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

 
TIDMKR1 
 
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 and  Keld 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       6 months to      12 months to 
                                   30 June 2022      30 June 2021       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                17,167,097       (1,621,707)         8,614,890 
taxation 
 
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               (15,315)         (217,996)       (3,765,107) 
loss 
 
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        At 30 June    At 31 December 
                                            2022              2021              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 Share premium   Revaluation        Option    Profit and 
                                         capital                     surplus       surplus  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             -             -    69,725,003             -   (1,839,704)    67,885,299 
year 
 
Issue of options 
                                                                                  (17,526) 
 
Transactions with owners, recorded         1,850                                  (17,526) 
directly in equity 
 
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              -             - (155,499,143)             -    17,167,275 (138,331,868) 
period 
 
 
Total comprehensive income for the             -             - (155,499,143)             -    17,167,275 (138,331,868) 
year 
 
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     6 months to    12 months to 
                                           30 June 2022    30 June 2021     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        155,483,650    (69,725,002)   (138,810,157) 
assets 
 
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              15,315         217,996       3,681,118 
assets at fair value through profit and 
loss 
 
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        495,264     (3,884,750)       4,422,383 
activities 
 
Cashflows from financing activities 
 
Proceeds from issue of ordinary shares            3,750           1,850       3,486,862 
 
Net cash generated by financing                   3,750           1,850       3,486,862 
activities 
 
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                                                 [phone] 
George McDonaugh 
Keld van Schreven 
 
Peterhouse Capital Limited (AQSE Corporate              [phone] 
Adviser) 
Mark Anwyl 
 
FTI Consulting LLP (PR Adviser)                         [phone] 
Laura Ewart                                           [e-mail] 
Gina Magnin 
 
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). 
 
 
 
END 
 
 

(END) Dow Jones Newswires

September 30, 2022 11:41 ET (15:41 GMT)