax at 16.5%.

(Loss) Profit from Discontinued Operations

Eqonex sold the Solutions Business in May 2020 to Rhino Ventures Limited, a company controlled by Miles Pelham. While the transaction was completed post the March 31, 2020 year end it was considered material and hence the results of the business line have also been reported as discontinued in both the years ended March 31, 2020 and March 31, 2019. The business was sold for $6.0 million with the consideration value being offset against the Pelham Limited loan. Costs associated with the sale amounted to $0.9 million.

The Solutions Business produced revenues of $0.0 million, $0.2 million and $0.4 million during the years ended March 31, 2021. 2020 and 2019, respectively. The Solutions Business incurred general and administrative expenses of $0.1 million, $1.1 million and $0.7 million during the years ended March 31, 2021,2020 and 2019, respectively. These costs relate, primarily, to employee salaries and benefits.

In the year ended March 31, 2019, discontinued operations relate to the Solutions Business as well as the results of DHPC up to the date of divestment, following which the subsidiary was deconsolidated.

DHPC produced revenue of $1.1 million in the year ended March 31, 2019 and incurred general and administrative expenses of $2.7 million which were primarily associated with maintaining the equipment and renting a data center to host the equipment.

Eqonex divested 51% of DHPC for consideration of $60.0 million. The net assets at the time of sale amounted to $2.5 million, of which 51%, or $1.3 million, was disposed of. Additionally, at the time of divestment a shareholder loan to DHPC of $0.4 million was waived. This resulted in a reported gain on sale of $59.1 million. See Notes 9 and 37 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Inflation

Since incorporation, Eqonex has not been materially impacted by changes in inflation.

Impact of Foreign Currency Fluctuations on Results

Eqonex’s main operating currencies have historically been the US Dollar and Hong Kong Dollar. As the Hong Kong Dollar is pegged to the US Dollar, Eqonex has not been overly exposed to foreign currency fluctuations in prior years. As the business grows, Eqonex is exposed to more foreign currencies and their fluctuations, such as the British Pound, Euro and Singapore Dollar.

Critical Accounting Policies, Judgments and Estimates

An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.

Eqonex prepares its financial statements in conformity with IFRS, which requires it to make judgments, estimates and assumptions. Eqonex continually evaluates these estimates and assumptions based on the most recently available information, its own historical experiences and various other assumptions that Eqonex believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from Eqonex’s expectations as a result of changes in its estimates. Some of Eqonex’s accounting policies require a higher degree of judgment than others in their application and require it to make significant accounting estimates.

The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with Eqonex’s financial statements and the notes related thereto, and other disclosures included in this document. When reviewing Eqonex’s financial statements, you should consider (i) Eqonex’s selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Deemed reverse acquisition

On September 30, 2020, the Company completed the Transaction. Management has made the following judgments which have the most significant effect on the amounts recognized in the consolidated financial statements:

The Company entered into the Transaction with 8i Enterprises and Diginex Hong Kong that resulted in the issuance of shares and warrants to the shareholders of 8i Enterprises, Diginex Hong Kong and service providers to the Transaction. Following the issuance, the Company became the ultimate parent holding company of 8i Enterprises and Diginex Hong Kong (together with its subsidiaries) and listed on Nasdaq.

Under IFRS 3, neither 8i Enterprises nor the Company met the definition of a business and therefore the Transaction is not defined as a business combination. Although Diginex Hong Kong is considered a business under IFRS 3, a business combination requires the combination of businesses and hence requires more than one business in the transaction to fall within the scope of the standard. In accordance with IAS 8 paragraph 10, in the absence of an IFRS that specifically applies to such a transaction, management should apply judgment in developing and applying an accounting policy that results in consolidated financial statements that are presented in a way that reflects the economic substance of the transaction.

Management has concluded that the Transaction would be more accurately represented as a deemed reverse acquisition of 8i Enterprises and the Company by Diginex Hong Kong, together with a recapitalization of the Group’s share capital. The outcome of such judgment being that the results of Diginex Hong Kong, subject to an adjustment to equity to reflect the issuance of shares by the Company on completion of the Transaction, have been consolidated on the basis that Diginex Hong Kong is the accounting acquirer and hence the historical results of Diginex Hong Kong continue to be consolidated on an on-going basis. The excess between the fair value of the shares and equity instruments issued and the net assets acquired is treated as an expense under IFRS 2. Details of the accounting policy applied is summarized in Note 2 of the consolidated financial statements as at March 31, 2021.

Share-based payments – replacement of employee share options plan

The Group replaced the employee share options plan issued by Diginex Hong Kong with the establishment of a plan with modified terms issued by the Company upon completion of the Transaction. Under IFRS 2, the Group considered this as a replacement and modification of the Diginex Hong Kong plan, see Note 25 of our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Share-based payments – earn-out awards

The Transaction agreement between the Company, 8i Enterprises and Diginex Hong Kong has an earn-out provision where former Diginex Hong Kong shareholders will receive up to 12,000,000 additional shares in the Company if share price related milestones are achieved over a period of time post Transaction. Upon reaching the earn-out milestones, a service provider to the Transaction is also entitled to receive the equivalent of 1% of the earn-out shares issued. Earn-out awards are accounted for under IFRS 2 as equity-settled awards with non-vesting conditions. See Note 25 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

The fair value of the earn-out awards is based on a Monte Carlo simulation analysis utilizing a Geometric Brownian Motion taking assumptions on share price volatility, risk-free rate and other market data to predict distribution of relative share performance.

The share price volatility assumption used in the model (as detailed below) is based on publicly listed traditional financial exchanges (i.e. non-Digital Asset) and other related companies, and a 6-months BTC option volatility. The 6-months BTC option volatility being included to reflect the exposure to Digital Assets which would not be a feature of the traditional exchanges and other related companies selected as a comparable within the model.

