KR1 plc - Interim Report

KR1 plc - Interim Report

PR Newswire

London, September 30

30 September 2021

KR1 Plc
("KR1", the "Company)

Interim Report for the Half Year Ended 30 June 2021

KR1 plc (KR1: AQSE), a leading digital asset investment company, today announces its half year results for the six months ended 30 June 2021 (HY21).

Financial highlights

• Net current assets of £105,736,099, +1,208% on HY20; +179% on FY20
• NAV per share of 80.30p as at 30 June 2021
• Staking revenue £5,473,597, +7,373% on HY20; +558% on FY20

Investment highlights

• Continued investments in innovative decentralised blockchain projects
• Emerging Polkadot and Kusama ecosystems: Initial and follow-on investments into Moonbeam, Interlay and more.
• Major participant in ongoing Kusama parachain crowdloan auctions - a large majority of KR1's KSM position was contributed into crowdloan campaigns of Karura, Shiden, Moonriver, Basilisk with a view to continue allocating to further projects.
• DeFi: Initial and follow-on investments into Exponent, Divergence, Vega Protocol, and Redstone.
• Base layer blockchains: Invested in Celestia (formerly LazyLedger), which aims to bring better data availability to blockchains.
• Privacy: Initial investments into Automata, a decentralised service privacy middleware layer for multiple platforms

Strategic highlights

• Growing revenue stream from 'Proof-of-Stake' networks, primarily coming from Polkadot and Cosmos with a view to add further streams going forward (in particular Ethereum 2.0 and Internet Computer/Dfinity)
• New appointments to the Company's Board of Directors, including Rhys Davies as Non-Executive Chairman and Mona Elisa as Non-Executive Director, reflecting our efforts to further enhance our corporate governance.
• Improved internal structures and processes, including establishment of a more robust and aligned relationship between the Company and the research team.

Outlook

• We are currently witnessing unprecedented usage of blockchain networks, accompanied by increasing allocations to digital assets among institutional investors - trends which we expect to continue.
• Further clarifications with regards to regulation in the crypto and digital assets space is expected, with stablecoins being a likely area of focus. Regulatory bodies are also taking note of the rate of growth and power inherent in decentralised technologies, but we are confident that permission-less, open-source, decentralised technologies will continue to proliferate globally.
• The current enthusiasm in the digital asset market and increasing rates of adoption mean we expect KR1 to remain in a very strong position to the end of the financial year 2021.

George McDonaugh and Keld van Schreven, Managing Directors of KR1 plc, commented:

"The first half of the year was very positive for the Company, our long-term strategic commitment to digital assets and the crypto space continues to serve us well, resulting in a significant increase of our Net Current Assets to £105,736,099 GBP. We have also recently seen a major acceleration in the adoption of decentralised technologies, ensuring a full pipeline of innovative and disruptive projects. We also made important steps in the evolution of our corporate governance, including two new appointments to the Company's Board of Directors which bring a valuable mix of capital markets experience and digital assets expertise. As we look ahead, we are excited about the significant investment opportunities available to the Company. We remain confident that KR1's portfolio performance and its ability to generate strong revenues from staking activities will continue to deliver consistent shareholder returns."

Managing Director's Report
We were delighted by the positive start of 2021 which saw crypto markets take off lifting KR1's underlying portfolio of high-quality projects into new highs. Most significantly, we saw material increases in Polkadot and Cosmos, two of our core holdings. We also saw Lido, a more recent investment, go from strength-to-strength as Lido's liquid Ethereum 2.0 staking product went live and attracted vast sums of ETH without signs of stopping. As a Company, we look to allocate capital strategically and actively manage portfolio investments over time to derive the best possible returns for our shareholders. Managing the incoming pipeline of projects successfully is critical to the success of KR1 and in 2021, we continued to analyse and invest in many exciting disruptive projects, increasing the number of investments in our portfolio. The rate of innovation throughout the highs and lows of price volatility in the crypto markets has not slowed and, looking ahead, we are confident to see the pipeline of investable new projects continue to grow.

As a Company, we are building on the foundation of our successes since 2016, throughout long crypto winters but also hype cycles, enabling us to continue on our journey of investing in and supporting world-class teams building decentralised technologies. As part of this effort, KR1 strengthened the Company's corporate governance, by appointing Non-Executive Director Rhys Davies as Chairman. Rhys brings extensive public markets experience and corporate governance insights to KR1's operations and has become a key member of the Board of Directors. Alongside Rhys, Mona Elisa, Founder of Enzyme Finance (previously Melon Protocol) was also appointed as a Non-Executive Director. Mona is one of the most respected voices in decentralised finance and the crypto world and we are excited to work with both of them and they will both add huge expertise to our efforts moving forward. While expanding the team, the Company has also improved internal structures and processes in line with the rate of change KR1 has seen over the last year.

