BIGG Digital Assets : MD&A 2021

MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2021

This Management Discussion and Analysis (“MD&A”) of BIGG Digital Assets Inc. (the “Company” or “BIGG) provides analysis of the Company’s financial results for the year ended December 31, 2021 and should be read in conjunction with the

Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021, which are available on SEDAR atwww.sedar.com.

The December 31, 2021 financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRS”) as issued by the International Accounting Standards Board. All amounts are expressed in Canadian dollars, unless otherwise noted.

This MD&A is current as at April 29, 2022, the date of preparation, and includes certain statements that may be deemed “forwardlooking statements”. We direct investors to the sections “Forward-Looking Statements” and “Risk and Uncertainties”

included within this MD&A.

Additional information relating to BIGG is available on the SEDAR website atwww.sedar.comand on the Company’s website atwww.biggdigitalassets.com.

NATURE OF BUSINESS

BIGG Digital Assets Inc. is dedicated to the digital assets and blockchain technology industry. It has two operating business segments: blockchain technology development and digital currency sales brokerage. BIGG manages the two business segments and activities associated with being a public company.

The Company‘s global blockchain search and analytics operations focus specifically on crypto investigations and managing financial risk. With the exponential growth of digital currency, the global marketplace must navigate increased risks and regulatory compliance. BIGG‘s mission is to bring digital currency mainstream – by providing trust and real-time risk evaluation through its language agnostic proprietary platforms. The Company offers business, government and law enforcement clients a suite of forensic solutions, advanced analytics and risk-scoring capabilities to meet security needs and the growth of the digital currency marketplace.

On August 1, 2019, BIGG acquired Netcoins Inc., NTC Holdings Corp. and NTC Holdings USA Corp. (together referred to as “Netcoins”) in exchange for 37,500,000 common shares issued from its treasury. Netcoins is in the business of developing software to make the purchase and sale of digital currency easily accessible to the mass consumer and investor through brokerage services. Netcoins enables crypto transactions a self-serve crypto purchase portal and an Over-The-Counter (OTC) trading desk. The business of BIGG and Netcoins are highly complementary, and this acquisition is expected to create value for shareholders in both the near and long-term. It has offered BIGG an opportunity to step into the world of digital currency trading, in an immediately operational capacity.

BIGG Digital Assets Inc. was incorporated under the Business Corporations Act (British Columbia) on October 17, 2014 under the name Ameri-can Agri Co. Inc., which was subsequently changed to Acana Capital Corp. (“Acana”). On November 30, 2017, the Company acquired Blockchain Technology Group Inc. (“BTGI”) through a reverse acquisition transaction (“RTO” or “Transaction”) through the closing of a Share Exchange Agreement (the “SEA”) dated September 14, 2017. BTGI, now along with Netcoins, is the continuing business of the Company.

On September 26, 2019, the Company changed its name to BIGG Digital Assets Inc. to better reflect its planned future growth and existing businesses.

At December 31, 2021, the Company has $7,044,178 net loss during the year and accumulated deficit of $44,043,833 during the year. These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. The Company continues to rely on financing through equity raises or debt instruments to support its operations and expects to do so until the business operates with sufficient cash flows from operations Management has determined that the Company has adequate resources to continue as a going concern for the foreseeable future, which Management has defined as being at least the next 12 months from December 31, 2021.

BUSINESS OVERVIEW

BIGG Digital Assets Inc. believes the future of crypto is a safe, compliant, and regulated environment. BIGG invests in products and companies to support this vision.

BTGI’s has developed a blockchain-agnostic search and analytics engine, QLUETM, enabling Law Enforcement, RegTech, Regulators and Government Agencies to visually track, trace and monitor digital currencies transactions at a forensic level. QLUETM enables Law Enforcement, RegTech, regulators and government agencies to literally “follow the virtual money”. Investigators are able to quickly and visually trace, track and monitor transactions in their fight against terrorist financing, human trafficking, drug trafficking, weapons trafficking, child pornography, corruption, bribery, money laundering, and other cyber crimes. Initially built around Bitcoin, BTGI has more recently incorporated Ethereum, Bitcoin Cash, ERC20, and Litecoin.