The earn-out award share price related targets are as below:

Earn-out awards are accounted for under IFRS 2. The earn-out awards are settled in a fixed number of shares with conditions based on future market prices, but do not require the former Diginex Hong Kong shareholders nor the service provider to provide on-going service to the Group until such milestone dates.

The awards are considered as equity-settled share-based payments with non-vesting conditions since there is no explicit nor implicit service requirements despite that the share price targets are set beyond September 30, 2020.

The fair value of the earn-out awards has been valued on a probability basis using a Monte Carlo simulation model with the below inputs:

Volatility parameter of 50% is used on the basis that on September 30, 2020:

The outcome of the Monte Carlo simulations derived the probabilities and fair values per award (based on probability of achieving the share price target) per milestone date, totaling a fair value of $32.1 million, inclusive of the service provider’s 1% entitled shares upon reaching the earn-out milestones.

Related party transaction – sale of Solutions Business

The IFRS conceptual framework of accounting defines income as increases in assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity holders. When a transaction is entered into with a related party, judgment is required in determining whether the accounting gain represents income or a capital contribution. The accounting treatment is determined by considering if the related party was acting in his/her capacity as a related party or a normal counterparty for the particular transaction.

In May 2020, the Group sold the Solutions Business to Rhino Ventures Limited, an entity controlled by Miles Pelham, the founder of Diginex Hong Kong. The transaction resulting in income recorded in the consolidated statement of profit or loss on the basis that Rhino Ventures Limited was acting as a normal counterparty and purchased the Solutions Business at fair market value, as determined by the following:

Management believes that these attributes support that Rhino Ventures Limited purchased the Solutions Business at fair market value, therefore the gain on sale of the Solutions Business should be reflected as profit from discontinued operations in the consolidated statement of profit or loss.

Public warrants

Public warrants are classified as equity instruments under IAS 32 on the basis that the public warrants do not create an obligation for the Company to pay cash to the warrant holders since the warrant holders cannot put the warrants to the Company, and a fixed number of shares are to be issued based on a fixed warrant price. Permitted adjustments to the warrant price and the number of shares are anti-dilutive and therefore preservative in nature to maintain the relative economic interest of the holder and the issuer, which do not breach the fixed-for-fixed principle of IAS 32 para 16. See Note 26 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Private warrants

Private warrants were issued in January 2021 as part of the private placement capital raise. The warrants were recognized as a liability on the basis there is a contingent settlement provision outside of Eqonex’s control when the holder may require Eqonex to redeem the private warrants in cash.

The private warrants were valued at $16.6 million on issuance using the Black Scholes pricing model with the following inputs:

Volatility parameter of 55.52% is used on the basis that on January 15, 2021:

The private warrants were valued again to $ 5.2 million at March 31, 2021 using the below updated inputs:

The fair value of the private warrants at March 31, 2021 resulted in a fair value gain of $11.4 million against the initial valuation. See Note 26 to our consolidated financial statements included elsewhere in this Form F-1 for additional information.

Digital Assets

The Group holds digital assets which are also referred to as cryptocurrencies. There is no specific accounting standard that applies to all digital assets and accordingly judgement is applied based on the terms and structure of each individual cryptocurrency in determining the most relevant accounting standards to adopt. The Group assessed that the cryptocurrencies currently owned (primarily BTC and ETH), unless specifically stated otherwise, are most appropriately accounted for as intangible assets in accordance with IAS 38 on the basis that they do not meet the definition of financial assets and are assets with no tangible form. Under IAS 38 the Group has elected to measure digital assets at a revalued amount on the basis that an active secondary market exists for the assets.

USD Coin (“USDC”)

USDC is a type of digital asset which the Group holds to meet certain working capital requirements. The Group classifies USDC as a financial asset in accordance with IFRS 9 on the basis that one USDC can be redeemed for one US dollar from an issuer, which is unlike other digital assets held, as noted above.

Client assets and liabilities

Clients deposit fiat, digital assets and USDC with the Group for trading purposes on the Exchange, and for OTC trading.

For fiat, the Group recognizes client assets and equal and opposite client liabilities on its consolidated statement of financial position in relation to fiat in accordance with IFRS 9 D.1.1.

For USDC and digital assets, there is no specific accounting guidance on recognition for these assets held on behalf of others. As such, the Group refers to para 4.3 and 4.4 of the conceptual framework for the definition of an asset. An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. On the basis that the USDC and digital assets deposited by clients are held in omnibus wallets offered by digital asset custodians under the relevant Group company’s name, the company has ultimate control over the wallets. Therefore, with control over the wallets, an asset and a corresponding liability is recognized.

EQO token

The EQO white paper was published on March 15, 2021 and the token was launched on April 8, 2021 when a number of tokens were airdropped to eligible recipients. Holders of EQO may initially benefit from Exchange fee reductions and staking rewards. Fee paying price takers on EQONEX during the period March 16, 2021 to April 7, 2021 were entitled to an allocation of EQO on April 8, 2021. Post April 8, 2021, EQO was and will be airdropped daily based on a formula weighted between price taking volume and the number of EQO tokens staked on EQONEX by eligible users.

EQO is a utility token and was not issued for cash consideration but instead used as a tool to incentivize activity on EQONEX while providing value to the recipient. The holding of EQO by clients does create a liability for the EQONEX as clients can, post April 8, 2021, receive benefits such as reduced trading fees. However, management estimates the impact from March 16, 2021 to March 31, 2021 to be immaterial.

