Digatrade Financial Corp (OTCMKTS:DIGAF) Is A Cheap Exposure To Bitcoin

Digatrade Financial Corp (OTCMKTS:DIGAF) was first featured by us in "Is Digatrade Financial Corp (OTCMKTS:DIGAF) A Valid Bitcoin Play?". In that piece, my colleague Chris Sandburg assessed the digital currency trading platform that the company offers and we concluded the following:

"The platform is well branded and the company’s Canada base and public listing could well be enough to serve as a draw for clients looking for some accountability from a platform (this is a sore subject for the market right now). If this proves the case, then as the company grows (and we get some confirmation of user numbers across the platform), it could become more attractive." Source

Additionally, we explained that this was for the moment a very short term play and we needed to wait for more press releases to understand the strategic direction of the company. Well, that moment seemed to arrive recently, as the company put out its interim financial statements for the period ended March 31, 2017. The market did not react to it, but we still believe that our readers need to know what was inside that document. Have a look at the recent price action:SourceBusiness and Recent DevelopmentsDigatrade Financial Corp. was founded on December 28, 2000. It is a Vancouver, British Columbia company. The business objective as it appears in the company reports is the development of "blockchain technology services and branding a digital asset exchange trading platform that allows customers to trade digital assets and alternative currencies."How did DIGAF obtain the necessary know how to start in this business? In March 2015, the company signed an agreement with Mega Ideas Holdings Limited ("ANX"). This partner, based in Hong Kong, has the technology and the know-how to operate in the sector:

"Mega Ideas Holdings Limited owns and operates a technology platform and provides operational support specializing in web-based digital currency exchange and transaction services for the cryptographic digital currencies known as Bitcoin and other alternative digital coins". Source

We found the following details in the annual report regarding the agreement with Mega Ideas Holdings Limited:

"Pursuant to the terms of the agreement, the Company is required to pay monthly maintenance fees of US$1,500 for the first six months commencing the first month after the effective date, and US$5,000 thereafter. The revised agreement with ANX is for a term of two years." Source

Financial Statements and Shares OutstandingWe are the only website that offers the last state of the company's financial accounts. Yahoo Finance and the OTC Markets Exchange had not yet obtained them. Assessing information before other market participants is key in the markets. Even if it is good or bad, it always gives us an edge. The following is the state of the balance sheet:Source (Figures are in CAD$)Source (Figures are in CAD$)Investors should note that although the equity value in the balance sheet did not move in 2017, the "weighted average number of shares outstanding" went from 82,442,179 shares to 42,909,650. Additionally, the deficit of the company is quite large; CAD$ 4,547,136. What does it mean? It means that the company will pay very little taxes in future. These are accumulated losses, which are tax deductible. Investopedia explains this accounting advantage in the following way:

"A net operating loss (NOL) is a loss taken in a period where a company's allowable tax deductions are greater than its taxable income. When more expenses than revenues are incurred during the period, the net operating loss for the company can generally be used to recover past tax payments. The reasoning behind this is that corporations deserve some form of tax relief when they lose money, so they may apply the net operating loss to future income tax payments, reducing the need to make payments in future periods." Source

Let us note that if another Bitcoin exchange wishes to merge with ANX, the resulting business combination would benefit from these NOLs.What could happen now? In a recent press release, the company stated its future strategy, which "is currently developing several new technologies for the Digatrade Core 2.0 Digital Asset Trading Platform" and "seeking additional new opportunities and partners". New developments in the company's technology or another partnership, such as ANX's, could excite the market. It would mean that the company is still growing, thus the share price may become volatile. We need to be alert.ConclusionDigatrade Financial Corp. released its quarterly financial accounts, which did not create a share price reaction. We included them in this piece so that our readers could assess them. Other websites did not do so yet. We discovered that the amount of shares decreased in 2017, that the company owns NOLs, and noted the company's strategy. In our opinion, DIGAF looks to be a cheap exposure to bitcoin.Be sure to check out our coverage on DIGAF.We will be updating our subscribers as soon as we know more. For the latest updates on DIGAF, sign up below!Image courtesy of gulf exchanger via FlickrDisclosure: We have no position in DIGAF and have not been compensated for this article.