30 September 2020
KR1 Plc
("KR1", the "Company "or, together with its subsidiary the "Group")
Interim Report for the Half Year Ended 30 June 2020
The Group is pleased to present its interim report for the half year ended 30
June 2020.
Managing Director's Report
For the half year 30 June 2020
The first half of 2020 was a remarkable period in recent human history. To call
these times unprecedented feels like an understatement. Across the world,
Covid19 continues to spread unabated, leaving huge question marks on how and
when the world's major economies will begin to recover. Such an unparalleled
shock to the system undoubtedly creates ripple effects for all markets,
especially financial. The reaction to this crisis set in motion major stimulus
packages from the central banks of leading global economies, adding pressure to
already fraught global banking infrastructure. The result was a subsequent
cascade of financial volatility as money sought new, safer asset classes to sit
out a now seemingly inevitable financial winter. This is the backdrop that the
life raft of digital assets finds itself afloat on. The digital asset
investment sector KR1 operates in has, on the whole continued to function
normally despite the ravages of this pandemic. This crisis is the ultimate
stress test for this new nascent asset class, and what we believe will be the
making of it.
Throughout the period we continued to invest in high quality projects focused
on disruption and innovation. Looking back at this difficult period it's clear,
investing through these bleakest of times can produce some of the best
investment opportunities and returns, witnessed by new funding rounds and the
solid progress these projects are making. Only the teams with the highest
conviction and tenacity are able to innovate during these times. Valuations are
often fairer, rather than the frothy raises seen in bull markets, as projects
vie for funds from tighter venture capital purses.
Decentralised Finance ("DeFi") took the crypto world by storm, starting earlier
this year through new innovative yield generation projects, large amounts of
Bitcoin moving over to Ethereum to be usable at last, and huge trading volumes
on smart-contract-based decentralised exchanges. This trifecta created a strong
DeFi-flavoured tailwind returning impetus to a sluggish crypto market, with
both Bitcoin and Ethereum smashing through two-year highs. Following closely
behind with huge surges of interest were many of our excellent portfolio
projects, highlights over this period being Nexus Mutual, Melon Protocol,
Rocket Pool and anything Polkadot related.
The force with which Polkadot broke into the top five list of crypto assets,
meant that investors' money took aim at this new protocol. Many Polkadot
ecosystem projects are now gaining huge attention and enjoying oversubscribed
funding rounds and fervent public token distribution events. KR1 saw the
potential of Polkadot early and has been backing projects building on Polkadot
from day one, long before Polkadot's DOT token came to market. Subsequently, we
have managed to secure a 'seat at the table' on many of the best Polkadot
investment opportunities. For KR1, this means that the Company has a world
class pipeline of investment projects, a solid reputation as one of the premier
Polkadot ecosystem venture firms, and a very healthy core position in
Polkadot's DOT, a network we see as one of the few real challengers to
Ethereum.
The Company's net assets of £8,082,646 at the end of June 2020 reflected a
window into the slightly depressed crypto markets following the heavy Covid19
related sell-off in March 2020. Subsequently, in the summer months, the
Polkadot DOT token coming to market was transformational for KR1, not only in
terms of return and increased assets on the balance sheet, but also for the
future staking revenue that we expect to generate going forward.
Alongside this watershed moment for KR1, we have continued to generate steady
income from our position in the Cosmos network. The native ATOM staking yields
in this H1 period to 30 June 2020 accrued to a lower GBP equivalent revenue
figure than previous periods due to depressed market conditions in the earlier
half of the year. However, with the markets improving over the summer months
our strategy to realise staking yields at the best possible prices proved
successful once again, resulting in higher realised prices than the daily
prices of when staking rewards were generated.
Our reputation and brand within the digital asset ecosystem strengthen daily as
we fund evermore important and respected projects. With so many of our
investments from previous years now tradable and considerably more valuable,
not only has our balance sheet grown, but it has also become far more liquid.
This means that portfolio management becomes an ever more important aspect for
KR1 as some positions become very valuable. Maximising returns, whether through
staking yield bearing assets, realizing profits through sales, or by utilizing
these assets as security collateral for new crypto networks in terms of
'Lockdrops' or 'Stakedrops', has become a new priority in our portfolio
management.
KR1 is a public stock on London's AQSE Growth Market (KR1: AQSE), which was
previously the NEX Exchange. Aquis Exchange plc recently acquired NEX Exchange
with the intention of making improvements to the exchange infrastructure in
regards to electronic trading, higher volumes, deeper liquidity and allowing
for a more global investor base. We are looking forward to seeing how the new
Aquis Exchange team implements their plans for improving the legacy NEX
Exchange over the months to come.
On a wider level we are currently seeing some correlation between Bitcoin,
other digital assets and movements in the equity and gold markets. The macro
outlook long term, with central bank balance sheets overflowing, places
Bitcoin, Ethereum and other key digital assets firmly as an essential asset to
add to company treasuries or investor portfolios. This is best shown by the
recent and very significant purchase of $425 million of Bitcoin that US company
MicroStrategy made as a hedge against possible rampant inflation. As mentioned
in our full year report, well renowned fund manager Paul Tudor Jones also
started to purchase Bitcoin to include in his investment portfolio. We expect
the trend of strengthening balance sheets and diversification into Bitcoin to
continue as the world's monetary policies shift evermore towards unbridled
money printing and higher inflation. The digital asset world will continue to
disrupt and innovate in all directions, and although the disruption will be
most keenly felt in finance first through DeFi, we will see this impact every
industry over time.