Significant accounting policies – New Policies

Revenue recognition – Exchange income

In July 2020, the Group launched EQONEX Exchange, its Digital Asset exchange platform. Revenue is generated from fees earned when clients buy and sell Digital Assets on EQONEX Exchange at that point in time. In addition, revenues are also generated, at a point in time, when clients withdraw assets from the platform.

Deemed reverse acquisition

The acquisition method of accounting is used to account for all deemed reverse acquisitions where in substance there is an operating company is acquired by a shell company where the shareholders of the operating company obtain control of the shell company.

For the Transaction, Diginex Hong Kong is the operating company while both the Company and 8i Enterprises are considered as shell companies.

Identifying the accounting acquirer/accounting acquiree:

The Company is considered as the legal acquirer and the accounting acquiree. Control is obtained by Diginex Hong Kong shareholders as the Company issued 25,000,000 shares which allowed Diginex Hong Kong shareholders to hold the majority of issued share capital and voting rights.

Determining the deemed consideration transferred:

The deemed consideration transferred for the deemed reverse acquisition of 8i Enterprises is:

In a transaction involving only the exchange of equity instruments, the fair value of the Company’ s shares and warrants that are quoted on Nasdaq should be used to measure the consideration transferred as it is more reliably measurable than the value of the Diginex Hong Kong’s equity based on IFRS 13 fair value hierarchy principles.

Based on this principle, the Group measured the deemed consideration for the Transaction using the quoted Nasdaq share price of the Company’ s shares and warrants on the completion date of September 30, 2020.

Fair value of assets and liabilities acquired in a deemed reverse acquisition:

Identifiable assets acquired and liabilities assumed in a deemed reversed acquisition are, with limited exceptions, measured initially at their fair values at the acquisition date. For the Transaction, the net assets acquired from 8i Enterprises and the Company are primarily cash, prepayments and trade payables, and their carrying value approximates fair value.

There is no non-controlling interest involved in the Transaction. Acquisition related costs such as professional fees were expensed as incurred.

Calculating the Transaction expense:

The excess of the deemed consideration transferred over the fair value of the net identifiable assets acquired from 8i Enterprises represents a service and is recorded as an expense under IFRS 2 in the Group’s consolidated statement of profit or loss.

Presentation of the consolidated financial statements post deemed reverse acquisition:

In the Transaction, the Company being the accounting acquiree (legal acquirer), becomes the ultimate parent holding company of the Group, however, the consolidated financial statement represents a continuation of Diginex Hong Kong, the accounting acquirer (legal acquiree) with the exception of the legal capital structure.

Shareholders’ equity of Diginex Hong Kong prior to the Transaction is retrospectively adjusted as a recapitalization for the equivalent number of shares received and on a pro rata basis for prior reporting periods. Retained earnings and relevant reserves of the Diginex Hong Kong are carried forward after the Transaction. Any difference to shareholders equity of Diginex Hong Kong arising from the recapitalization of share capital and equity instruments issued is recorded in equity under the reverse acquisition reserve.

Share-based payments – earn-out awards

The earn-out awards are equity-settled awards measured on grant date in accordance with IFRS 2 and the grant date fair value of each award takes into account the non-vesting conditions. Earn-out awards are only fair valued on the grant date and not subsequently fair valued on each future reporting date on the basis that they are equity-settled awards.

Market conditions and non-vesting conditions are considered in estimating the fair value of an individual share using a Monte Carlo simulation model.

Earnings per share

Earnings per share for periods prior to the deemed reverse acquisition are retrospectively adjusted to reflect the number of equivalent shares received by the accounting acquirer, Diginex Hong Kong, based on the number of shares outstanding on the reporting dates multiplied by the exchange ratio. The exchange ratio being calculated as the number of shares issued by the Company to the former shareholders of Diginex Hong Kong divided by the number of shares outstanding in Diginex Hong Kong on September 30, 2020.

Significant accounting policies relevant to the consolidated financial statements to note:

Impairment of financial assets

Under IFRS 9, the Group records an allowance for Expected Credit Loss (“ECL”) for financial assets not held at fair value through profit or loss.

ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the asset’s original effective interest rate.

For trade and other receivables, amounts due from an associate/shareholders/related companies/joint venture and loan receivables, the Group has applied the standard’s simplified approach and has calculated ECLs based on lifetime expected credit losses. The Group calculates the ECL based on adjusted for forward-looking factors specific to the customer and the economic environment.

The Group considers a financial asset in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.

Reclassification

Certain reclassifications have been made to prior year consolidated financial statements to conform to the current year presentation to present the discontinued operations following the sale of the Solutions Business, the recapitalization of the Group on a comparable basis following the Transaction, the alignment of unlisted investment to be reported as financial assets held at fair value through profit or loss in accordance with IFRS 9, the distinction of USDC from other Digital Assets, and the presentation of General and Administrative expenses by categorization to enhance reader understandability. The reclassification had no impact on previously reported loss for the year nor accumulated losses.

Recently Released Accounting Standards

See Note 2 to the financial statements included elsewhere in this Form F-1.

Liquidity and Capital Resources

Eqonex’s ability to fund its operations is based on its ability to generate revenue, its ability to attract investors and its ability to borrow funds on reasonable economic terms. During the year ended March 31, 2021, Eqonex raised capital via the issuance of a convertible bond for $25 million which was converted into equity of Diginex Hong Kong prior to the Transaction. The cash position was increased by a further $24.1 million on completion of the Transaction from proceeds from former 8i Enterprises shareholders. In January 2021, the Company raised another $38.6 million, before costs from a private placement issuance of equity and private warrants. Furthermore, Eqonex raised $17.0 million when public warrants were called in February 2021. In prior years Eqonex funded operations, primarily, from the issuance of shares and the utilization of a $20 million credit facility from Pelham Limited.

