REG-Quantum Blockchain Technologies Plc: Interim Results
21/09/2022 10:45
21 September 2022
Quantum Blockchain Technologies plc
("Quantum Blockchain Technologies", “the Group” or "the Company")
INTERIM RESULTS
For the six months ended 30 June 2022
Quantum Blockchain Technologies plc (AIM: QBT) announces its unaudited interim
results for the six months ended 30 June 2022.
For further information please contact: Quantum Blockchain Technologies Plc Francesco Gardin, CEO and Executive Chairman +39 335 296573
SP Angel Corporate Finance (Nominated Adviser & Broker) Jeff Keating +44 (0)20 3470 0470
Kasia Brzozowska
Leander (Financial PR) Christian Taylor-Wilkinson +44 (0) 7795 168 157
About Quantum Blockchain Technologies Plc
QBT (AIM: QBT) is an AIM listed investment company which has recently
realigned its strategic focus to technology related investments, with special
regard to Quantum computing, Blockchain, Cryptocurrencies and AI sectors. The
Company has commenced an aggressive R&D and investment programme in the
dynamic world of Blockchain Technology, which includes cryptocurrency mining
and other advanced blockchain applications.
Chairman’s Statement
During the first six months of 2022, the Company continued working on its new
research and development (“R&D”) strategy focused on finding disruptive
and advanced proprietary techniques especially for Bitcoin (“BTC”) mining.
At the same time, the Company continued to deal with its Legacy Assets,
especially the litigations which although no longer forming part of the core
business of the Company, continue to represent potentially important financial
assets and therefore they are being dealt with in a careful and logical
manner.
The Company’s main strategy now is to invest in building its own BTC miner
utilising all the optimisations, enhancements and discoveries which have been
developed by the Company’s R&D teams. On this note, the Company is now
working with two independent partners to conduct verification tests on the
performance of its prototype application-specific integrated circuit chip
(“ASIC”). The current plan is to produce a variety of working prototypes
based on 12nanometer(“nm”) or 7nm ASIC chips (which are significantly less
expensive to produce than the 5nm ASIC chip) in order to produce empirical
results which will provide an educated and confident estimate of the
performance of the 5nm ASIC chips.
Assuming these prototype verification tests corroborate QBT’s own findings,
the Company will launch the production of its mining machines based on the 5nm
ASIC which, at the moment, is intended for internal use only.
The Company can report that its R&D teams have started delivering the first
results of its in-house R&D programme. The first milestone was filing the ASIC
Ultraboost patent application in late 2021, an improvement by the Cryptography
team of the Bitcoin mining process which eliminates redundant computations of
a key part of the Bitcoin mining algorithm, potentially resulting in a faster
and more efficient bitcoin mining process as it reduces the number of
operations across the three iterations of SHA-256 algorithm by approximately
7%. The patent has not been granted as of today’s date.
As announced on 11 March 2022, the Quantum Computing R&D team has developed a
quantum version of a BTC mining algorithm, centered on qubit-based quantum
computation, using quantum logic gates, simulated on a reduced-sized SHA-256
algorithm, while waiting for the number of qubits available on the next
generation of commercial quantum computers (expected to be released into the
market in 2023) which the Company expects to be sufficient to sustain full
SHA-256 computation.
The Deep Learning & Artificial Intelligence R&D team has also delivered some
interesting results by applying Machine Learning and data analysis tools to
the Company’s existing Big Data database of block-solving computations. This
led to the development of the two “knowledge-based” algorithms (called
“Method A” and “Method B”) controlling the SHA-256 computation.
Through a series of internal trial mining tests, Method “A” has improved
the performance in speed and energy consumption significantly compared to
existing crypto mining hardware, although measurements on current difficulty
are not yet available.
To determine the success of the “Method B”, the Company will need the
availability of the proprietary ASIC chip. Theoretical analysis has shown a
material improvement in speed and energy consumption with respect to current
commercial ASIC chips and given the relevance of the theoretical improvements,
the Company is assessing the use of GPU and FPGA chip technology, to carry out
empirical tests.
Relevant patent applications will be filed in due course when deemed
appropriate, according to internal analysis and assessments.
Investments in R&D during the period under review, amounted to €347,000, of
which €111,000 has been invested in hardware equipment supporting R&D and
€236,000 in costs related to cloud services and consultants.
