Half-year Results

Quantum Blockchain Technologies (AIM: QBT), the AIM-listed investment company focusing on a R&D and investment programme within blockchain technology, is pleased to announce its Interim Results for the six months ended 30 June 2024.

Chairman’s Statement

During the first half of 2024, QBT continued to focus its efforts on developing the first commercial Bitcoin mining products and services that utilises its intensive R&D programme.

R&D

The R&D programme has achieved several positive milestones so far:

• Asic UltraBoost: Designed to improve Bitcoin mining by eliminating redundant computations in a key part of the mining algorithm, resulting in faster and more efficient operations. A patent application has been filed with patent offices in the UK and the EU (which also covers the UK), as well as the USA, Canada, Australia and South Korea.
• Asic Enhanced Boost: An optimised approach to SHA-256 computation for Bitcoin mining that enables partial pre-computation of future blockchain blocks. A patent application has also been submitted to the UK and EU patent offices.
• Quantum Mining: A quantum version of the Bitcoin mining algorithm that utilises qubit-based quantum computation and quantum logic gates. A patent application for this is being drafted and expected to be filed as soon as practicable in jurisdictions to be determined.
• Method A: A Machine Learning (“ML”) based approach aimed at reducing the SHA-256 search space compared to the brute-force method used in Bitcoin mining currently.
• Method B: Another innovation leveraging ML and statistical optimisation to reduce the SHA-256 search space, but with a fundamentally different approach than Method A.
• Method C: An AI Oracle developed by the R&D Machine Learning team to assess in real-time the likelihood that an input to SHA-256 will generate a winning hash. A patent application is under consideration.

Company Objectives:

The Company’s short-term goal is to develop commercial products and services from the above R&D activities, prioritising Methods A, B and C. The longer-term goals are to develop an in-house ASIC chip for Bitcoin mining as well as a quantum computing based miner.

Current Developments:

Currently, the Company is testing Methods A and B through pool-based live mining. These tests are being conducted in order to assess the improved performance of commercial ASIC chips when these chips are controlled by the two Methods. Significantly, the two Methods can be applied to existing ASIC-based mining machines simply as a client-server software upgrade. QBT’s recent software switch from CG Miner to ESP-miner is expected to assist and facilitate the testing programme. If the results of the live testing are successful, Method A and B could thereafter be made available as SaaS products.

Method C, which requires its integration at chip-level, is undergoing real time mining tests using slower FPGA chips on historic blockchain blocks. This provides the Company with a Bitcoin mining difficulty compatible with the hashing power of available FPGAs in order to allow the team to understand the chip mapping process for the purpose of scaling up towards commercial ASIC integration.

Should any of the tests confirm the R&D team’s findings, the Company may consider potential partnerships with either miners or chip manufacturers to quickly deploy Method A and Method B on ASIC Mining Machines and Method C on an ASIC chip. In preparation for this eventuality, QBT has already initiated high-level discussions with key industry players.

QBT’s longer-term strategy of using its Quantum Mining Algorithm still requires more advanced quantum computing power than is currently available, so the Company will review this project in 2025.

QBT’s previously announced project to build in-house its own Bitcoin mining chip. This is anticipated to commence once the relevant patents have been granted. As previously stated, the chip will be based on a large format ASIC and, while it will not be competitive in the market, it will serve as a demonstrator model for the major Bitcoin miners serving to prove the disruptive nature of QBT’s enhancements. A second option under consideration whereby the Company may exploit its patents (once granted) would be to partner with a chip designer and, through a licensing arrangement share QBT’s patented Method C intellectual property. This second option is less capital intensive than QBT manufacturing its own chips but the Company also anticipates that such an approach would be expected to reduce future revenue.

Conclusion

Despite the slower than anticipated progress with the results from the R&D programme, which should not be considered unexpected given QBT’s stated objectives, the Company firmly believes in the results it has obtained so far and it is working diligently to complete all the necessary testing in order to launch one or more Bitcoin products.

Legacy Assets

The board believes that its legal matters are moving closer to a positive resolution.

The Company continues its court action against the former management and statutory committee of Sipiem Srl In Liquidazione (“Sipiem”). The claim is being conducted by QBT’s wholly owned subsidiary, Clear Leisure 2017 Ltd (“CL17”).

In April 2024, CL17 reached an agreement with certain of the Sipiem jointly liable defendants with an agreement to settle these defendants’ liabilities for €700,000 (this amount, net of costs, was received by CL17). CL17 also secured the right to 30% of any future sums recovered through the litigation by acquiring the Sipiem Receiver’s rights for €170,000. The intention was to provide CL17 with damages already received (€700,000) as well as maximise eventual receipt of those damages QBT hopes to recover pursuant to the 2022 judgment of the trial court in CL17’s favour (the remaining €5.575 million plus interest and inflation adjustments – together with the damages already received, the "Settlement"). The Settlement, however, was itself subject to the approval of trial court in Venice being granted prior to the Venice Court of Appeal making a ruling on the appeal of the 2022 judgment filed by the defendants.