Management is of the opinion that the capital of the Company is sufficient to meet present requirements. The Company is not aware of any legal or economic restrictions on the ability of its subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. The Company is also not aware of any material restrictions that impact the transfer of funds between subsidiaries to enable the operating of the business in various jurisdictions.

At March 31, 2021, Eqonex held cash and cash equivalents of $52.1 million. $52.0 million was held in USD with residual balances primarily held in Hong Kong Dollars, British Pounds and Euros. Eqonex held all balances in bank accounts, had no debt positions and had not hedged any foreign exchange exposures. Given the increased use of British Pounds, Euro and Singapore Dollar, Eqonex is looking to implement a Treasury Policy to manage foreign exchange requirements going forward.

As of March 31, 2021, 2020 and 2019, Eqonex has cash and cash equivalents of $52.1 million, $1.0 million and $0.7 million, respectively, as detailed below:

Cash Flows from Operating Activities

Total cash outflows from operating activities were $39.5 million in the year end March 31, 2021, compared to an outflow of $22.3 million for the year ended March 31, 2020 and an outflow of $19.4 million for the year ended March 31, 2019. Cash flow relates to both continued and discontinued operations:

Continued Operations

Cash inflow from operating activities were $38.5 million in the year ended March 31, 2021 compared to an outflow of $21.5 million in the year ended March 31, 2020 and an outflow of $17.0 million for the year ended March 31, 2019, The cash outflow increase relates, in part, to an increase in employees from 137 to 157 together with costs associated with the Transaction and listing. Eqonex also incurred additional expenditure year-over-year on technology matters in the course of growing the business as well as marketing the Group’s business lines.

During the year ended March 31, 2021, Eqonex also acquired $1.7 million in USDC and Digital Assets which have, in part, been used to fund promotions to attract clients and volumes to the Exchange. The liquidation risk management desk has also been funded with USDC to managed liquidated positions on the Exchange.

Discontinued Operations

The cash outflow from discontinued operations of $1.0 million for the year ended March 31, 2021 and $0.8 million for the year end March 31, 2020 and outflows of $2.4 million for the year ended March 31, 2019. The outflows in all three years relates to costs associated with the operations of the Solutions Business and costs incurred to operate the DHPC business for the year ended March 31, 2019.

Cash flows from Investing Activities

Total cash inflows from investing activities were $18.4 million in the year ended March 31, 2021, compared to outflows of $5.4 million for the year ended March 31, 2020 and inflows of $12.1 million for the year ended March 31, 2019. Cash flow relates to both continued and discontinued operations:

Continued Operations

Cash inflow from investing activities relating to continuing operations was $18.4 million in the year ended March 31, 2021 compared to outflows of $5.4 million in the year ended March 31, 2020 and inflow of $27.7 million for the year ended March 31, 2019.

During the year ended March 31, 2021, Eqonex collected cash of $24.1 million following the completion of the Transaction with 8i Enterprises.

During the year ended March 31, 2021, Eqonex invested $5.7 million in capitalized software for its Digital Asset exchange. This compares to $5.3 million invested in the year ended March 31, 2020. The Company also issued equity to the value of $0.6 million and $5.4 million to acquire software which had no cash flow impact in the years ended March 31, 2021 and 2020 respectively.

During the year ended March 31, 2019, Eqonex received Madison stock valued at $50.0 million as part of the DHPC partial disposal. Eqonex sold a significant portion of the stock for cash consideration of $34.0 million. In the year ended March 31, 2020, the balance of Madison stock was sold for $0.2 million.

In late 2018, Eqonex moved into a new office in Hong Kong and the related leasehold improvements during the year ended March 31, 2019 amounted to $2.1 million with a further $0.3 million spent on fixed assets.

Eqonex also acquired two business in the year ended March 31, 2019 which resulted in a net cash outflow of $0.1 million. During the year ended March 31, 2020, Eqonex acquired the remaining 25% of BPAMJ and incurred a cash outflow of $25,000 with a further $75,000 paid in the year ended March 31, 2021.

Eqonex also invested in a number of startup companies and during 2019 the cash outflow for these investments amounted to $3.8 million. During the year ended March 31, 2020, Eqonex increased its stake in an existing investment by $0.3 million. There were no similar investments in the year ended March 31, 2021.

Discontinued Operations

There were no cash movements associated with discontinued operations for the years ended March 31, 2021 and 2020. There were cash outflows from discontinued operations for the year ended March 31, 2019 of $15.6 million.

In the year ended March 31, 2019, DHPC invested $25.6 million in high performing computing equipment. As previously reported, Eqonex received $10.0 million cash as part consideration for the DHPC divestment.

Cash flows from Financing Activities

Total cash inflows from financing activities were $72.7 million in the year ended March 31, 2021, compared to an inflow of $28.0 million for the year ended March 31, 2020 and an inflow of $1.9 million for the year ended March 31, 2019. Cash flow relates to both continued and discontinued operations:

Continued Operations

Eqonex had inflows from financing activities in the year ended March 31, 2021 of $72.7 million compared to an inflow of $28.0 million in the year ended March 31, 2020 and an outflow of $26.0 million for the year ended March 31, 2019.

During the year ended March 31, 2021, Eqonex raised $24.3 million, net of costs, from the issuance of a convertible bond with a 10% coupon. The bond converted into Diginex Hong Kong shares prior to the Transaction.

Eqonex completed a private placement in January 2021 raising $36.2 million net of costs for the issuance of both shares and private warrants.

Upon completion of the Transaction, Eqonex issued public warrants to the former holders of 8i Enterprises warrants. The warrants met the redemption conditions and Eqonex called them in February 2021. Eqonex raised $17.0 million from this exercise with 48% of the warrants being converted into Eqonex shares at a price of $11.50.

