Audited results to 31 December 2022
29 June 2023
KR1 Plc
(“KR1”, the “Company “)
Audited final results for the twelve months ended 31 December 2022
KR1 plc, a leading digital asset investment company, is pleased to announce its audited results for the twelve-month period ended 31 December 2022 (“FY22”).
Financial Highlights
- Net assets of £70.0 million down 62.2% (FY21 £185.0 million)
- NAV per share of 39.47p, a reduction of 67.8% (FY21 122.68p)
- Income from digital assets of £20.2 million, 3.6% lower (FY21 £21.0 million)
Strategic Highlights
- Consistent income from staking in 'Proof-of-Stake' network, as well as other crypto-native strategies such as rewards from parachains and lockdrops; aiming to strengthen staking activities further.
- Optimising our corporate structure, following recent initiatives such as the unaudited monthly NAV updates, the previous appointment of new auditors and the appointment of a new independent non-executive director.
Investment Highlights
- Continued progress developing our high-quality long-only portfolio of innovative, diversified digital assets with continued investment activity into attractive opportunities (Anoma, Code&State and Hydra Ventures since year-end).
- Strong momentum for portfolio projects such as Lido and Rocket Pool following Ethereum's 'Proof-of-Stake' upgrade.
- Well positioned within the modular blockchain space through the Company’s seed investment in Celestia (formerly LazyLedger), a pluggable consensus and data availability layer.
- Decentralised Finance ("DeFi") continues to be the primary driver of blockchain adoption and remains an important investment focus.
Markets Outlook
- Most recently, the crypto ecosystem has found stability, even witnessing some sustained positivity following the return of investor confidence after last years' events.
- Despite the still seemingly uncertain macroeconomic conditions, we remain confident in the growth opportunity of the underlying technology and our high quality portfolio.
George McDonaugh and Keld van Schreven, Managing Directors of KR1 plc, commented:
“Whilst the Company’s NAV has been impacted by a turbulent year for the crypto market due to multiple crises, KR1 has shown remarkable resilience throughout. Our continued focus on building a high quality long-only portfolio of innovative digital assets enabled us to deliver consistent income from our portfolio. We have also strengthened the Company with key internal and external appointments and improved reporting transparency with the long-desired publication of our unaudited monthly NAV updates. KR1 is well placed to capture an ever-growing inflow of innovative projects seeking investment and deploying capital through a disciplined investment approach.”
Chairman’s Report
We are pleased to present the Annual Report and Audited Financial Statements of the Company for the twelve months ended 31 December 2022.
At 31 December 2022, the net asset value of KR1 plc (“the Company”) was 39.47 pence per share as compared with 122.68 pence per share a year earlier. The net asset value of the Company at 31 December 2022 was £70,006,184, as compared with £185,030,165 a year earlier. Moreover, the Company reported a loss for the year of £145,211,303 (2021: profit £143,663,018).
On behalf of the Board of Directors, I thank all Shareholders for their support.
Sincerely yours,
Rhys Davies
Chairman
28 June 2023
Managing Directors’ Report
The cyclical nature of the digital asset economy is once again fully evident: Throughout the financial year, the crypto ecosystem saw the unravelling of multiple crises, starting with the Luna and Terra implosion earlier in the year, the subsequent blowups of formerly major entities in the space and, ultimately, the demise of FTX and Alameda Research and their affiliated operations. Following the momentous bull market cycle previous to that, 2022 saw investor confidence plummet and an exit of participants and liquidity from the digital asset sector. As market cycle history repeats itself, the previous year and recent partial recovery serves once again as a strong reminder that with such extreme cyclical volatility, complex trading, loans and leverage are a dangerous mix of unnecessary risks when investing in this asset class.
As shown in the Company’s financial statements and despite the turmoils in the crypto ecosystem, especially in the latter part of the financial year, the Company’s Net Asset Value stood at £70,006,184 (2021: £185,030,165) at the year end, which resulted in a Net Asset Value per Ordinary Share of 39.47p (2021: 122.68p) at the year end. While the portfolio suffered from the decrease of crypto assets prices across the board, we are continuing to build a high quality ‘long-only’ portfolio of innovative digital assets. This strategy has allowed the Company to ride out and benefit materially from the market cycles that we have experienced to date. We believe the structure of KR1 as a publicly listed permanent capital vehicle and its approach to investments creates a resilient model which puts the Company in a leading position to take advantage of crypto’s exceptional growth potential going forward.
Throughout the year the Company generated a total Income from Digital Assets of £20,204,355 (2021: £20,959,934) for the financial year. We are particularly pleased with the consistency of this income, which is driven primarily by the Company’s staking activities and the rewards received from participation in parachain auctions. These activities have very efficient underlying economics, especially when compared to the capital-intensive Bitcoin mining businesses.
Since the close of the previous year, following the shock of the FTX panic and its contagion, the crypto ecosystem has found stability, even witnessing some sustained positivity more recently. While encouraging, it is not necessarily indicative of an impending start of the bull market anytime soon with the macro backdrop still threatening valuations of ‘risk assets’. A seemingly overtly hostile regulatory position of the current US administration towards digital assets could also stifle adoption, suppress prices and continue to drive future innovations out of the US, to nations more welcoming of the technology and its potential benefits.
The recent partial US banking crisis reignited interest in Bitcoin’s ‘sound money’ narrative, however, Ethereum looks to potentially capture some of this narrative following its successful upgrade to ‘Proof-of-Stake’ (ETH now being termed ‘ultra sound money’ by respected voices in the Ethereum community). Following the completion of Ethereum’s upgrade, KR1 benefited from the performance of Rocket Pool and Lido, both long-time seed investments since 2017 and 2020 respectively, that relate to Ethereum’s staking ecosystem and were placed firmly front and centre in the minds of the market after the successful move.
In terms of technology, Ethereum remains the platform that sees by far the most activity, currently still best expressed through the blossoming Decentralised Finance (“DeFi”) ecosystem, which will continue to become ever more relevant to crypto’s overall growth. There are also very exciting developments happening within other layer-1 blockchain ecosystems. Cosmos has recently captured attention as ‘interchain security’ shipped, which could benefit the ATOM token economics while placing the Cosmos on a high-growth trajectory for hundreds of new application specific chains to onboard. Likewise, the Polkadot ecosystem continues to develop at a rapid pace, ranking at the top of developer activity charts across the entire crypto landscape.
Throughout the past year and into this year we have continued to see strong inflows of innovative projects seeking investment and have also seen portfolio projects successfully go live and launch their products, such as Vega recently with enabling trading for its alpha mainnet.
We are expecting further projects in the portfolio to come to market over the next time period: A major one being Celestia (formerly LazyLedger), which received investment from KR1 during its initial seed funding round a few years ago and subsequently progressed on executing on their technical roadmap of creating a modular blockchain architecture that solves the core scaling problems of today’s blockchains.
On the corporate side of the Company, the past year served as a great opportunity to improve various internal structures and functions. The most notable recent development of this being the introduction of our monthly unaudited net asset value (“NAV”) updates. These updates are currently published on a monthly schedule as public announcements and detail not only the relevant unaudited NAV and NAV per share, but also provide further insights into the top holdings of the KR1 portfolio. This process has been a long time in the making and we are thrilled to finally have the updates in production and available to our shareholders. Another important milestone for the Company has been the appointment of PKF Littlejohn LLP as the Company’s new auditors. Their expertise in the digital asset sector is highly suitable for KR1 and ensures that the Company meets all its obligations as a publicly listed company in terms of financial reporting and transparency. Last but not least, the Company also welcomed Aeron Buchanan as a non-executive director. After gaining a doctorate from Oxford University, Aeron was involved in several start-ups before joining the Ethereum Foundation soon after it was founded and was subsequently involved in the launch of Polkadot and the Web3 Foundation.
As we continue to move through 2023 and beyond, we will keep building a high quality ‘long-only’ portfolio of innovative digital assets. As in previous years, KR1 plc remains at the very heart of the crypto ecosystem, fully focused and taking advantage of the disruption that this exciting technology will bring to society.
George McDonaugh Keld van Schreven
Managing Director & Co-Founder Managing Director & Co-Founder
28 June 2023
Statement of Comprehensive Income
for the year ended 31 December 2022
Note |
2022 £ |
2021 Restated £ |
|
| Continuing operations | |||
| Income | |||
| Income from digital assets | 8 | 20,204,355 | 20,959,934 |
| Interest received | 8 | 2,371 | - |
| Direct costs | 9 | (444,194) | (392,514) |
| Gross profit | 19,762,532 | 20,567,420 | |
| Administrative expenses | 9 | (3,726,682) | (32,778,173) |
| Gain on disposal of intangible assets | 8 | 3,642,819 | 20,758,540 |
| Movement in fair value of financial assets at fair value through profit and loss | 6 | (183,932) | (3,765,107) |
| Share options | 9,16 | (39,327) | (13,810) |
| Operating profit | 19,455,410 | 4,768,870 | |
| Taxation on profit | 11 | - | - |
| Profit after taxation | 19,455,410 | 4,768,870 | |
| Other comprehensive income: | |||
| Movement in fair value of intangible assets | 13 | (164,666,713) | 138,894,148 |
| Total other comprehensive income for the year | (164,666,713) | 138,894,148 | |
| Total comprehensive income attributable to the equity holders of the Company | (145,211,303) |
143,663,018 |
|
| Earnings per share attributable to the equity owners of the company (pence): | |||
| Basic earnings per share | 12 | 11.86 | 3.53 |
| Diluted earnings per share | 12 | 10.96 | 3.12 |
The notes contained in the Company’s Annual Report form part of these financial statements.
Statement of Financial Position
for the year ended 31 December 2022
Note |
2022 £ |
2021 Restated £ |
1 January 2021 Restated £ |
|
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 13 | 3,270,856 | 26,307,014 | 667,029 |
| Intangible assets receivable | 13,14 | 3,795 | 163,888 | - |
| Total non-current assets | 3,274,651 | 26,470,902 | 667,029 | |
| Current assets | ||||
| Intangible assets | 13 | 57,669,180 | 177,560,034 | 40,406,173 |
| Intangible assets receivable | 13,14 | 1,774,020 | 3,755,494 | - |
| Financial assets at fair value through profit and loss | 6 | 8,067,895 | 6,026,270 | 720,586 |
| Cash and cash equivalents | 634,163 | 3,488,421 | 332,535 | |
| Trade and other receivables | 14 | 125,570 | 103,305 | 31,034 |
| Total current assets | 68,270,828 | 190,933,524 | 41,490,328 | |
| Total assets | 71,545,479 | 217,404,426 | 42,157,357 | |
| Equity and liabilities Current liabilities |
||||
| Trade and other payables | 15 | 1,539,295 | 32,374,261 | 4,290,882 |
| Total current liabilities | 1,539,295 | 32,374,261 | 4,290,882 | |
| Net assets | 70,006,184 | 185,030,165 | 37,866,475 | |
| Equity | ||||
| Share capital | 16 | 808,756 | 758,320 | 720,076 |
| Share premium | 17 | 36,602,619 | 6,505,061 | 3,056,443 |
| Revaluation reserve | 17 | 6,716,815 | 171,383,528 | 32,489,380 |
| Option reserve | 16 | 149,852 | 110,524 | 252,630 |
| Retained reserves | 17 | 25,728,142 | 6,272,732 | 1,347,946 |
| Total equity | 70,006,184 | 185,030,165 | 37,866,475 | |
| Total equity and liabilities | 71,545,479 | 217,404,426 | 42,157,357 |
The notes contained in the Company’s Annual Report form part of these financial statements.
Statement of Cash Flows
for the year ended 31 December 2022
| 2022 £ |
2021 Restated £ |
|
| Cash flows from operating activities | ||
| Profit / loss after tax for the financial year | 19,455,410 | 4,768,870 |
| Other Comprehensive Income | (164,666,713) | 138,894,148 |
Adjustments for: |
||
| Movement in fair value of intangible assets | 164,666,713 | (138,894,148) |
| Gain on disposal of intangible assets | (3,642,819) | (20,758,540) |
| Non-cash income from digital assets | (20,204,355) | (20,959,934) |
| Other non-cash transactions | 270,344 | 392,410 |
| Forex Exchange Loss | 36,072 | 17,354 |
| Movement in fair value of financial assets at fair value through profit and loss |
183,932 | 3,765,107 |
| Share option issue | 39,327 | 13,810 |
| (Increase) in debtors | (22,266) | (72,271) |
| (Decrease) /increase in creditors | (30,834,966) | 28,083,379 |
| Net cash (outflow)/inflow from operating activities | (34,719,321) | (4,749,815) |
| Cash flows from investing activities | ||
| Sales of investments | 6,249,761 | 21,325,335 |
| Purchases of investments | (4,496,617) | (16,902,952) |
| Net cash inflow from investing activities | 1,753,144 | 4,422,383 |
| Cash flows from financing activities | ||
| Proceeds from issue of ordinary shares | 30,147,991 | 3,500,672 |
| Net cash generated by financing activities | 30,147,991 | 3,500,672 |
| Net (decrease)/increase in cash | (2,818,186) | 3,173,240 |
| Cash at the beginning of the year | 3,488,421 | 332,535 |
| Effect of exchange fluctuations on cash | (36,072) | (17,354) |
| Cash as at 31 December | 634,163 | 3,488,421 |
| Represented by: | ||
| Cash at bank | 634,163 | 3,163,061 |
| Cash held on trading platforms | - | 325,360 |
| 634,163 | 3,488,421 |
Non-cash transactions consist of expenses paid and investments purchased using digital assets and cryptocurrency assets.
The notes contained in the Company’s Annual Report form part of these financial statements.
The financial statements were approved by the Board of Directors on 28 June 2023 and were signed on its behalf by:
George McDonaugh Keld van Schreven
Director Director
The financial information set out in this announcement does not constitute statutory accounts. This financial information has been extracted from the audited full accounts of the Company for the year ended 31 December 2022. The Company does not declare a dividend for the period.
The full Annual Report of the Company will be available on the Company’s website: www.KR1.io.
The Directors of the Company accept responsibility for the contents of this announcement.
For further information please contact:
KR1 PLC George McDonaugh Keld van Schreven |
+44 (0)1624 630 630 |
| Peterhouse Capital Limited (AQSE Corporate Adviser) Mark Anwyl |
+44 (0)20 7469 0930 |
| FTI Consulting (PR Adviser) Ed Berry Maxime Lopes Lynn Begany |
+44 (0)7711 387 085 KR1@fticonsulting.com |
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
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).
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