This sequence of events did not occur as foreseen in the Settlement, however, for in June 2024, the Venice Court of Appeal issued its appeal judgement upholding the 2022 ruling in favour of CL17, with a minor exception of certain items of damages that were judged as awarded on inadequate grounds amounting to €105,412,19 while confirming the award of €6,083,562 (plus interest and inflation adjustments) in damages, along with overall €134,176 in legal fees accrued since the start of legal proceedings. Since, however, the Appeals court’s decision was issued before the trial court’s approval of the Settlement, the terms of the Settlement were not confirmed.

The Company is currently reviewing the situation with its legal team but retains the funds received to date, less the €170,000 payment to the Sipiem Receiver. Discussions are ongoing with all relevant parties to assess the legal and contractual implications of the voided Settlement.

In other litigation activity, the Company continues to also pursue its claim against the former management of Sosushi Srl, amounting to approximately €1 million. The matter is subject to arbitration and although the arbitration process has stalled, QBT intends to relaunch it soon.

Regarding QBT’s investee companies, the Company is happy to report that in late June 2024 Forcrowd Srl obtained authorisation to extend its crowdfunding licence across all EU jurisdictions. With respect to PBV Monitor Srl (now More Legal Srl), the Company's stake has decreased to approximately 0.45% following a recent fundraising round.

Finally, as announced on 9 January, QBT reached an agreement with MC Strategy S.A., the sole bondholder of its €3.5 million Zero-Coupon Bond issued in 2020, to extend the bond’s maturity from 15 December 2024 to 15 December 2026, and to increase the yield on maturity from 1% to 3%. Similarly, bondholders of QBT's Zero-Coupon Bond issued in 2013 agreed to extend the maturity date from 15 December 2024 to 15 December 2026, and to amend the conversion price from £0.05 to £0.03.

Financial Review

The Group reported a total comprehensive loss for the period of €1.3 million (30 June 2023: loss €1.4m). The operating loss for the period was €1.1 million (30 June 2023: operating loss €1.2m). There were no charges relating to the recognition of share options within administrative expenses (2023: €370,000) however, within finance costs there are charges for the revaluation of derivatives totaling €231,000 (2023: €142,000). The difference of these items is strictly dependent on the volatility of the Company’s share price during the first half of 2024, used for the calculation according to the relevant accounting standards.

At 30 June 2024, the Group is in a net assets position of €4.3 million, compared to a net liabilities position of €2.6 million at 31 December 2023. The Group is also at a net current assets position of €3.9m compared to net current liabilities of €3.1m at 31 December 2023.

The Company’s cash position at the period end was €1.6m, compared to €2m at 31 December 2023.

Post 30 June 2024 Events

In August 2024 the Company announced that, with regards to the porting of the Methods to existing commercial ASIC-based, it decided to migrate away from CGMiner to AxeOS (ESP-miner), a more recently developed and, in the Company’s opinion, a better designed public domain operating system software for Bitcoin mining devices.

In September 2024, the QBT announced the appointment of Mr. Jose Rios as Strategic Adviser Mr. Rios is the former General Manager of Blockchain and Business Solutions in the Accelerated Computing Systems and Graphics Group at Intel Corp, where he spent 25 years. He was instrumental in the Blockscale ASIC project - Intel’s dedicated chip for Bitcoin mining – and he brings extensive expertise in ASIC chip design, production and proprietary architecture development to QBT.

Outlook

The Board remains committed to return value to its shareholders by:

• continuing to focus on its R&D programme, which is providing promising and consistent results;
• investing in the technology sector (both in a direct and an indirect manner);
• managing the Legacy Assets portfolio, where positive outcomes are expected from the Company’s various legal claims; and
• Further reduction of the debt position (if and when the conditions are deemed appropriate).

The Board remains positive as the technology investments are deemed sound and promising in fast growth markets, while the legal claims have strong merit against defendants who are expected to remain solvent, thereby enhancing the prospect of collection of the judgment debts.

Francesco Gardin

Quantum Blockchain Technologies PLC

CEO and Chairman

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2024

NOTES TO THE FINANCIAL STATEMENTS

General Information

Accounting policies

Basis of preparation

Going concern

The Group’s activities generated a loss of €1,342,000 (June 2023: €1,439,000) and had net current assets of €3,809,000 as at 30 June 2024 (June 2023: net current assets €4,816,000). 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.

Risks and uncertainties

www.quantumblockchaintechnologies.com. The key financial risks are liquidity and credit risk.

Critical accounting estimates

Loss per share

The loss and weighted average number of shares used in the calculation are set out below:

Investment Policy

The principal activities of the Company are focused on the R&D programme relating to bitcoin and as an investing company with a portfolio in technology sectors. The main focus of management is to successfully run the R&D programme and release new products to the market. The management is also pursuing the monetisation of all of the Company’s Legacy Assets, through selected realisations, court-led recoveries of misappropriated assets and substantial debt recovery processes

Copies of Interim Accounts

Copies of the interim results are available at the Group’s website at: