KR1 Plc

("KR1" or the "Company")

Audited Final Results

Managing Director’s Report

For the year ended 31 December 2019

We are pleased to present the audited final results of the Company for the twelve months ended 31 December 2019.

Financial markets tend to explore the boundaries of an asset’s value, spiking upwards to test highs, and capitulating downwards at moments of deep uncertainty. These last few years in the crypto markets have seen both ends of the spectrum in full force. The one constant has been the ever expanding number of credible and exciting startup projects launching new disruptive systems using blockchain and decentralised technologies. KR1 has been continuously investing in these new projects through this market volatility cycle. We continued to add new investments to the portfolio, knowing full well that, with the increased number of decentralised platforms finding real product market fit, the markets would soon return to a more favourable outlook. Currently we are seeing many of our earliest investments in the decentralised finance (DeFi) space gaining huge traction and recognition as the market catches up with the leap forward that the technology has made. 

The last year saw a major step change for KR1 as we became income generating and we are pleased to report £241,633 in income from the Company’s staking activities, mainly resulting from our participation in the Cosmos Network during the 2019 financial year. Going into 2020 and beyond, staking activities are becoming an evermore important area, as further promising portfolio projects such as Polkadot, Dfinity and Ethereum turn on their Proof-of-Stake blockchains. On top of our staking success, we undertook active advisory work with one of our portfolio companies, Vega Protocol, resulting in revenues of £180,748 in their native token. All of these activities combined with our successful track record of investing, have made 2019 another successful year for KR1, resulting in an unrealised profit of £2,053,608 reflecting the gain in fair value on our digital assets investments with a realised profit on disposal of digital assets of £693,665 for the Company.

Since December 2019, we have entered some very turbulent and uncertain times in the global economy, the catalyst being the recent Covid19 pandemic outbreak. Yet even before the virus swept across the globe, there was an ever growing unease at the weaknesses within the global financial system, the unfairness and inequality the system creates, and the staggering size of the debt that burdens the world’s largest economies. Bitcoin’s growth is in direct correlation to these now critical and unsustainable weaknesses, and is seen as a hedge against the untrammeled fiat currency printing by the world’s central banks. Respected investor and fund manager Paul Tudor Jones of the Tudor Investment Company recently allocated a portion of his fund into Bitcoin, joining a long list of influential traders and investors in this momentum shift to Bitcoin and the crypto markets. 

In March 2020, Bitcoin and all crypto assets saw massive volatility, mirroring the wider market panic on the expected economic damage from Covid19, but subsequently weathered the storm. KR1 experienced no operational or structural portfolio issues in these challenging times, as the Company is not exposed to unnecessary risks and has a modest cost-basis. The fear and uncertainty in the global economy has set a new backdrop on which Bitcoin is poised to take its place next to gold as a safe haven asset, with Bitcoin acting as the ‘bellwether’ or ‘blue chip’ asset in the crypto markets. This is potentially very positive for KR1 which holds a solid position in both leading cryptocurrencies, Bitcoin (“BTC”) and Ethereum (“ETH”), in its portfolio.

KR1 specialises in seed and early stage investments into projects that use decentralised technologies to create innovative products and services to disrupt current systems. More recently, it is DeFi that has come into the spotlight with billions of funds flowing into that ecosystem. KR1 was one of the earliest investors in the DeFi movement, investing into Melon Protocol in 2017, which was when we first realised the potential for programmable money to upend the financial system. Since then we have continued to add more DeFi projects to the portfolio including Acala, Argent, Nexus Mutual, Vega Protocol and Union to name a few. Each project aims to solve a different aspect of the DeFi puzzle, from uncollateralized lending through to stablecoins, decentralised exchanges and insurance. We have further balanced the portfolio with meaningful stakes in important infrastructure blockchains, including Polkadot, Cosmos and Dfinity as well as a wide range of disruptive projects in other areas such as privacy, scalability and staking.

The big bang of decentralised money and applications continues to expand at an ever increasing speed and at every corner of the blockchain ecosystem we are seeing increased adoption; from the amount of transactions on-chain through to hash rates, active wallet addresses, billions of value locked up in DeFi and more. At KR1 we are fully involved in experimenting and using these new DeFi platforms in our day to day operations, all of which are being built on the Ethereum protocol. The fly in the ointment for Ethereum is that it is creaking under the weight of its own success, resulting in high transaction fees and network congestion. These issues will be addressed by the long awaited release of Ethereum 2.0, but the road to launch of a fully featured version remains unclear. In the meantime, newer, more advanced layer one protocols will seek to take advantage of these pain points in the coming years, opening the door to Ethereum competitors. While we are huge proponents of everything Ethereum has delivered to drive this space forward and believe it will dominate the decentralised space for years to come, we have major positions in relevant Ethereum competitors, who will drive forward experimentation and innovation and promise a universe of many blockchains.

One of these innovative blockchain projects is the Cosmos Network, which has become a major position in KR1’s portfolio since Cosmos’ launch in March 2019. Cosmos is positioned as a critical hub that will route transactions between different blockchains, analogous to the TCP/IP messaging protocol on the World Wide Web. KR1 participated in the first Cosmos funding round in 2017 and, as mentioned above,  staking revenue from our Cosmos staking activities started to flow into KR1’s balance sheet ever since the network’s launch in March 2019. To blow our own trumpets for a moment, KR1 was one of the first institutions to recognise the compelling potential of ‘Proof-of-Stake’ blockchain networks, where the early investments are not only seeing great appreciation in the crypto markets, but are also proving to be profitable yield bearing crypto assets.

Similar to the above, two other highly anticipated yet-to-launch ‘Proof-of-Stake’ blockchain networks in the Company’s portfolio are Polkadot and Dfinity, which are the largest investments that KR1 has made to date. Polkadot is in the middle of its launch process as we write and Dfinity recently unveiled the first parts of its project, which they executed in stealth, gearing up for a launch process starting as early as later this year.

Since the Initial Coin Offering (ICO) fervour diminished in early 2018, KR1 has been at the forefront of participating in newer token distribution methods and models. The need for crypto networks and protocols to distribute tokens to active participants who add value in order to be fully decentralised in nature has not disappeared, rather it became more important than ever. One of the most compelling new token distribution mechanisms, called a ‘Lockdrop’, was pioneered by the Commonwealth Labs and Edgeware team, which saw a huge influx of funds. Buoyed by this success, KR1 is participating in more lockdrops and distribution mechanisms, prime examples being the Plasm Network and aforementioned Edgeware lockdrop, but there are many more projects in the pipeline.

For much of 2020, Bitcoin has been sitting ‘still’ under the $10k resistance level with low volatility. However, this has changed recently with a major break to the upside. Ethereum has also seen a strong price surge, which, given the massive success of DeFi projects in generating economic activity on Ethereum, was an expected move. These are all very encouraging developments and we are in an excellent position to take full advantage of this. 

While maximising staking yields and the utilization of our portfolio assets has become an important area for us, our focus has always been and continues to be researching the bleeding edge of this transformative ecosystem, backing the brightest and best teams to help build out the new decentralised world of Web 3.0 and beyond.

George McDonaugh and Keld Van Schreven, KR1

Managing Directors

Date: 31 July 2020

Statement of Comprehensive Income

For the year ended 31 December 2019

                                                                       Restated
                                                             2019          2018
                                                                      (Note 13)

                                                 Note           £             £

Income

Realised gain on disposal of digital investments          693,665     2,354,118

Staking yields                                            241,633             -

Advisory fees                                             180,748             -

Unrealised (loss)/gain on investments                 (1,080,599)       636,693

Unrealised gain/(loss) on digital investments           2,053,608  (12,714,187)

Unrealised (loss)/gain on loan issued                     (8,088)         1,665

                                                        2,080,967   (9,721,711)

Expenses

Administration expenses                                 (117,364)     (102,794)

Advisory fees                                            (37,397)     (136,947)

Audit fees                                               (14,706)      (19,800)

Bank charges and trading commissions                     (11,122)      (57,188)

Branding and promotional expenses                        (81,300)     (107,675)

Commission                                                      -      (15,850)

Escrow fees                                               (2,500)             -

Foreign exchange loss                                     (2,233)       (6,842)

Insurance                                                 (6,798)       (1,129)

Legal and professional                                   (36,313)      (89,703)

Loss on share buy back                                    (6,000)             -

Office rental                                            (13,671)      (39,317)

Provision against receivable                             (32,466)             -

Staff costs                                       3     (268,584)     (455,997)

Other expenses                                            (8,711)             -

Travel expenses                                          (84,136)     (102,959)

                                                        (723,301)   (1,136,201)

Taxation                                          5      (23,778)     2,519,393

Profit/(loss) for the year                              1,333,888   (8,338,519)

Other comprehensive income                                      -             -

Total comprehensive income/(loss) for the year          1,333,888   (8,338,519)

Earnings per share expressed in pence per share:

Basic and diluted                                 6          1.02        (6.95)

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 2019

                                                     Restated
                                              2019       2018
                                                    (Note 13)

                                    Note         £          £

Assets

Fixed asset investments              8   7,403,708  5,100,393

Cash at bank                               179,243     87,387

Cash held on trading platforms             100,130    618,150

Debtors                              7      28,607    819,247

                                         7,711,688  6,625,177

Creditors

Amounts falling due within one year  11  (237,865)  (508,172)

Net current assets                       7,473,823  6,117,005

Capital and reserves

Called up share capital              12    720,076    718,843

Share premium                            3,056,443  3,034,746

Profit and loss account                  3,697,304  2,363,416

Shareholders’ funds                      7,473,823  6,117,005

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 31 July 2020 and were signed on its behalf by:

George McDonaugh                                                    Simon Nicol

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 2019. 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: https://www.kryptonite1.co/.

The Directors of the Company accept responsibility for the contents of 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)
Mark Anwyl                                          +44 (0)20 7469 0930

Allie Feuerlein

Nominis Advisory Ltd (PR Adviser)
Angus Campbell                                      pr@KR1.io

ENDS

Notes to Media

About KR1 plc

KR1 is a leading digital asset investment company supporting early-stage decentralised and open source blockchain projects. Founded in 2016 and publicly listed in London (NEX:KR1), KR1 has built a notable reputation for generating significant returns by investing in key projects that will power the decentralised platforms and protocols that form the emerging Web3 infrastructure.

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.