During the year ended March 31, 2021, Eqonex raised $0.3 million from the issuance of equity compared to $30.9 million during the year ended March 31, 2020 and $2.4 million during the year ended March 31, 2019.

At September 2020, Eqonex terminated a credit facility with Pelham Limited. The facility was for $20.0 million and charged interest at 12.5% per annum. As of March 31, 2020, Eqonex had drawn $10.6 million of the credit facility. A further $0.1 million was advanced during the year ended prior to the termination of the facility. The facility was repaid via the sale of the Solution Business for $6.0 million, This $6.0 million was offset against the outstanding balance. A further $3.9 million was settled in cash with $0.7 million settled via the issuance of shares and $0.1 million swapped into the convertible bond. During the year ended March 31, 2021, Eqonex was charged interest of $0.3 million which was paid in full. During the year ended March 31, 2020, Eqonex was charged $1.3 million of interest expense and $0.4 million during the year ended March 31, 2019.

Eqonex advanced funds to DHPC during the year ended March 31, 2020 of $2 million of which $0.8 million was repaid in the same year. A further $1.0 million was repaid during the year ended March 31, 2021 Eqonex advanced a net sum of $13.0 million in the year ended March 31, 2019. During the year ended March 31, 2021, Eqonex received an advance of $0.9 million from a subsidiary of DHPC. This amount is non-interest bearing and repayable on demand.

During the year ended March 31, 2020, Eqonex issued a 12-month loan note paying interest at 15%. The loan note raised $0.7 million and was repaid in full during the year ended March 31, 2021.

During the years ended March 31, 2021 and 2020, Eqonex paid $2.4 million for long-term office leases accounted for under IFRS 16. The office leases are in Hong Kong, Singapore and Vietnam. During the year ended March 31, 2109, Eqonex paid $1.6 million for long-term office leases.

On February 20, 2019, Eqonex signed a term sheet to set up a partnership in the United States which was subject to shareholder approval. Eqonex advanced $0.5 million to the United States operation shortly after signing the term sheet during the period ending March 31, 2019. Additionally, a further $0.5 million was advanced in the year ended March 31, 2020. However, Diginex Hong Kong’s shareholders failed to agree to the term sheet and a definitive shareholder agreement was not signed. This loan has been fully written off. In addition, during the year ended March 31, 2019, Eqonex advanced $0.2 million to Rise Tech Ventures which was fully impaired in the same year.

In October 2018, Eqonex agreed to buy back Eqonex equity held by an employee. The employee held 55,727 shares of common stock. The consideration paid was a combination $3.1 million in cash and Madison common stock. The combined costs of the share buyback were $6.6 million, and the buyback was paid out of the accumulated profits of the Company.

In October 2018, Eqonex paid an interim dividend of $20 million to shareholders.

Discontinued Operations

There were no cash movements associated with discontinued operations for the years ended March 31, 2021 and 2020. Cash inflow of $27.9 million in the year ended March 31, 2019 related to cash received by DHPC via the issuance of debt prior to the sale and deconsolidation of 51% of the business.

Indebtedness

As of March 31, 2020, Eqonex had drawn down $10.7 million of the credit facility with Pelham Limited. This credit facility was fully repaid and terminated in September 2020.

During the year ended March 31, 2021, Eqonex issued capital via a private placement which resulted in the issuance of equity and warrants. The warrants have been recorded as a liability on the consolidated statement of financial position and were fair valued at $5.1 million using a Black Scholes model as at March 31, 2021. The warrants can result in a liability to the Company in the event of a forced change of control.

During the year ended March 31, 2021, Eqonex received an advance of $0.9 million from a subsidiary of DHPC. The advance is non-interest bearing and repayable on demand. Eqonex also owes $0.2 million to the asset management fund that is managed by Eqonex. The amounts arise as Eqonex have agreed to pay any costs to operate the fund that are more than 1% of the assets under management.

Eqonex Capital Limited, a subsidiary registered in the United Kingdom and operating as an authorized representative of Starmark, issued a loan note with a value date of September 6, 2019. Starmark is regulated by the UK Financial Conduct Authority (FCA), the financial services regulatory body in the United Kingdom. The loan note was available to employees of Eqonex and shareholders only due to regulatory constraints. The loan note was structured in $5,000 units and pays interest of 15% per annum and interest payments were made on a quarterly basis. As of March 31, 2020, Eqonex Capital raised $0.7 million and accrued $0.1 million of interest payable. The proceeds of the loan note were advanced via an intercompany loan to Eqonex Markets, a Hong Kong subsidiary. Eqonex Markets used the loan advanced as capital to trade Digital Assets on a proprietary basis. The loan notes were fully redeemed on June 1, 2020 and Eqonex ceased to trade on a proprietary basis.

Other payables outstanding relate primarily to accounts payable and accruals that have accumulated in the ordinary course of business.

At March 31, 2021 the Eqonex had contracted to the below long and short term office leases:

Long term:

Short term:

The table below illustrates the indebtedness as at March 31, 2021 and 2020:

*The client liabilities held of $27.0 million (March 31, 2020: $0.5 million) relate to monies held in the form of cash (fiat) and Digital Assets (including USDC) on behalf of clients to enable then to trade on the Exchange and execute OTC trades.

Research and Developments, Patents and Licenses, Etc.

We own and control a variety of intellectual property, including but not limited to trademarks, patents, proprietary information and software tools and applications that, in the aggregate, are material to our business. The proprietary software related to our Exchange Business is material to our business. No other individual instance of intellectual property is material to the Company.

Off-Balance Sheet Arrangements

In March 2020, the Group acquired software from a third party for potential consideration of up to $10.0 million. Of this, $8.5 million of the fair value consideration was based on the integration of the software into the EQONEX Exchange infrastructure and the delivery of future products with the balance of $1.5 million payable based on future trading volumes on the exchange. At March 31, 2021, $6.5 million had been paid via cash and shares in Diginex Hong Kong. The third party will not be providing the service associated with the remaining $2.0 million of the $8.5 million fair value consideration. Trading volume targets associated with $1.0 million of the $1.5 million contingent payment were not met prior to the target date in February 2021. The remaining $0.5 million may be payable if future trading volume target is met by future target date of February 2022.

The table below illustrates a summary of Eqonex’s contractual obligations and commitments as at March 31, 2021:

business

Overview

Eqonex is a Singapore domiciled financial technology company that builds products, delivers services and develops solutions that utilize distributed ledger and other technologies to improve the efficiency of financial markets and the current cryptocurrency industry. Eqonex has built a cryptocurrency and Digital Assets ecosystem that offers innovative product and services that are compliant, fair and trusted. Eqonex believes in a future where all financial and non-financial transaction data is recorded on distributed ledgers, such as blockchains. This will enable the financial services industry to reduce the cost of originating, distributing and executing transactions of financial assets, all of which depend on access to secure and trusted data. In June 2021, the Company announced that it was unifying its businesses under the Eqonex brand. The rebrand follows the divestment of Diginex Solutions, the ESG blockchain solutions company, in May 2020 and the impending lapse of the license to use the “Diginex” brand at the end of June 2021. The new EQONEX brand focuses on the Digital Asset element of the business, reflected in the EQUOS and EQO brands, while recognizing its history as “Diginex”.

History

Eqonex was founded in Hong Kong in June 2017. The Company was incorporated in October 2019 and operates within Singapore. Eqonex was founded based on the Company’s understanding that the combination of both technology and an extensive knowledge of the intricacies of capital markets would be required to achieve potential efficiency gains using distributed ledger technology within financial markets. Eqonex believed that existing players would struggle to transition to the new paradigm of conducting business and would be resistant to change given their cost base and legacy business models in place. The Company identified an opportunity to create a new class of financial institution.

The founders and early employees of Eqonex (the “Founding Team”) observed that several businesses related to Virtual Currency investing and trading were thriving but were concerned that regulations had not kept pace with the industry. After considering several opportunities to partner with existing firms to build Virtual Currency infrastructure, Eqonex decided to build its own Digital Asset ecosystem comprising of a Virtual Currency exchange and custody solution, among other business lines. Eqonex recruited a compliance team to oversee applications for various licenses and continues to engage with financial regulators and industry players to advocate for further development of regulation of Digital Assets. Eqonex believes a comprehensive regulatory framework of Digital Assets is necessary to enable its institutional adoption and market growth. Given that many institutional investors would prefer to allocate to investment products, Eqonex also applied to the Hong Kong Securities and Futures Commission (“SFC”) for a license to operate a multi-manager fund.

The Founding Team’s analysis of the cryptocurrency industry and, in particular, ICO’s was that, while the coins in early 2018 were predominantly unregulated security offerings for early stage companies, which they did not believe to be a scalable business upon which to build a financial technology or services business, the underlying technology (the blockchain network and smart contracts) could be applied to institutional offerings of debt, equity and alternative instruments. Participation in this business would require securities licenses, investment banking advisory services, technology products and solutions. The Founding Team recognized that the medium-to-long-term impact of distributed ledger technology in capital markets would extend beyond simply changing the form in which traditional securities were traded (e.g. as a digital security on a distributed ledger) or the way they were distributed (e.g. fractionalized via a technology platform). They believed distributed ledger technology would enable the creation of innovative financial products, that would give issuers a way to lower their cost of capital by programming securities based on inputs (secure and trusted transaction data) that was recorded on a distributed ledger.

Eqonex has built and continues to develop a comprehensive set of products, services and solutions to capture the full value chain resulting from transitioning data and securities to a distributed ledger.

Eqonex has a current headcount of 178 with employees and contractors located in Hong Kong, Singapore, Vietnam, United Kingdom, Switzerland, France, China, Dubai, Japan, Philippines, South Korea, USA, Puerto Rico and Canada.

Industry Background

A distributed ledger is a ledger containing records of transactions between parties in a network that is “distributed” (shared) between those parties. When a participant in the network requests a transaction to be added to the ledger, it is broadcast to other computers (nodes) in the network, which validate the transaction using a consensus algorithm that enables transactions to be confirmed without the need for a central point of authority or control. A validated transaction is added to the network in a way which is permanent and unalterable (immutable), leaving an audit trail by design. Every participant in the network has simultaneous access to view the information, which is kept secure with the use of cryptographic functions. The network can be public (open to anyone), permissioned (open only to approved parties) or private.

A blockchain is a distributed ledger in which transaction data is grouped into specific, time-stamped sets. Once consensus is reached on the data that will go into the set, the set is sealed with a cryptographic signature called a “hash” creating a sealed “block.” This block is then mathematically tied to the previous block on the ledger, forming a chain. A blockchain is a type of distributed ledger, though the terms are often incorrectly used interchangeably.

The potential benefits of distributed ledger technology arise in the following circumstances, among others: (i) where there is value to be created from the removal of a need for a central point of control (an intermediary) to verify transactions, leading to near or real time processing and settlement of transactions, (ii) where there are efficiencies to be realized from the automation of transactions between parties according to business logic embedded in a smart contract and (iii) where the provision of more information that participants know to be verified and immutable can reduce the economic value lost by a lack of trust between parties.

In 2020, PwC estimated that blockchain technology has the potential to boost global gross domestic product by US$1.76 trillion by 2030. The forecasted acceleration of growth is consistent with Eqonex’s expectation that once more enterprises have moved data onto distributed ledgers, there will be more firms building applications, and value-added use cases will grow.

Since 2018, venture capital firms have invested billions of dollars into companies in the blockchain industry. This has included investment into many different blockchain protocols, each with their own consensus mechanisms, programming language, and rules governing what information is shared, in what form, and to whom. Eqonex is not a blockchain protocol, nor a type of distributed ledger, and does not intend to design its own blockchain. Rather, Eqonex views blockchains and distributed ledgers as a foundational layer of data record keeping that enables transactions between parties to be smarter (automated), faster, and more secure.

Currently, there are numerous online trading venues to trade Digital Assets, primarily in the form of Virtual Currencies and Stablecoins, which operate on a 24-hour, 365-day, basis. According to Nomics, a Virtual Currency data provider, the spot market for bitcoin, the largest and most widely used Virtual Currencies, traded an average daily spot and derivative volume of $75 billion in May 2021.

Custodial services for Digital Assets continue to grow, with several well-known institutions from traditional finance, now providing insured custody for Digital Assets. Eqonex is not aware of any reliable data on the current market size for third-party custody of Digital Assets. BitGo, a Digital Asset custodian which Eqonex believes is one of the largest Digital Asset custodians globally, announced over $16 billion of assets under custody in December 2020.

Eqonex expects the size of the Digital Assets industry to continue to grow significantly, particularly through the disruption of traditional financial services, and has developed several business lines in anticipation of this growth.

Business Lines

Eqonex has established several complementary lines of business to deliver products and services to its clients. These lines consist of (i) the Exchange Business, (ii) the Custody Business, (iii) the Trading Business, (iv) the Capital Markets Business and (v) the Asset Management Business. Eqonex also anticipates the launch of the Investment Products Business and the Borrowing & Lending Business in the third quarter of 2021, subject to regulatory approval for Investment Products.

Our Business Lines

The Exchange Business

The EQONEX Exchange, formerly known as EQUOS is a Digital Assets exchange that facilitates the trading of Virtual Currencies, their respective derivatives and, in the future, Digital Securities. EQONEX Exchange offers retail, professional and institutional investors to trade Digital Assets 24 hours per day, 7 days a week and 365 days per year without a noticeable seasonality in trading volumes. EQONEX Exchange, based in Singapore, launched a beta version in the fourth quarter of 2019 and became fully operational in the second quarter of 2020. The Exchange is operating since February 28, 2020 under an exemption to provide payment services pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019, allowing it to continue operating until such time as a decision on a full license application has been made by the regulator. EQONEX Exchange launched with an initial focus on clients based in Asia and Europe.

EQONEX Exchange commenced as a spot exchange offering trading in BTC/USDC and ETH/USDC. Both BCH/USDC and USDT/USDC were subsequently added in March 2021, with EQO/USDC in April and MATIC/USDC, LINK/USDC and GRT/USDC expected to be added in July 2021.

The product suite was expanded in January 2021 to include a perpetual swap offering for BTC/USDC and this was followed by ETH/USDC.

EQONEX Exchange has plans to add further trading pairs and has a comprehensive product roadmap for future releases including dated futures and options.

Sales and Marketing

Since the launch of EQONEX Exchange, the focus has been to build volumes and attract clients. EQONEX Exchange does not market make on the exchange, and instead acts to oversee the fairness of the markets on the platform and hence an initial focus has been on building liquidity from clients using, amongst others, the below initiatives:

In April 2021, EQONEX Exchange launched its own utility token, EQO, which can only be earned from trading or staking on EQONEX Exchange. EQO provides various utilities for owners of EQO, including reduced trading fees and, in the future, cross-asset collateralization on EQONEX Exchange as well as enhanced yields with Eqonex’s planned Borrowing & Lending Business. EQO can be traded on EQONEX Exchange or with Eqonex Group’s Trading Business. See Note 40 to our consolidated financial statements for additional information.

EQONEX Exchange has a comprehensive social media marketing program including Twitter, Telegram, YouTube and LinkedIn. To optimize these channels across multiple jurisdictions, languages and generational demographics EQONEX Exchange contracts with a network of influencers.

The revenue for the year ended March 31, 2021 was $203,230 with an average daily volume in March 2021 of $15.9 million, of which 73% was generated by institutional clients.

Competition and Pricing

The Digital Asset exchange industry is intensely competitive. Many of our competitors and market leaders have been established for many years and have greater financial, technology and research and development resources, larger sales and marketing teams and greater brand name recognitions than we have. However, barriers to entry have been relatively low resulting in numerous entrants into the space.

There does appear to be a trend to wider adoption of Digital Assets with some large institutions expressing positive opinions, particularly on Bitcoin.

While the industry is not yet fully regulated, regulators globally are starting to put policies in place for the future governance of the industry. The introduction of such regulation will significantly heighten the barriers to entry and is expected to force those exchanges with limited legal and compliance capability out of the industry. Even some of the largest and most successful exchanges could come under intense scrutiny forcing a reduction in their product offering and a KYC remediation of their existing customer base.

Eqonex was established based on the belief that the wider adoption of Digital Assets is only possible through the enforcement of AML/KYC and licensing frameworks commensurate with traditional finance. EQONEX Exchange is based in Singapore due to the progressive approach to Digital Assets and Singapore’s reputation as a robustly regulated and trustworthy financial center. EQONEX Exchange is also exploring the establishment of a regulated exchange in Europe.

We do not believe that pricing is a major factor between competing Exchanges. We believe that our pricing is competitive and is not a barrier to growing the business.