Our product BitRank Verified® offers a “risk score” for digital currencies, enabling RegTech, banks, ATMs, exchanges, and retailers to meet traditional regulatory/compliance requirements. Both utilize the blockchain, which is fundamentally a digital ledger of transactions with unique characteristics designed to create records that are secure, reliable, transparent, and accessible. In late 2018, BTGI launched its Certified Cryptocurrency Investigator (CCI) designation program (https://www.cryptoinvestigatortraining.com/) the first of its kind. Students are taught how to track, trace and investigate cryptocurrency transactions and/or crimes.

Netcoins, acquired in August 2019, expanded the Company’s footprint in the digital assets industry. Netcoins develops brokerage and exchange software to make the purchase and sale of digital currency easily accessible to the mass consumer and investor with a focus on compliance and safety.

RESULTS OF OPERATIONS

The Company is continuing to build out its core businesses – resulting in greater customer traction and higher on-boarding numbers.

The business segments made significant strides during 2021, with a focus on excelling at delivering quality products and services. The Company seeks to meet the needs of customers today, as well as anticipating their future needs in the ever-changing landscape of the digital assets industry.

2021 Highlights

BIGG:

  • Completed two prospectus equity offerings, with overallotments, to raise gross proceeds of $42,777,378

  • Added a further 179.4 Bitcoin to its long-term treasury holdings, valued at approximately $4.16 million, or $70,100 per coin. BIGG intends to continue to accumulate Bitcoin over time, as it believes a target price of USD$100,000 per coin is achievable given the current lack of supply available in the market, strong on-chain metrics, and an increasingly widespread interest in Bitcoin

  • Announced the appointment of KPMG LLP as the Company’s auditor. In addition to being a leader in audit, tax and advisory services, KPMG has expertise in the digital assets sector and a global reach that will support BIGG’s growth initiatives

  • Made strategic equity investments into LQwD (lqwdfintech.com) and TerraZero Technologies Inc. (“TerraZero”) (terrazero.com), further increasing its interest in TerraZero in early 2022. BIGG crystalized gains of approximately $618,000 on disposal of 80% of its investment in WonderFi Technologies Inc., with the remaining interest sold in February 2022 (See “Subsequent Events” below). BIGG continued to hold a minor equity stake in ZenLedger, Inc. (zenledger.io),

    acquired in July 2021.

Netcoins operations:

  • Commenced operating as a Restricted Dealer under Canadian securities regulation – see “Netcoins Restricted Dealer

    License” section below

  • Netcoins revenues grew strongly, increasing 712% to $12,512,723 in 2021 (2020 – $1,540,395). The margin rate increased to 1.28% in 2021, up from 1.10% in 2020

  • Active Users totaled approximately 61,545 during 2021, up 639% year-over-year (YoY)

  • Launched its Android and Apple iOS native crypto trading apps on the Google Play store and Apple Store

  • Launched additional coins: ALGO, EOS, USDC and XLM

  • Soft launched Netcoins Pay, a prepaid card that enables users to draw from their Canadian dollar balance within Netcoins, and earn Bitcoin back with every purchase made. A select group of testers comprise the first cardholders, with additional launches planned in 2022

  • Purchased the domain Netcoins.com

  • Continued to grow the team – including the hire of Kim Dwyer as Chief Operating Officer and Ankit Anne as Director of Strategy & Operations, as well as a VP of Finance and Assistant Controller

  • Continued to ramp up marketing across all channels, including radio and television

  • Continued its review of licensing requirements for expansion into the United States

BTGI operations:

  • BTGI revenues increased by 64% YoY, to $1,602,424 in 2021 (2020 – $974,134), at a margin rate of 86% (2020 90%)

  • Continued performance enhancements were made to BTGI’s products

    • launched the Ethereum ERC-20 explorer in our Compliance Suite, with powerful filtering and visibility tools

    • launched several enhancements to our i-Graph (investigation graph), including better cluster visualization and high-definition export of graphs, and custom address and labelling tools

    • completed BTC, ETH, BCH, BSV and Syscoin support on the i-Graph

    • redesigned the Compliance Suite dashboard

    • launched a case management system in BitRank

    • introduced an enhanced BitRank API product that delivers new functionality and enables access to our extensive database to partners

  • Made significant upgrades to our Address Watch:

    • adding three alert profile rules related to Counterparty Risk Exposure and the monitoring of the risk score of addresses in the group

    • monitoring exposure of the individual addresses or the group as a whole

    • implementing APIs that enable client systems to interact with our Address Watch, update the addresses that are being monitored, and receive alerts

  • Continued performance enhancements were made to BTGI’s products, including improvements to allow for high-definition export

  • Continued improvements made to our data management software with an emphasis placed on data integrity and auditing

Netcoins’ Restricted Dealer License

BIGG strongly believes the future of crypto is a safe, compliant, and regulated environment.

