KR1 plc - Interim Report for the Half Year Ended 30 June 2022

KR1 plc - Interim Report for the Half Year Ended 30 June 2022

PR Newswire

London, September 30

30 September 2022

KR1 Plc

("KR1", or the "Company")

Interim Report for the Half Year Ended 30 June 2022

KR1 plc (KR1: AQSE), a leading digital asset investment company, today announces its half year results for the six months ended 30 June 2022 (HY22).

Financial highlights

• Net current assets of £46,741,375, -56% on HY21; -75% on FY21
• NAV per share of 30.59p as at 30 June 2022
• Income from digital assets £16,567,889, +203% on HY21

Investment highlights

• Continued investments in innovative decentralised blockchain projects
• Investment made in base layer protocol Subspace
• Investment made in prediction market protocol Zeitgeist

Strategic highlights

• Continued strong revenue stream from digital assets, in particular from staking in 'Proof-of-Stake' network such as Polkadot or Cosmos and other rewards with a view to adding further streams going forward

Outlook

• We are nearing, or could be at, a market bottom as macroeconomic conditions and geopolitical tensions continue, causing uncertainty
• The long-term outlook for DeFi remains extremely positive - with on-chain liquidity holding up extremely well through crypto's recent liquidation and credit crisis

George McDonaugh andKeld van Schreven, Managing Directors of KR1 plc, commented: "It has undoubtedly been a challenging time for all investors, but we remain confident in the long-term prospects for blockchain technology, and we were glad to see how DeFi and the underlying technology held up through crypto's recent liquidation crisis. Bear markets bring with them opportunities, and as valuations begin to normalise we will look to add new investments to our high quality digital asset portfolio. Increased institutional and retail interest, alongside positive regulatory activities, all point to a bright future for crypto and digital assets."

Chairman's Report

At 30 June 2022, the net asset value of KR1 plc was 30.59 pence per share as compared with 80.30 pence per share a year earlier. The net assets of the Company at 30 June 2022 was £46,741,375, as compared with £105,736,099 a year earlier.

The underlying progress of the Company's investments is strongly positive and it is gratifying to see the Company's investment team navigate the vagaries of the digital asset investment cycle in executing their singular investment thesis.

On behalf of the Board of Directors, I thank all Shareholders for their support.

Sincerely yours,

Rhys Davies

Chairman

Managing Directors' Statement

After last year's record results, owing to the growth of digital asset value and portfolio performance, the first half of 2022 saw KR1's portfolio heavily impacted by the wider macro correction of speculative asset prices, or more specifically crypto. By mid 2022, we had entered bear market territory and as such saw prices of all digital assets fall steeply. As in previous downturns, the Company remains steadily focused on its long-term investments in innovative decentralised technology. While we are increasingly attracted to the low risk profile and opportunities provided by staking and other opportunities to produce a yield on portfolio assets, which these half year results demonstrate strongly, we do not engage in complex trading strategies or utilise leverage.

As we entered the bear market, we continued to see and invest in the most disruptive projects with fair valuations. An overhang from a fading bull market meant that many valuations were still unsustainable, and this was reflected in the wider investment market downturn. The bear market has a number of distinct benefits, which include giving project teams more time to deliver on roadmaps without constant price pressure. These conditions allow teams to gain traction with their products and services. Ultimately this will set the stage for better times ahead and for the onboarding of the next tranche of users and investors into crypto.

The entire market witnessed the epic collapse of Terra Luna and the subsequent 3 Arrows Hedge Fund collapse, which were seismic shocks to the whole system. While private enterprises engaged with over-leverage and a lack of transparency, on-chain activity proved to be very robust and without any crisis. This demonstrates the benefits of blockchain versus more traditional trading structures. And, of course, the crypto bear market has been set against the backdrop of wider macroeconomic uncertainty and geopolitical tensions, from the invasion of Ukraine, to the inflationary environment and current cost of living crisis.

However, there remain many reasons to be optimistic as to the future of digital assets. We continued to see a constant stream of new institutions coming onboard to crypto, which included Blackrock, Brevan Howard and many other respected financial institutions. Regulation is also starting to be formulated and this will ultimately cement digital assets as a recognised asset class and increase the inbound activity of institutional and retail investors.

As of writing, Ethereum's 'Merge' (i.e. complete transition to a 'Proof-of-Stake' network) has finally happened. It's been a long wait for this milestone to complete and it was very encouraging to see. This transition was necessary to become more efficient, both in terms of technology and energy efficiency as we increasingly witness the troubling impacts of climate change.

As an investment company, we keep ourselves more focussed on the disruptive potential of the technology. Prices may rise and fall but our thesis remains the same: we are in a unique, once-in-a-generation wealth creation phase. Our position as capital allocators in the space gives us a privileged overview into what is coming down the line. We expect to see innovation and disruption continuing at pace with projects like Celestia pushing the boundaries of blockchain design and data availability. By keeping to our thesis, investment principles and process, we remain extremely confident that KR1 will emerge from the bear market strongly and well-positioned for the cyclical upturn.