On the Legacy Assets side, the main progress is related to the claim against
the previous management and internal audit committee of Sipiem in Liquidazione
S.p.A’s (“Sipiem Claim”) assessed by the independent court appointed
third-party expert to be valued at up to €7.8m and held by Clear Leisure
2017 Ltd (“CL17”), a wholly owned subsidiary of the Company. As all the
procedural steps have now been completed, the Venice Court is expected to
provide its final judgement on the Sipiem Claim by the end of 2022.
The claim against Sosushi’s previous management in Italy (“Sosushi
Italian Claim”), also held by CL17, is currently continuing an arbitration
process and is expected to conclude by the end of this year. Our defence in
response to proceedings brought by previous Sosushi directors and shareholders
in the English courts against the Company, (“Sosushi UK Claim”), has
been successful, and the claimants discontinued their €1.7m legal claim
against the Company. Following an English court order enforced in Italy, the
claimants have paid the Company approximately €77,000 towards legal costs
sustained in defence of the claim. Further legal costs and damages may still
be awarded to the Company following a final hearing to assess the quantum of
the Company’s counterclaim for, amongst other things, loss of profit which
remains ongoing.
With regard to the other Legacy Assets, being the investments in Geosim
Systems Ltd, PBV Monitor srl and Forcrowd srl, each investee company continues
to pursue the goal of a stable growth within the respective market.
During the period under review, the Company raised a total of £1.05m pursuant
to the exercise of 52,500,000 warrants issued as part of the placing announced
on 22 February 2021.
On 6 April 2022, the Company announced it had renegotiated the date of
maturity of the €3.5m Zero-Coupon Bond (“New Bond”) issued in 2020 with
the sole bondholder to 15 December 2024. Additionally, at the Bondholder
Meeting held on 21 April 2022, the Company extended the maturity of the
Zero-Coupon Bond also to 15 December 2024 and amended the conversion price
from 15 pence to 5 pence. The extension of the maturity date for both bonds
improves the current net asset position of the Group (see financial review
below).
In conclusion, although the Company is still dealing with some Legacy Assets
(related to litigations and previous investments), QBT’s focus is fully on
the technology side of the business, with an extensive team of researchers
aiming on delivering a novel solution to mining BTC.
Financial Review
The Group reported a total comprehensive loss for the period to 30 June 2022
of €2.8 million (30 June 2021: loss €1.1m). The operating loss for the
period was €2.1m (30 June 2021: operating loss €714,000).
Included within administrative expenses are charges relating to the
recognition of share options totaling €1.3m(2021: nil) and within finance
costs are charges for the revaluation of derivatives totaling €700k (2021:
nil). The increase of these items is strictly dependent on the volatility of
the Company’s share price during the first half of 2022, used for the
calculation according to the relevant accounting standards.
Without the impact of these two “accounting” elements the total
comprehensive loss for the period to 30 June 2022 would have been €799,000
and the operating loss for the period was €803,000.
At 30 June 2022, the Group net liabilities had improved to €2.1
million, compared to net liabilities of €2.8 million at 31 December 2021.
As a result of the extension of the maturity dates of the Company’s bonds as
described above, net current assets of the Group also improved during the
period under review, to €6 million, compared to net current liabilities of
€3.8 million at 31 December 2021
Post 30 June 2022 Events
On 16 August 2022, the Company announced with great sadness that Mr Reginald
Eccles, independent Non-Executive Director of the Company had passed away. As
a result, the Company had only one remaining director and was therefore not
able to meet its obligations under the Companies Act and trading in the
Company's shares on AIM was temporarily suspended.
Trading was restored on 12 September when the Company announced the
appointment of Mr Perter Fuhrman as independent Non-Executive Director. The
Company has committed to appoint a further non-executive director to its board
within the next three months.
Peter has extensive experience in high-technology, semiconductors, finance,
and investment industries. Currently, Peter is chairman and chief executive of
China First Capital which advises on and invests in the technology sector with
expertise, inter alia, in China’s semiconductor industry, advanced
manufacturing, robotics, precision automation, nano-positioning and photonics.
He is also a strategic adviser on advanced technologies and market expansion
to the board and chairman of one of China’s largest listed high-technology
manufacturing companies and to one of Germany’s largest semiconductor
technology companies. Peter was previously CEO of Los Angeles based
Awareness Technologies, a cloud-based enterprise security software company
(which he successfully sold in 2008) and Head of Europe for the publisher,
Forbes Inc.