On September 30, 2020, the Company applied for registration with the British Columbia Securities Commission (the “BCSC”) and other provincial and territorial securities regulators and the Canadian Securities Administrators (the “CSA”) regulatory sandbox to allow Netcoins to operate as a regulated open-loop crypto asset trading platform.

On September 29, 2021, Netcoins obtained its registration as a restricted dealer in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Prince Edward Island, and Nova Scotia. Shortly thereafter, Netcoins was also registered in Newfoundland.

BIGG continues to be at the forefront of regulation in the Canadian crypto space and, notably, is the first publicly traded company in the country to own and operate a registered crypto trading platform. This marks a significant milestone for BIGG, Netcoins, and the crypto trading industry, with a new regulatory regime for an emerging industry that is growing exponentially.

Netcoins is now one of the first crypto trading platforms (CTPs) to be registered as a restricted dealer in Canada, which will provide a distinct early mover advantage as the industry continues to mature and evolve into a regulated framework. Underthis framework, Netcoins will continue to operate and market to new customers across Canada, including Ontario. Netcoins anticipates continued growth on its platform through:

  • the addition of new coins

  • additional launches of Netcoins Pay and other new products

  • expansion into the United States, and

  • expanding advertising campaigns to new channels to reach new audiences.

Custody and Safeguarding of Digital Currencies

Netcoins has made safeguarding and custody of customer assets a priority, and has dedicated significant time and resources to evaluating third-party custody providers to ensure the solution offered through Netcoins provides the most integrity and security to its customers. Netcoins does not maintain custody of (or otherwise hold) crypto assets owned by customers.

Netcoins utilizes BitGo Trust Company, Inc. (“BitGo”) as its primary custodian.

On March 24, 2022, Netcoins received an update to its restricted dealer license with the BCSC and CSA that permits the company to hold up to 20% of its total client crypto assets online in hot wallets secured by Fireblocks Ltd. (“Fireblocks”).

A summary of each custodian is provided below.

BitGo Trust Company, Inc.

BitGo Trust Company, Inc. acts as the third-party custodian for customer crypto assets (including providing cold wallet custodian services). BitGo is responsible for holding and safeguarding these crypto assets. BitGo does not act as a payment processor in connection with their custodian service arrangements with Netcoins.

BitGo is a trust company organized under the laws of the State of South Dakota and regulated as a trust company by the Division of Banking in South Dakota. BitGo has not appointed any sub-custodian to hold any of the crypto assets. All of the Company’s long-term Bitcoin investment holdings are also held in cold storage with BitGo.

BitGo provides insured wallet management and custody solutions for a variety of digital assets, maintaining a comprehensive insurance policy for digital assets covering $100 million in losses for crypto assets held in cold storage and in hot wallets, including the assets owned by Netcoins’ customers. BitGo is not responsible for any losses resulting from inaccurate

instructions and the Company is responsible for maintaining adequate security and control of any and all keys, IDs, passwords, hints, personal identification numbers, non-custodial wallet keys, API keys, yubikeys, 2-factor authentication devices or backups, or any other codes that the Company uses to access BitGo. Furthermore, BitGo is not responsible for any damage or interruptions caused by any computer viruses, spyware, scareware, Trojan horses, worms or other malware that may affect the Company’s computer or other equipment, or any phishing, spoofing or other attack, unless such damage or interruption directly resulted from BitGo’s gross negligence, fraud, or willful misconduct. There are no limitations on liability if BitGo breaches its confidentiality obligations or if any damage or interruptions directly result from BitGo’s gross negligence, fraud,

or willful misconduct. All other damages are limited to the fees paid to BitGo within the twelve-month period preceding the incident giving rise to such liability.

The due diligence process for BitGo included the following:

  • Review of BitGo Inc.‘s (which licenses technology to BitGo Trust Company, Inc.) SOC 2 Type 2 report and certification

    (System and Organization Controls Report Relevant to Security conducted by Deloitte for the periods from December 1, 2019 to September 30, 2020 and October 1, 2020 to September 30, 2021, with a bridge letter obtained for the period of October 1, 2021 to December 31, 2021).

