Registered number:
FOR THE PERIOD ENDED 31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
COMPANY INFORMATION
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CELSIUS NETWORK LIMITED
CONTENTS
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CELSIUS NETWORK LIMITED
GROUP STRATEGIC REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2020
Celsius Network Limited (“the Company”) and the group now headed by it ("the Group") was created to establish a community centric organisation that will always act in the best interest of its customers and users, providing two services:
1. The ability to transfer to the Group digital assets and earn yield on such assets 2. The ability to borrow against such digital assets. The Group has built a mobile application and a web-interface that provides these services (the "Platform") and has onboarded over 1.1 million users from over 150 countries. There is an intention to keep adding more utilities to the service and to continue to improve the community offering.
Technology
The Group uses a combination of centralised and decentralised technologies. As of the date of this report, the platform supports more than 45 different digital assets such as BTC, ETH, XRP, LTC, USDT, CEL, PAX and others. There is a plan to add many more decentralised services to provide further transparency and resilience to the Group's Platform. Business model The Group’s business model relies on attracting users to utilise the Group's services, and use the digital assets on the Group's Statement of Financial Position to generate yield by using various deployment activities. Generally, the rates payable by the Group on digital assets transferred to it by the users are higher than customary returns/earnings at banks/financial institutions. This key differentiator helps to engender a feeling of mutual trust between the Group and users. Customers The Group helps a diverse customer base to create income on their assets, in a world where banks and financial institutions have stopped paying out interest income and users often are at a disadvantage. The Group spends very little on advertising and instead focuses on scaling up its community of users.
The Group is primarily exposed to credit risks related to its digital asset lending activities. Should any of its borrowers fail to repay any loan, the Group may face losses and unrepairable damage. Such risks are managed by way of reviewing and constantly monitoring borrowers' financial standing. In addition, the Group is exposed to risks from movements in exchange rates of fiat currencies and the volatility of prices in digital assets that affect the cash flows arising from financial assets and liabilities. Since the financing of the Group is primarily from equity, interest rate risk is limited. The Group manages these risks primarily through regular monitoring of ongoing operational and finance activities.
Additionally, the Group is exposed to operational risk driven by potential hacking/infiltration. While there are robust controls in place to mitigate these risks, the risk of service interruption from external infiltration needs to be continuously monitored and measured. The Group is part of the global FinTech industry and complies with all the relevant rules and regulations across the world. While the Group applies its best efforts in areas such as KYC and AML, there is no guarantee that the Group will identify all ‘bad’ users who may cause harm to its network (which may impede the Group’s ability to operate in one or more jurisdictions). There is also the risk that future unknown regulations could impede the Group’s ability to operate in a number of jurisdictions.
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CELSIUS NETWORK LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2020
The Group's main Financial KPIs are Revenue, Gross Profit ($ and %), Operating Profit ($ and %), Net Profit ($ and %) and Total Assets.
This report was approved by the board on 8 October 2021
and signed on its behalf.
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CELSIUS NETWORK LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2020
The directors present their report and the financial statements for the period from 1 March to 31 December 2020.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the
consolidated
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year
. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙
select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙
make judgments and accounting estimates that are reasonable and prudent;
∙
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the period, after taxation, amounted to $
1,396.4 million
(2020 -
$
34.2 million
)
.
The directors do not propose the payment of a dividend.
The directors who served during the period were:
The Group’s plan is to continue to serve the wider community by offering additional services and expanding its operation into new markets to scale to over 100 million users worldwide. This may be achieved, among others, by enhancing marketing efforts to new jurisdictions, listing CEL token in leading digital exchanges and providing more utility to the CEL tokens to increase market reach and demand, and adding more functionalities to the Platform (all subject to legal, regulatory and tax considerations).
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CELSIUS NETWORK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2020
The Group’s management continues to have faith in its business model and believes it will continue to be a going concern for the next 12 months. However, it must be acknowledged that there are potential risks, including but not limited, to the unfolding economic crisis due to the COVID 19 virus, which may have an impact on the Group’s profitability and ultimate viability. The management team will endeavour to mitigate these inherent risks (where possible) but remain cautious and cannot make any guarantees, in light of this unprecedented event and future unknown developments that may arise.