Statement of Comprehensive Income

		6 months to 30 June 2022		6 months to 30 June 2021		12 months to 31 December 2021
		Unaudited £		Unaudited £		Audited £
Revenue
Gain on disposal of intangible assets		2,510,663		4,881,832		20,758,540
Income from digital assets		16,567,889		5,473,597		20,959,934
Loss on disposal of financial assets		-		-		-
Direct costs		(188,380)		(14,793)		(122,716)
Gross profit		18,890,172		10,340,636		41,595,758
Administrative expenses		(1,683,567)		(11,973,395)		(33,047,971)
Share options		(39,328)		17,526		67,103
Movement in credit loss provision		-		(6,474)		-
Operating profit / (loss)		17,167,277		(1,621,707)		8,614,890
Taxation		(180)		-		-
Profit / (loss) after taxation		17,167,097		(1,621,707)		8,614,890
Other comprehensive income:
Movement in fair value of intangible assets		(155,483,650)		69,725,002		138,894,148
Movement in fair value of financial assets at fair value through profit and loss		(15,315)		(217,996)		(3,765,107)
Total other comprehensive income for the year		(155,498,965)		69,507,006		135,129,041
Total comprehensive income attributable to the equity holders of the Company		(138,331,868)		67,885,299		143,743,931
Earnings per share attributable to the equity owners of the company (pence):
Basic earnings per share		(90.69)		51.56		106.39
Diluted (loss) per share		(90.40)		(1.23)		6.38

Statement of Financial Position

		At 30 June 2022		At 30 June 2021		At 31 December 2021
		Unaudited £		Unaudited £		Audited £
Assets
Current assets
Intangible assets		69,142,950		119,573,398		207,786,430
Fixed asset investments		-		100		-
Financial assets at fair value through profit and loss		7,667,478		694,154		6,026,270
Cash and cash equivalents		785,252		870,449		3,488,421
Trade and other receivables		42,737		42,202		103,305
Total current assets		77,638,417		121,180,303		217,404,426
Total assets		77,638,417		121,180,303		217,404,426
Equity and liabilities
Current liabilities
Trade and other payables		30,897,042		15,444,204		32,374,261
Total current liabilities		30,897,042		15,444,204		32,374,261
Equity
Share capital		762,070		721,926		758,320
Share premium		6,505,061		3,056,443		6,505,061
Revaluation surplus		13,426,658		103,521,763		168,925,801
Option reserve		224,855		235,104		185,527
Profit and loss account		25,822,731		(1,799,137)		8,655,456
Total equity		46,741,375		105,736,099		185,030,165
Total equity and liabilities		77,638,417		121,180,303		217,404,426
Net Asset Value per share		30.59 pence		80.30 pence		122.68 pence

Statement of Changes in Equity

	Share capital	Share premium	Revaluation surplus	Option surplus	Profit and loss account	Total
	£	£	£	£	£	£
Balance at 1 January 2021	720,076	3,056,443	33,796,760	252,630	40,567	37,866,476
Profit for the financial period	-	-	69,725,003	-	(1,839,704)	67,885,299
Total comprehensive income for the year	-	-	69,725,003	-	(1,839,704)	67,885,299
Issue of options				(17,526)
Transactions with owners, recorded directly in equity	1,850			(17,526)
Balance at 30 June 2021	721,926	3,056,443	103,521,763	235,104	(1,799,137)	105,736,099
Balance at 1 January 2022	758,320	6,505,061	168,925,801	185,527	8,655,456	185,030,165
(Loss) / profit for the financial period	-	-	(155,499,143)	-	17,167,275	(138,331,868)
Total comprehensive income for the year	-	-	(155,499,143)	-	17,167,275	(138,331,868)
Issue of options	3,750	-	-	39,328	-	43,078
Transactions with owners, recorded directly in equity	3,750	-	-	39,328	-	43,078
Balance at 30 June 2022	762,070	6,505,061	13,426,658	224,855	25,822,731	46,741,375

Statement of cash flows

	6 months to 30 June 2022	6 months to 30 June 2021	12 months to 31 December 2021
	Unaudited £	Unaudited £	Audited £
Cash flows from operating activities
(Loss) / profit for the period	(138,331,868)	67,885,299	173,888,175
Adjustments for:
Movement in fair value of intangible assets	155,483,650	(69,725,002)	(138,810,157)
Gain on disposal of intangible assets	(2,510,663)	(4,881,832)	(20,758,541)
Movement in credit loss provision	-	6,474	100
Foreign exchange gain/(loss)	1,606	1,237	17,354
Movement in fair value of financial assets at fair value through profit and loss	15,315	217,996	3,681,118
Share option issue	39,328	(17,526)	(67,103)
	14,697,368	(6,513,354)	17,950,946
(Increase)/decrease in debtors	60,568	(17,642)	(72,271)
Increase/(decrease) in creditors	(1,477,221)	11,153,322	(2,060,863)
	(1,416,653)	11,135,680	(2,133,134)
Net cash inflow from operating activities	13,280,715	4,622,326	15,817,812
Cashflows from investing activities
Net sales/(purchases) of investments	495,264	(3,884,750)	4,422,383
Net cash inflow/(outflow) from investing activities	495,264	(3,884,750)	4,422,383
Cashflows fromfinancing activities
Proceeds from issue of ordinary shares	3,750	1,850	3,486,862
Net cash generated by financing activities	3,750	1,850	3,486,862
Net increase in cash	13,779,729	739,426	23,727,057
Cash and at the beginning of the year	3,488,421	332,535	332,535
Effect of exchange fluctuations on cash	(1,605)	(1,236)	(17,458)
Non-cash transactions	(16,481,293)	(200,276)	(20,553,713)
Cash and at 31 December	785,252	870,449	3,488,421
Represented by:
Cash at bank	785,252	833,528	3,163,061
Cash held on trading platforms	-	36,921	325,360
	785,252	870,449	3,488,421

Interim report notes

1. Interim report

The information relates to the 6-month period from 1 January 2022 to 30 June 2022.

The interim report was approved by the Directors on 30 September 2022.

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. 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.

e. The Company will report again for the full year to 31 December 2022.

The Directors of KR1 plc accept responsibility for this announcement.

--ENDS--

For further information please contact:

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

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.

www.KR1.io

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation EU 596/2014 as it forms part of retained EU law (as defined in the European Union (Withdrawal) Act 2018).