Some of the highlights for KR1 in the first half of 2021 were Lido's ETH 2.0 liquid staking product going live, the Internet Computer (formerly Dfinity) mainnet launch and the kick-off of the Kusama crowdloan campaigns and parachain auctions. These Kusama auctions allow projects to secure a parachain slot on the Kusama network but are also a precursor to Kusama's 'bigger' sister chain Polkadot, which could see crowdloan and parachain auctions go live in the upcoming final quarter of the year. Current sentiment suggests that the parachain auction model has performed very strongly with enormous communities forming around successful crowdloan campaigns as witnessed with Karura, Shiden, Moonriver etc. All of this is a glimmer of what is to come for Polkadot later this year.

As positive market sentiment continues, we are excited by KR1's portfolio performance, composition and the Company's ability to generate strong revenues from staking activities and consistent shareholder returns. All these bode well for a strong end to the year and exciting 2022.

George McDonaugh and Keld van Schreven, KR1 plc

Statement of Comprehensive Income

		6 months to 30 June 2021		6 months to 30 June 2020		12 months to 31 December 2020
		Unaudited £		Unaudited £		Audited £
Revenue
Gain on disposal of intangible assets		4,881,832		315,359		2,994,034
Investment income		5,473,597		75,840		978,639
Loss on disposal of financial assets		-		(273,951)		(273,951)
Direct costs		(14,793)		(7,839)		(34,649)
Gross profit		10,340,636		109,409		3,664,073
Administrative expenses		(11,973,395)		(296,187)		(4,693,647)
Share options		17,526		-		(74,998)
Movement in credit loss provision		(6,474)		(2,149)		3,194
Operating (loss)		(1,621,707)		(188,927)		(1,101,378)
Taxation		-		87,159		78,497
(Loss) after taxation		(1,621,707)		(101,768)		(1,022,881)
Other comprehensive income:
Movement in fair value of intangible assets		69,725,002		377,810		31,112,822
Movement in fair value of financial assets at fair value through profit and loss		(217,996)		332,783		227,713
Total other comprehensive income for the year		69,507,006		710,593		31,340,535
Total comprehensive income attributable to the equity holders of the Company		67,885,299		608,825		30,317,654
Earnings per share attributable to the equity owners of the company (pence):
Basic earnings per share		51.56		0.47		23.20
Diluted (loss) per share		(1.23)		(0.08)		(0.78)

Statement of Financial Position

		At 30 June 2021		At 30 June 2020		At 31 December 2020
		Unaudited £		Unaudited £		Audited £
Assets
Current assets
Intangible assets		119,573,398		7,305,104		41,073,202
Fixed asset investments		100		100		100
Financial assets at fair value through profit and loss		694,154		683,269		720,486
Cash and cash equivalents		870,449		180,494		332,535
Trade and other receivables		42,202		21,086		31,034
Total current assets		121,180,303		8,190,053		42,157,357
Total assets		121,180,303		8,190,053		42,157,357
Equity and liabilities
Current liabilities
Trade and other payables		(15,444,204)		(107,405)		(4,290,882)
Total current liabilities		(15,444,204)		(107,405)		(4,290,882)
Equity
Share capital		721,926		720,076		720,076
Share premium		3,056,443		3,056,443		3,056,443
Revaluation surplus		103,521,763		822,828		33,796,760
Option reserve		235,104		177,632		252,630
Profit and loss account		(1,799,137)		3,305,669		40,566
Total equity		105,736,099		8,082,648		37,866,475
Total equity and liabilities		121,180,303		8,190,053		42,157,357
Net Asset Value per share		80.30 pence		6.18 pence		28.97 pence

Statement of Changes in Equity

	Share capital		Share premium		Revaluation surplus		Option surplus		Profit and loss account		Total
	£		£		£		£		£		£
Balance at 1 January 2020	720,076		3,056,443		112,234		177,632		3,407,438		7,473,823
Profit for the financial year	-		-		710,594		-		(101,769)		608,825
Total comprehensive income for the year	-		-		710,594		-		(101,769)		608,825
Balance at 30 June 2020	720,076		3,056,443		822,828		177,632		3,305,669		8,082,648
Balance at 1 January 2021	720,076		3,056,443		33,796,760		252,630		40,566		37,866,475
Profit for the financial year	-		-		69,725,003		-		(1,839,703)		67,885,299
Total comprehensive income for the year	-		-		69,725,003		-		(1,839,703)		67,885,299
Issue of options	1,850		-		-		(17,525)		-		(15,675)
Transactions with owners, recorded directly in equity	1,850		-		-		(17,525)		-		(15,675)
Balance at 30 June 2021	721,926		3,056,443		103,521,763		235,104		(1,799,137)		105,736,099