Subsequent to the reporting date: • The Group continues to expand its Mining activity through significant investment in equipment purchases and equity investments in other Mining-related companies as follows: (i) On 7 May 2021 the Group signed a Stock Purchase Agreement with Luxor Technology Corporation for Series A-1 Preferred Stock for $ 0.2 million and Series A Shares for $ 0.225 million. (ii) On 2 June 2021 the Group signed a Simple Agreement for Future Equity (SAFE) with Rhodium Enterprises Inc. of $50 million. (iii) On 19 April 2021 the Group signed a Secured Convertible Note Purchase Agreement with Core Scientific Holding Co. (“Scientific”), where Scientific has agreed to sell Initial and Additional Notes and the Group agreed to buy Initial Notes in the amount of $50 million on 19 April 2021 and Additional Note of $4 million on 23 April 2021 out of total Notes of $215 million. (iv) On 31 July 2021 the Group signed two Agreements with Bitmain Technologies Limited for purchasing a total of 24,250 Rigs for BTC Mining for a total of $125 million. The equipment will be delivered to the Group from 31 December 2021 until the end of Q1 2022. • The Group is expanding its operations by establishing new subsidiaries in Australia, Serbia, Cyprus, Gibraltar & Lithuania. • On 22 July 2021, the Company filed to withdraw its temporary registration regime application for crypto asset firms from the UK Financial Conduct Authority (FCA). Subsequent to the withdrawal, the Company concluded a migration of its users transfers as well as certain business activities (mainly user transfers earning reward and decentralised finance lending and trading activities) from the United Kingdom to the United States, and where applicable, to several other jurisdictions. • The Company issued a Senior Secured Convertible Promissory Note (the “Note”) of $93.75 million with the option to issue a further $56.25 million. In the event that the conversion option of the Note is not exercised, the loan and accrued interest is due for repayment on 1 September 2022. The Note is secured over the assets of the Group.
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CELSIUS NETWORK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2020
The auditors, Nyman Libson Paul LLP, will be proposed for reappointment in accordance with
section 485 of the Companies Act 2006.
This report was approved by the board on
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED
We have audited the financial statements of Celsius Network Limited (the 'parent Company') and its subsidiaries (the 'Group') for the period ended 31 December 2020, which comprise the Group Statement of Comprehensive Income, the Group and Company Statements of Financial Position, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity
and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
For the purposes of determining whether the financial statements are free from material misstatement, we define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We also determine a level of performance materiality which we use to assess the extent of testing needed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.
Materiality for the financial statement in respect of both the Group and Company was set at $65 million. This was calculated based on 1% of gross assets. Using our professional judgment, we have determined this to be the principal benchmark within the financial statements as the group's activities are focused on its provision of loans and cryptocurrency asset balances. Performance materiality was set at $32.5 million being 50% of materiality for the financial statements as a whole. We agreed to report to those charged with governance all corrected and uncorrected misstatements we identified during the course of our audit with a value in excess $3.25 million.
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙
the information given in the Group Strategic Report and the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
∙
the Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following: • the nature of the industry and sector, control environment and business performance; • results of our enquiries of management about their own identification and assessment of the risks of irregularities; • any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to: - identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; - detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; - the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; - the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud was in relation to the potential overstatement of cryptocurrencies and related transactions. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and local tax legislation. In addition, we considered other laws and regulations that could have an effect on the company and result in the imposition of financial or other penalties and litigation. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. These limited procedures did not identify actual or suspected non-compliance. All matters in relation to non-compliance with laws and regulations and potential fraud risks were communicated to all members of the engagement team and we remained alert to any indications of non-compliance throughout the audit.
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
Our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; • enquiring of management concerning actual and potential litigation and claims; • assessing the appropriateness and where appropriate with third parties concerning actual and potential litigation and claims; • performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • reading minutes of meetings of those charged with governance; • in addressing the risk of fraud through management override of controls, reviewing the appropriateness of journal entries and other adjustments; assessing whether the judgments made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. There are inherent limitations in the audit procedures described above even though we have properly planned and performed our audit in accordance with auditing standards. The further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. As with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. We did not identify any key audit matters relating to irregularities, including fraud.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our Auditors' Report.
