30 September 2020
(“KR1”, the “Company “or, together with its subsidiary the “Group”)KR1 Plc
Interim Report for the Half Year Ended30 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 year30 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, and anything Polkadot related. Rocket Pool
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 reflected a window into the slightly depressed crypto markets following the heavy Covid19 related sell-off in . 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. June 2020March 2020
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 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.30 June 2020
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 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 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. $425 millionPaul Tudor Jones
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.
and , KR1 plcGeorge McDonaughKeld van Schreven
Group Statement of Comprehensive Income
Group Statement of Financial Position
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 and Republic of Ireland’ (‘FRS 102’), this interim financial information does not itself contain sufficient information to comply fully with FRS 102.United Kingdom
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.
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 and as at have been restated in order to reclassify Cash Equivalents (Bitcoin cash, Bitcoin and Ethereum) as Digital Currencies.30 June 201930 June 2019
The Directors of KR1 Plc accept responsibility for this announcement.
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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 (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.London
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.
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 share0.47 pence7.01 pence1.09 pence
At 30 June 2020 At 30 June 2019 At 31 December 2019 As restated 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 1 506,720 100,130 platforms Cash at bank 180,493 572,807 179,243 8,190,053 11,178,485 7,711,688 Creditors Amounts falling due within (107,407) (464,574) (237,865) one 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 share6.18 pence8.20 pence5.72 pence
KR1 PLC +44 (0)16 2467 6716 Peterhouse Capital Limited (AQSE Corporate Adviser) +44 (0)20 7469 0930 Nominis Advisory Ltd (PR Adviser)George McDonaughSimon NicolMark AnwylAllie FeuerleinAngus Campbell[email protected][email protected]