At KR1 we will continue to back amazing teams innovating in DeFi, the Polkadot
and Cosmos ecosystems and other key crypto areas. Exciting times are ahead for
KR1 shareholders as we are in a very strong position for the digital asset
markets entering a new bull cycle. We are witnessing this with increased assets
on the balance sheet, successful partial investment exits at many multiples and
newer, stronger cash flows from more and more staking activities being switched
on.
George McDonaugh and Keld van Schreven, KR1 plc
Group Statement of Comprehensive Income
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 December
2019
Unaudited Unaudited Audited
£ £ £
Income
Unrealised profit/(loss) 710,593 4,292,325 964,921
Realised profit 315,359 580,320 693,665
Staking yields 73,244 116,788 241,633
Investment income 2,596 - -
Advisory fees - 19,036 180,748
Gross profit 1,101,792 5,008,469 2,080,967
Administrative expenses (580,126) (386,313) (723,301)
Profit on ordinary activities
before taxation 521,666 4,622,156 1,357,666
Taxation 87,159 (54,181) (23,778)
Profit on ordinary activities
after taxation 608,825 4,567,975 1,333,888
Consolidated profit per share 0.47 pence 7.01 pence 1.09 pence
Group Statement of Financial Position
At 30 June 2020 At 30 June 2019 At 31 December
As restated 2019
Unaudited Unaudited Audited
£ £ £
Current assets
Debtors 21,086 52,290 28,607
Investments 2,700,221 3,598,106 2,774,957
Digital currencies 5,288,252 6,448,562 4,628,751
Cash held on trading platforms 1 506,720 100,130
Cash at bank 180,493 572,807 179,243
8,190,053 11,178,485 7,711,688
Creditors
Amounts falling due within one (107,407) (464,574) (237,865)
year
Net current assets 8,082,646 10,713,911 7,473,823
Total assets less current
liabilities 8,082,646 10,713,911 7,473,823
Capital and reserves
Called up share capital 720,076 726,076 720,076
Share premium account 3,056,443 3,056,443 3,056,443
Profit and loss account 4,306,127 6,931,392 3,697,304
Equity shareholders' funds 8,082,646 10,713,911 7,473,823
Consolidated Net Asset Value per
share 6.18 pence 8.20 pence 5.72 pence
Interim report notes
1. Interim report
The information relates to the 6-month period from 1 January to 30 June 2020.
The interim report was approved by the Directors on 30 September 2020.
2. Basis of accounting
a. While the financial information included in this interim financial report
has been prepared in accordance with the recognition and measurement criteria
of Financial Reporting Standard 102 - 'The Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland ' ('FRS 102'), this
interim financial information does not itself contain sufficient information to
comply fully with FRS 102.
b. These interim financial statements are the financial statements of the
Group.
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. These interim financial statements consolidate the financial statements of
the Company and its subsidiary KRX Limited.
e. Investments
i. Investments are held as current asset trade investments and 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 investments listed on a recognised market, net realisable
value is taken as mid-market price. Where the directors consider the market
price of a company is likely to irreversibly fall, additional write downs in
valuation to below mid-market price are made.
ii. The net realisable value of certain investments 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 investment where it is considered less than cost.
This estimate requires estimation techniques, which are reliant upon their
experience and expertise.
iii. The Group accounts for digital currencies, which it considers to be an
operating asset, at their initial cost and subsequently revalues the carrying
amounts of the digital currencies held at each reporting date based on their
current fair value 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. Digital currencies which have
not undergone their ICO (initial coin offering) at the reporting date are
valued at cost and the directors have verified that this is in line with the
opening prices at ICO post period end should an ICO have occurred. The changes
in fair value are recognised in the Group's Statement of Comprehensive Income.
f. The Group will report again for the full year to 31 December 2020.
3. Prior year restatement
Comparative figures for the 6 months ended 30 June 2019 and as at 30 June 2019
have been restated in order to reclassify Cash Equivalents (Bitcoin cash,
Bitcoin and Ethereum) as Digital Currencies.
The Directors of KR1 Plc accept responsibility for this announcement.
For further information please contact:
KR1 PLC
George McDonaugh +44 (0)16 2467 6716
Simon Nicol simon@KR1.io
Peterhouse Capital Limited (AQSE Corporate
Adviser) +44 (0)20 7469 0930
Mark Anwyl
Allie Feuerlein
Nominis Advisory Ltd (PR Adviser)
Angus Campbell pr@KR1.io
ENDS
About KR1 plc
KR1 is a leading digital asset investment company supporting early-stage
decentralised and open-source blockchain and DeFi projects. Founded in 2016 and
publicly traded in London (KR1:AQSE), KR1 has built a notable reputation for
generating significant returns by investing in many key projects that are
designed to power the decentralised platforms and protocols that are emerging
to form new internet infrastructures.
www.KR1.io
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.KR1.AQSE
KR1 Plc
KR1 plc - Interim Results
30th September 2020, 13:38
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