Statement of cash flows

	6 months to 30 June 2021	6 months to 30 June 2020	12 months to 31 December 2020
	Unaudited £	Unaudited £	Audited £
Cash flows from operating activities
Profit for the period	67,885,299	608,825	30,317,654
Adjustments for:
Movement in fair value of intangible assets	(69,725,002)	(377,810)	(31,112,822)
Gain on disposal of intangible assets	(4,881,832)	(315,359)	(2,994,034)
Loss on disposal of financial assets	-	273,951	273,951
Movement in credit loss provision	6,474	2,149	(3,194)
Foreign exchange gain/(loss)	1,237	-	(137,220)
Movement in fair value of financial assets at fair value through profit and loss	217,996	(332,783)	(227,713)
Share option issue	(17,526)	-	74,998
	(6,513,354)	(141,027)	(3,808,380)
(Increase)/decrease in debtors	(17,642)	5,372	(2,427)
Increase/(decrease) in creditors	11,153,322	(130,458)	4,053,017
	11,135,680	(125,086)	4,050,590
Net cash inflow/(outflow) from operating activities	4,622,326	(266,113)	242,210
Cashflows from investing activities
Net sales/(purchases) of investments	(3,884,750)	243,077	765,557
Net cash inflow/(outflow) from investing activities	(3,884,750)	243,077	765,557
Cashflows fromfinancing activities
Proceeds from issue of ordinary shares	1,850	-	-
Net cash generated by financing activities	1,850	-	-
Net increase/(decrease) in cash	739,426	(23,036)	1,007,767
Cash and at the beginning of the year	332,535	279,373	279,373
Effect of exchange fluctuations on cash	(1,236)	1,235	8,845
Non-cash transactions	(200,276)	(77,078)	(963,450)
Cash and at 31 December	870,449	180,494	332,535
Represented by:
Cash at bank	833,528	180,493	292,192
Cash held on trading platforms	36,921	1	40,343
	870,449	180,494	332,535

Interim report notes

1. Interim report

The information relates to the 6-month period from 1 January to 30 June 2021.

The interim report was approved by the Directors on 30 September 2021.

2. Basis of accounting

a. While the financial information included in this interim financial report has been prepared in accordance with International Financial Reporting Standards ("IFRSs"), this interim financial information does not itself contain sufficient information to comply fully with IFRSs.

b. These interim financial statements are the financial statements of the Company.

c. The financial statements are prepared under the historical cost convention except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below and are in accordance with applicable accounting standards.

d. Consolidated financial statements have not been prepared as they are not required under the Isle of Man Companies Act 2006 and the subsidiary is immaterial to the financial statements.

e. Current assets

i. Current assets are valued at the lower of cost and net realisable value. Foreign denomination loans are translated into sterling at the rate of exchange ruling at the balance sheet date. For those current assets listed on a recognised market, net realisable value is taken as mid-market price. Where the directors consider the market price of a current asset is likely to irreversibly fall, additional write downs in valuation to below mid-market price are made.

ii. The net realisable value of certain current assets is not readily determinable by reference to a quoted market price. The directors have therefore made their own assessment of the net realisable value and adjusted the carrying value of the current asset where it is considered less than cost. This estimate requires estimation techniques, which are reliant upon their experience and expertise.

iii. The Company accounts for digital currencies, as Intangible Assets in accordance with IAS 38 and the revaluation model has been applied as there is an active market for the cryptocurrencies. Intangible assets held are measured initially at cost and are subsequently carried at a revalued amount (based on fair value) less any subsequent impairment losses, using rates obtained from various exchanges, including Oanda and Coinmarket. The rates obtained from these sources represent a generally well recognised quote price in an active market, which market and database is accessible to the Company on an ongoing basis.

Revaluation increases are recognised in other comprehensive income and accumulated in the revaluation surplus within equity except to the extent that they reverse as revaluation decrease previously recognised in profit and loss. Gains are not recycled however if the gain reverses a prior reduction in the asset's value, the loss is recorded in other comprehensive income and the reduce the carrying amount of the asses in the revaluation reserve to the extent of the gain previously recognised.

f. The Company will report again for the full year to 31 December 2021.

3. Prior year restatement

The Company's audited financial statements for the year ended 31 December 2020 were the first financial statements prepared in accordance with IFRSs and IFRS 1 First-time Adoption of International Financial Reporting Standards was applied. Comparative figures for the 6 months ended 30 June 2020 have been restated accordingly.

The Directors of KR1 Plc accept responsibility for this announcement.

For further information please contact:

KR1 PLC George McDonaugh Keld van Schreven Simon Nicol	[phone] [e-mail]
Peterhouse Capital Limited (AQSE Corporate Adviser) Mark Anwyl	[phone]
FTI Consulting LLP (PR Adviser) Ed Berry Laura Ewart	[phone] [e-mail]

ENDS

Notes to Media

About KR1 plc
KR1 plc is a leading digital asset investment company supporting early-stage decentralised and open source blockchain projects. Founded in 2016 and publicly traded in London on the AQSE Growth Market (KR1:AQSE), KR1 has one of the longest and most successful track records of investment in the digital assets space by investing in decentralised platforms and protocols that are emerging to form new financial and internet infrastructures.

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.