Outlook
The Board remains committed to return value to its stakeholders by:
1. Focusing on its R&D programme, which is providing promising and consistent
results.
2. Investing in the technology sector (both directly through in-house R&D and
indirectly via potential investments in third parties).
3. Managing the legacy portfolio assets, where positive outcomes are expected
from claims made by the Company, and in due course, from the sale of the
investees.
4. A further reduction of the debt position (if and when the conditions are
deemed appropriate).
The Board remains positive as the technology investments carried out for the
in-house R&D programme are deemed sound and promising, and the legal claims
have strong merit with counterparties that are expected to be solvent.
Francesco Gardin
Quantum Blockchain Technologies PLC
CEO and Chairman
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2022
Note Six months to 30 June 2022 Six months to 30 June 2021 Year ended 31 December 2021
(Unaudited) (Unaudited) (Audited)
Continuing operations €’000 €’000 €’000
Revenue - 6 9
- 6 9
Administrative expenses (2,067) (720) (4,985)
Other operating income - - 6
Operating loss (2,067) (714) (4,970)
Share of loss from equity-accounted associates - - (33)
Finance charges (797) (392) (446)
Loss before tax (2,864) (1,106) (5,449)
Taxation 74 - 53
Loss for the period attributable to owners of the parent (2,790) (1,106) (5,396)
Other comprehensive income/(loss) - - -
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT (2,790) (1,106) (5,396)
Earnings per share:
Basic loss per share (cents) 3 (€0.281) (€0.13) (€0.621)
Diluted loss per share (cents) 3 (€0.213) (€0.13) (€0.354)
GROUP STATEMENTS OF FINANCIAL POSITION AT 30 JUNE 2022
Note As at 30 June 2022 €’000 (Unaudited) As at 30 June 2021 €’000 (Unaudited) As at 31 December 2021 €’000 (Audited)
Non-current assets
Property, plant and equipment 234 - 164
Investments 714 1,014 664
Investments in equity-accounted associates 211 - 211
Total non-current assets 1,159 1,014 1,039
Current assets
Trade and other receivables 5,029 5,315 4,905
Cash and cash equivalents 1,307 1,083 1,039
Total current assets 6,336 6,398 5,944
Current liabilities
Trade and other payables (311) (265) (329)
Borrowings - - (8,365)
Derivative financial instruments - - (1,113)
Total current liabilities (311) (265) (9,807)
Net current assets/(liabilities) 6,025 6,133 (3,863)
Total assets less current liabilities 7,184 7,147 (2,824)
Non-current liabilities
Borrowings (8,439) (8,606) -
Derivative financial instruments (870) - -
Total non-current liabilities (9,309) (8,606) -
Total liabilities (9,620) (8,871) (9,807)
Net liabilities (2,125) (1,459) (2,824)
Equity
Share capital 8,378 8,080 8,221
Share premium account 50,541 48,463 49,442
Other reserves 12,673 8,787 11,409
Retained losses (73,717) (66,789) (71,896)
Equity attributable to owners of the Company (2,125) (1,459) (2,824)
Total equity (2,125) (1,459) (2,824)
GROUP AUDITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
2021
Group Share capital €’000 Share premium account €’000 Other reserves €’000 Retained losses €’000 Total equity €’000
At 1 January 2021 7,397 47,124 8,787 (65,531) (2,223)
Total comprehensive loss for the year - - - (5,396) (5,396)
Grant of warrants - - - 1,447 1,447
Exercise of warrants 119 831 - (2,416) (1,466)
Issue of shares 705 1,487 - - 2,192
Grant of share options - - 2,622 - 2,622
At 31 December 2021 8,221 49,442 11,409 (71,896) (2,824)
UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 JUNE 2021
Group Share capital €’000 Share premium account €’000 Other reserves €’000 Retained losses €’000 Total equity €’000
At 1 January 2021 7,397 47,124 8,787 (65,683) (2,375)
Total comprehensive loss for the period - - - (1,106) (1,106)
Issue of shares 683 1,339 - - 2,022
At 30 June 2021 8,080 48,463 8,787 (66,789) (1,459)
GROUP UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 JUNE
2022
Group Share capital €’000 Share premium account €’000 Other reserves €’000 Retained losses €’000 Total equity €’000
At 1 January 2022 8,221 49,442 11,409 (71,896) (2,824)
Total comprehensive loss for the period - - - (2,790) (2,790)
Exercise of warrants 157 1,099 - 969 2,225
Grant of share options - - 1,264 - 1,264
At 30 June 2022 8,378 50,541 12,673 (73,717) (2,125)
GROUP UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six months to 30 June 2022 (Unaudited) €’000 Six months to 30 June 2021 (Unaudited) €’000 Year ended 31 December 2021 (Audited) €’000
Cash used in operations
Loss before tax (2,864) (1,106) (5,449)
Fair value changes - 248 -
Impairment of investments - - 167
Share of post-tax losses of equity accounted associates - - 33
Non cash foreign exchange movements (50) - (41)
Finance charges 800 146 305
Decrease/(increase) in receivables (49) (124) 340
(Decrease)/increase in payables (18) (69) (5)
Loss/gain on derivatives - - 143
Share based payments 1,264 - 2,694
Depreciation 20 - -
Net cash (outflow)/inflow from operating activities (897) (905) (1,813)
Cash flows from investing activities
Purchase of investments - (34) (54)
Purchase of property, plant and equipment (90) - (164)
Net cash inflow from investing activities (90) (34) (218)
Cash flows from financing activities
Proceeds from capital issue 1,255 2,022 3,070
Net cash inflow/(outflow) from financing activities 1,255 2,022 3,070
Net increase in cash for the period 268 1,083 1,039
Cash and cash equivalents at beginning of year 1,039 - -
Cash and cash equivalents at end of period 1,307 1,083 1,039
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
Quantum Blockchain Technologies plc is a company incorporated and domiciled in
England and Wales. The Company’s ordinary shares are traded on the AIM
market of the London Stock Exchange. The address of the registered office is
22 Great James Street, London, WC1N 3ES.
The principal activity of the Group is that of an investment company with a
portfolio of companies primarily encompassing the leisure and real estate
sectors mainly in Italy and, more recently, technology sectors. The focus of
management is to pursue the monetisation of all of the Company’s existing
assets, through selected realisations, court-led recoveries of misappropriated
assets and substantial debt-recovery processes. The Company has also realigned
its strategic focus to technology related investments, with special regard to
interactive media, blockchain and AI sectors.
2.Accounting policies
The principal accounting policies are summarised below. They have all been
applied consistently throughout the period covered by these consolidated
financial statements.
Basis of preparation
The interim financial statements of Quantum Blockchain Technologies Plc are
unaudited consolidated financial statements for the six months ended 30 June
2022 which have been prepared in accordance with UK adopted international
accounting standards. They include unaudited comparatives for the six months
ended 30 June 2021 together with audited comparatives for the year ended 31
December 2021.
The interim financial statements do not constitute statutory accounts within
the meaning of section 434 of the Companies Act 2006. The statutory accounts
for the year ended 31 December 2021 have been reported on by the company’s
auditors and have been filed with the Registrar of Companies. The report of
the auditors was qualified in respect of the valuation of the investment in
Geosim Systems Ltd, the omission of Mediapolis Investment S.A. from the
consolidated accounts and the risk that the company may have to apply payroll
taxes to the payments made to the directors to either UK or overseas tax
authorities. The report of the auditor also contained an emphasis of matter
paragraph in relation to a material uncertainty regarding going concern.
Aside from the limitation of scope relating to Geosim Systems Ltd, Mediapolis
Investment S.A . and the potential payroll taxes, the auditor’s
report did not contain any statement under section 498 of the Companies Act
2006.
The interim consolidated financial statements for the six months ended 30 June
2022 have been prepared on the basis of accounting policies expected to be
adopted for the year ended 31 December 2022, which are consistent with the
year ended 31 December 2021 except as stated below:
Going concern
The Group’s activities generated a loss of €2,790,000 (June 2021:
€1,106,000) and had net current assets of €6,025,000 as at 30 June 2022
(June 2021: €6,133,000). The Group’s operational existence is still
dependent on the ability to raise further funding either through an equity
placing on AIM, or through other external sources, to support the on-going
working capital requirements.
After making due enquiries, the Directors have formed a judgement that there
is a reasonable expectation that the Group can secure further adequate
resources to continue in operational existence for the foreseeable future and
that adequate arrangements will be in place to enable the settlement of their
financial commitments, as and when they fall due.
For this reason, the Directors continue to adopt the going concern basis in
preparing the interim accounts. Whilst there are inherent uncertainties in
relation to future events, and therefore no certainty over the outcome of the
matters described, the Directors consider that, based upon financial
projections and dependent on the success of their efforts to complete these
activities, the Group will be a going concern for the next twelve months. If
it is not possible for the Directors to realise their plans, over which there
is significant uncertainty, the carrying value of the assets of the Group is
likely to be impaired.
Notwithstanding the above, the Directors note the material uncertainty in
relation to the Group being unable to realise its assets and discharge its
liabilities in the normal course of business.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business.
The key risks that could affect the Company’s medium-term performance and
the factors that mitigate those risks have not substantially changed from
those set out in the Company’s 2021 Annual Report and Financial Statements,
a copy of which is available on the Company’s website:
www.quantumblockchaintechnologies.com. The key financial risks are liquidity
and credit risk.
Critical accounting estimates
The preparation of interim financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the end of the reporting period. Significant items subject to
such estimates are set out in Note 3 of the Company’s 2021 Annual Report and
Financial Statements. The nature and amounts of such estimates have not
changed significantly during the interim period.
3.Loss per share
The basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. Diluted earnings per share is
computed using the same weighted average number of shares during the period
adjusted for the dilutive effect of share options and convertible loans
outstanding during the period.
The profit and weighted average number of shares used in the calculation are
set out below:
Six months to 30 June 2022 Six months to 30 June 2021 Year to 31 December 2021
(Unaudited) (Unaudited) (Audited)
€’000 €’000 €’000
Loss/profit attributable to owners of the parent company:
Basic earnings (2,790) (1,106) (5,396)
Diluted earnings (2,762) (1,106) (5,328)
Basic weighted average number of ordinary shares (000’s) 994,291 836,537 869,339
Diluted weighted average number of ordinary shares (000’s) 1,295,619 836,537 1,503,440
Basic and fully diluted earnings per share:
Basic earnings per share (€0.281) (€0.13) (€0.621)
Diluted earnings per share (€0.213) (€0.13) (€0.354)
IAS 33 requires presentation of diluted earnings per share when a company
could be called upon to issue shares that would decrease earnings per share or
increase net loss per share. No adjustment has been made to diluted earnings
per share for out-of-the money options and warrants.
4.Investment Policy
The Company invests in the technology sector, with special focus on, but not
limited to, Blockchain, Artificial Intelligence, Cryptocurrencies and Quantum
Computing. As well as making direct investments, the Company may also act as
Investment Manager for one or more selected venture capital funds, in
compliance with the FCA regulations, which identify, invest in, and acquires
companies, assets and projects in the technology sector which show excellent
growth potential on a stand-alone basis, and which would add value to the
Company’s portfolio of investments.
The Company may make investments in target businesses at all stages of
development. The majority of investments will be made in unlisted companies,
however listed companies may, from time to time, be considered on a selective
basis. The geographical focus will be mainly Europe, but investments may also
be considered in other regions to the extent the Board considers that valuable
opportunities exist, and positive returns can be achieved.
The Board expects that investments will typically be held for the medium to
long term, although short term disposal of assets cannot be ruled out. The
Company’s investments may range from a minority position with strategic
influence to a controlling position. Any transaction constituting a reverse
takeover under the AIM Rules will require shareholder approval and the
publication by the Company of an admission document meeting the requirements
of the AIM Rules.
The Board believes that its broad collective experience together with its
extensive network of contacts will assist it in the identification, evaluation
and funding of investment targets. When necessary other external expert
professionals will be engaged to assist in undertaking the due diligence of
prospective targets and related transaction analysis. The Board may also
consider appointing additional directors and key employees with relevant
experience as part of any specific investment.
Investments are expected to be in the form of equity, debt or convertible
debt. The Company may offer shares as well as cash by way of consideration for
prospective investments, thereby helping to preserve the Company’s cash for
working capital purposes. The Company may, in appropriate circumstances, place
shares, issue debt securities or borrow money to complete an investment
5.Copies of Interim Accounts
Copies of the interim results
are available at the
Group’s website at www.quantumblockchaintechnologies.co.uk.
Copies may also be obtained from the Group´s registered office: Quantum
Blockchain Technologies PLC, 22 Great James Street, London, WC1N 3ES.
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