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CELSIUS NETWORK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CELSIUS NETWORK LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
124 Finchley Road
England
NW3 5JS
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CELSIUS NETWORK LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
REGISTERED NUMBER:
11198050
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
REGISTERED NUMBER:
11198050
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(CONTINUED)
AS AT
31 DECEMBER 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 24 to 51 form part of these financial statements.
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CELSIUS NETWORK LIMITED
REGISTERED NUMBER:
11198050
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
REGISTERED NUMBER:
11198050
COMPANY STATEMENT OF FINANCIAL POSITION
(CONTINUED)
AS AT
31 DECEMBER 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 24 to 51 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
31 DECEMBER 2020
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE PERIOD ENDED 31 DECEMBER 2020
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Celsius Network Limited (the "Company") and its subsidiaries together form "the Group".
The Company is a private company limited by shares and is incorporated in England and Wales. The Company's registered office is the Harley Building, 77 - 79 New Cavendish Street, London, England, W1W 6XB. The address of its principal place of business is 43 W 23rd Street, 2nd Floor, New York, NY 10010.
2.
Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in
the UK and the Republic of Ireland and the Companies Act 2006
.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The Group meets its day to day working capital requirements through the utilisation of its own funds, yield on cryptocurrencies from users and loans from third party institutions.
After reviewing existing funding facilities, forecasts and projections, the directors consider that these facilities will be sufficient to meet the Group's operating and expansion requirements. On this basis, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its financial statements.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
2.
Accounting policies (continued)
The Group recognises revenue when the amount can be reliably measured; it is probable that future economic benefits will flow into the entity; and specific criteria have been met for each of the Group’s activities. Revenues generated by the Group mainly consist of (i) CEL token sales, (ii) exchange lending, (iii) interest receivable from institutional loans, (iv) interest receivable from retail loans, (v) discretionary trading of cryptocurrencies and (vi) decentralised finance lending. Below is a detailed explanation of all the Group’s sources of revenue: CEL Token Sales For the Group’s initial sale of CEL tokens, in which multiple purchasers made payments using cryptocurrency, revenue is recognised at the fair value of the relevant cryptocurrency at the transaction date and is recognised over the period to which the tokens were activated. The cryptocurrency holdings received as payment for CEL tokens were subsequently converted to USD. As such, any associated gains or losses generated upon sale of the cryptocurrency to USD are also recognised in the Statement of Comprehensive Income. Exchange Lending The Group lends both fiat and cryptocurrencies to centralised and decentralised exchanges for durations ranging from two days to thirty days. These exchanges are marketplaces where their users are the ultimate borrowers of the assets and the exchanges manage the collateral and settlement of all lending transactions. Revenue is reported by the exchanges on a daily basis. Institutional Lending The Group lends both fiat and cryptocurrencies to institutional borrowers that generally qualify as ECP’s (eligible contract participant) if they have greater than $10 million in gross assets (or $5 million in gross assets if they are hedging). These institutional loans are generally open term so are short in duration and the overall portfolio is collateralized 0.5 to 1. Revenue is derived from interest income which is invoiced monthly to all institutional counterparties. Retail Lending The Group lends both fiat and US dollar stablecoins to individual borrowers from within the United States (eligible in 35 states only) and internationally. Duration ranges from 6 months to 2 years, and loan-to-value ratios ranges from 25% to 50% for standard loans. Revenue comes from interest income that is invoiced monthly, as well as from collateral liquidations (2% of principal) in the case of defaults. Discretionary Trading The Group allocates a portion of the portfolio to put on hedged and unhedged positions to monetise on price discrepancies among centralised and decentralised exchanges or financial platforms, as well as speculative trades on the price movements of cryptocurrencies or blockchain protocols. Decentralised Finance Lending The Group lends cryptocurrencies to decentralised finance platforms for durations ranging from two days to thirty days. These platforms are marketplaces where the users are the ultimate borrowers of the assets and the decentralised finance platforms manage the collateral and settlement of all lending transactions. Revenue is reported by the decentralised finance platforms on a daily basis.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
2.
Accounting policies (continued)
Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (the functional currency). The functional and presentational currency of the Group is United States Dollars (USD).
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction or valuation date where items are re measured. Foreign exchange gains and losses resulting from the settlement of such transactions as well as from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Group operates and generates taxable income. Deferred tax is recognised in respect of all timing differences between taxable profits and profits reported in the financial statements. Unrelieved tax losses and other deferred tax assets are recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply to the reversal of the timing difference.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
2.
Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
2.
Accounting policies (continued)
Intangible assets are recognised at their cost of acquisition less accumulated amortisation and any impairment.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over their useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash generating unit level. Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Comprehensive Income when the asset is derecognised. Traded cryptocurrencies The Group considers that traded cryptocurrencies are an intangible asset with an indefinite useful life as the Group considers that they do not have an expiry date nor have a foreseeable limit to the period of which they will be exchanged with a willing counterparty for cash or goods and services. After initial recognition, cryptocurrencies are held at fair value at the reporting date. Gains or losses on revaluation are recognised through other comprehensive income and accumulated in the revaluation reserve. When traded cryptocurrencies are utilised in business activities, the base cost is reduced by the fair value at the transaction date. Treasury cryptocurrencies The Group considers that treasury cryptocurrencies are an intangible asset with an indefinite useful life as the Group considers that they do not have an expiry date nor have a foreseeable limit to the period of which they will be exchanged with a willing counterparty for cash or goods and services. Treasury cryptocurrencies relate to CEL tokens held by the Group and can be issued at the Group's discretion. No costs were capitalised in respect of treasury tokens in line with the Group's policy on research and development. After initial recognition, treasury cryptocurrencies are held at fair value at the reporting date. Gains or losses on revaluation are recognised through other comprehensive income and accumulated in the revaluation reserve.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
2.
Accounting policies (continued)
Other investments which are not publicly traded and where fair value cannot be measured reliably are measured at cost less impairment. The impairment loss is calculated as the difference between the asset’s carrying amount and the best estimate of the amount that the entity would receive for the asset if it were to be sold at the reporting date. Other financial assets, such as loans receivable or loan collateral, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment. Financial assets receivable in cryptocurrencies are marked to market at the reporting date with any corresponding gain or loss recognised in the Statement of Comprehensive Income. Cash balances held by cryptocurrency exchanges are recognised within intangible assets until paid to the Group. Other financial liabilities, such as customer transfers or loan collateral, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment. Financial liabilities payable in cryptocurrencies are marked to market at the reporting date with any corresponding gain or loss recognised in the Statement of Comprehensive Income.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
2.
Accounting policies (continued)
The Group primarily enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from other third parties, loans to related parties and investments in ordinary shares.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income. Derivatives, including forward contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re measured at their fair value. Changes in the fair value of derivatives are recognised in the Statement of Comprehensive Income. The Group does not apply hedge accounting for interest rate and foreign exchange derivatives.
The Accounting Reference Date has been shortened to a 10-month period ended 31 December 2020. The comparative information reflects a 12-month period ended 29 February 2020. This change has been made in order to align the Accounting Reference Date with fellow group companies.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
The following are the Group’s key sources of estimation uncertainty: Valuation of treasury and traded cryptocurrencies Cryptocurrencies held within intangible assets are carried at fair value with changes being recognised through other comprehensive income. Loans receivable, customer transfers and loan collateral based upon cryptocurrencies are also carried at the recoverable or payable amount if such a balance were to be settled at the reporting date with changes being recognised through the Statement of Comprehensive Income. Fair values are based on the closing valuation at the reporting date provided by readily available market information for each cryptocurrency. Tangible assets Tangible assets are depreciated over their useful lives taking into account residual values where appropriate. The actual lives of assets and residual values are assessed annually and may vary depending on a number of factors, such as technological innovation and maintenance programmes. Impairment of debtors The Group makes an estimate of the recoverable value of trade and loans receivable. When assessing impairment, management considers factors including the current credit rating of the debtor, the ageing profile and historical experience.
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Analysis of turnover by country of destination:
Page 32
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 33
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 34
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 35
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 36
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
15.
Taxation (continued)
There were no factors that may affect future tax charges.
Page 37
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 38
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
16.
Intangible assets (continued)
Page 39
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 40
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 41
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 42
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 43
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 44
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 45
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 46
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Share premium account
Revaluation reserve
Other reserves
Page 47
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 48
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
The following were subsidiary undertakings of the Company:
Page 49
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
Page 50
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CELSIUS NETWORK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2020
The ultimate parent company is Celsius Network Inc., incorporated in Delaware, USA, which is controlled by A. Mashinsky by virtue of his shareholding.
Page 51
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