Government Regulation

The Exchange is operating under an exemption to provide payment services pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019. The exemption will remain in effect until MAS decides on the license application.

Only a few countries have enacted detailed Digital Asset-centric legislation. We expect this to change, in the short to medium term. We expect countries, in particular those in the European Union, to continue the trend of enacting digital asset/AML regulations and require both host and extra-jurisdictional Digital Asset businesses to register and impose licensing obligations on the operating entities. Where legislative or license requirements already exist, the licenses often mirror traditional financial/banking licenses. Eqonex will continue to monitor the regulatory landscape as it evolves and make license applications as applicable to further grow the business.

Digivault

Digivault (“Custody Business”, “Digivault”): Eqonex’s custody solution is an institutionally focused, highly secure Digital Asset custodian that started to accept client assets from October 2019. The business operates both cold (Kelvin) and warm (Helios) custody services. The business commenced services by offering BTC custody and followed shortly thereafter with ETH. The assets that Digivault can provide custody services for continue to grow and the business currently supports BTC, ETH, USDC, USDT, EQO, PAX, LINK, TUSD, GRT, MATIC, WOO and CHZ. Support for DOT and BCH is currently under development.

Following the rebrand to Eqonex, Digivault retained the Digivault name.

Digivault has incepted a crime insurance policy which covers both Kelvin and Helios and is insured by various London insurance companies and syndicates rated A or higher by S&P.

During the year ended March 31, 2021 Digivault increased assets held under custody and generated revenues albeit offered pricing incentives initially. The revenues of assets under custody (“AUC”) for the year ended March 31, 2021 was $4,525 with assets under custody of $11.1 million.

Towards the end of the year ended March 31, 2020 the integration of Digivault to EQONEX Exchange, was complete and assets were transferred from BitGo, a Digital Asset custodian, to Digivault. The integration has led to a significant increase in AUC and daily transaction volume.

Sales and Marketing

Digivault is focused on institutional and high net worth individual clients and as such does not advertise in the same way that a retail focused solution might. Marketing is centered on the Digivault website and bolstered by social media, webinar appearances and press engagement. Sales of the Digivault solutions is led by a dedicated sales lead and supported by the wider Eqonex group sales team. The sales approach is also supported by submission for RFQs by institutions looking for custody solutions and by referrals.

Digivault has concentrated on securing partnerships with vendors and service providers whose systems and services are already in use with traditional institutions such as Torstone Technology (“Torstone”). Torstone is a leading platform for institutional post-trade processing and settlement. Digivault has signed a Proof of Concept agreement with Torstone to develop connectivity (due for completion in July 2021) between Torstone’s platform and Digivault to support the settlement flow of Digital Assets. The partnership with Torstone will provide institutions integrated access to Digivault and Torstone and allows Digivault to leverage the existing Torstone customer base while Torstone could offer support for digital as well as traditional asset services. The partnership with Torstone will provide traditional institutions with access to Digivault custody via the Torstone integration with front-office trading systems.

The assets held under custody relate to clients in Asia (c.70%), Europe (c. 20%) and the Middle East (c.10%).

Competition and Pricing

The Digital Assets custody competitive landscape has continued to grow since the inception of Digivault, more traditional custodians have either already entered, or are looking to enter the space. There have also been some high-profile business combinations as corporates look to strengthen their current offering by adding a Digital Assets custodian to their portfolio of products such as Galaxy Digital purchasing BitGo and Curve being acquired by PayPal.

Digivault continually monitors the competitive landscape in terms of pricing so that it remains competitive and adapts to market conditions. The initial expectation was that there would be price compression between competitors, however, prices have remained relatively stable which is believed to be partially due to the fact that the cost of insurance for Digital Assets has increased over time.

Government Regulation

Within the United Kingdom, Digivault is currently the only standalone Digital Asset custodian to be registered by the UK Financial Conduct Authority as a cryptoasset firm (registration number: 927958: Registered Cryptoasset Firms (fca.org.uk)) under the Money Laundering, Terrorist Financing and Transfer of Funds (Information of the Payer) Regulations 2017 (MLR 2017), as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019. This registration is a significant barrier to entry in the UK and companies who wish to offer digital wallets in the UK must receive this registration before they can provide services to clients. An exception is offered to those businesses who were offering Digital Asset custodian services before January 2020. Those that were operation before January 2020 received grandfather rights and in December 2020, approximately 180 were placed onto a temporary register. Of these businesses, Digivault were the first to proceed from temporary to full registration.

In the third quarter of 2021, Digivault will be recommencing its application for a custody license facilitating the “safeguarding and administering investments” that will enable Digivault to provide custody services for Digital Securities. The license will support the business’s future roadmap to support digital securities when the demand for Digital Asset securities evolves.

Global regulations continue to develop, as they do, Digivault will continue to monitor and assess the regulatory requirements to expand operations globally.

The Trading Business

The Trading Business consists of a liquidation risk management desk, an OTC desk and a Digital Assets trading tool, Access Trading. The risk management desk primarily manages liquidation trades on behalf of the Exchange out of Digital Markets Limited, a Seychelles incorporated entity.

The liquidation risk management desk involves the risk management of leveraged positions from Exchange customers who have triggered their margin limits. This service is not designed to generate any profit or loss for the Trading Business but to isolate and close out risk positions on Exchange.

The OTC desk, which commenced operation during the year ended March 31, 2019 has the capacity to trade as principal, or match client orders internally or externally via third party institutions. The OTC desk operates from Hong Kong and Singapore where all execution in fiat and Digital Asset payments are actioned. In Singapore, the OTC desk falls under the Singapore regulatory framework and was included in the full license application submitted on May 17,2020 for the Exchange.