  • Review of BitGo Trust Company’s SOC 1 Type 2 report and certification for the period of April 1, 2021 to September 30, 2021.

  • Review of BitGo’s comprehensive insurance policy for digital assets which currently covers $100 million in losses for funds held in cold storage, includes a set of corporate insurance policies, and optional hot wallet insurance.

  • Confirmation that BitGo will hold all crypto assets in trust for customers of Netcoins in an omnibus account in the name of Netcoins, and separate and distinct from the assets of Netcoins and all of BitGo’s other clients.

  • Review of BitGo systems that permit Netcoins to generate a unique address for each customer account so it can track who sent the funds in, and which account to credit. When a customer sends funds, it creates a new BitGo sub-account, which feeds into one main account which is in the name of Netcoins. Once a customer account is funded with the relevant crypto asset, BitGo custodies the crypto asset. BitGo utilizes 100% multi-signature technology to remove single points of failure, user and wallet controls to establish and enforce internal policies and procedures, and two-factor authentication for all accounts.

  • Review of BitGo’s policies and procedures which it has established and applied that manage and mitigate the custodial risks, including, but not limited to, an effective system of controls and supervision to safeguard the crypto assets for which it acts as custodian.

  • Confirmation that BitGo has an independent internal audit performed by Eide Bailly LLP, a public accounting firm.

Netcoins has conducted due diligence on BitGo and has not identified any material concerns. The Company is not aware of anything with regards to BitGo’s operations that would adversely affect the Company’s ability to obtain an unqualified audit opinion on its audited financial statements. The Company is not aware of any security breaches or other similar incidents involving BitGo as a result of which crypto assets have been lost or stolen. There are no restrictions on the Company’s ability to move crypto assets from the custodianship of BitGo, and these transfers can occur immediately, subject to the control processes, such as two video conferences to authorize cold storage transfers.

Netcoins has assessed the risks and benefits of using BitGo and has determined that in comparison to a Canadian custodian it is more beneficial to use BitGo, a U.S. custodian, to hold client assets than using a Canadian custodian, as there is not a suitable Canadian custodian option at this time.

In addition to the initial due diligence on BitGo, Netcoins continues to conduct ongoing due diligence on BitGo. As part of an annual review, Netcoins will require BitGo to:

  • provide copies of any completed SOC reports and reviewing same for any increase risk to Netcoins;

  • confirm from BitGo that it maintains adequate insurance coverage;

  • verify the amount of BitGo’s equity and other financial metrics to address counterparty risk; and

  • verify that BitGo maintains any requisite licenses including licenses issued by the Division of Banking in South Dakota or any other regulator.

The Company currently uses both hot and cold wallet systems within BitGo.

  • The cold wallet is completely segregated, is not connected to the internet and is used for long term storage of crypto assets. The cold wallet requires two of four authorized signatories, as representatives of the Company, to verify any transfers from the cold wallet via video conference.

  • The hot wallet is connected through the internet, is connected to the Netcoins web application via API and all customer deposits and withdrawals are processed through the hot wallet. As thresholds are met, transfers are reviewed and signed manually by one of four authorized signatories. The relevant thresholds include limits of 4 BTC per transaction, 30 BTC per hour, or 100 BTC per day.

Fireblocks Ltd.

Fireblocks is a developer of a blockchain security platform designed to protect digital assets. The platform securely transfers assets across exchanges, wallets, custodians, and counterparties and keeps them readily available using Fireblocks patent-pending chip isolation security, and model predictive control (MPC) technology, enabling traders to safeguard digital assets.

Fireblocks Ltd. is incorporated under the laws of Tel Aviv, Israel, and has obtained a SOC 2 Type 2 audit report prepared by the auditors of Fireblocks, a leading global audit firm. Netcoins has reviewed a copy of the SOC 2 Type 2 report for the period of September 1, 2020 to August 31, 2021, with a bridge letter obtained for the period of September 1, 2021 to December 31, 2021 and has not identified any material concerns.

https://www.marketscreener.com/quote/stock/BIGG-DIGITAL-ASSETS-INC-39027930/news/BIGG-Digital-Assets-MD-A-2021-40226125/

Erlando F Rasatro

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