ARBK 20-F/A
Argo Blockchain Plc (ARBK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
|
|
OR | |
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
|
|
OR | |
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
|
|
OR | |
|
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission file number
(Exact name of Registrant as specified in its charter) |
|
(Jurisdiction of incorporation or organization) |
|
(Address of principal executive offices) |
|
Telephone: |
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class: |
| Trading Symbol(s) |
| Name of each exchange on which registered: |
The | ||||
|
| The | ||
|
| The |
* The ordinary shares are not for trading, but only in connection with the listing of the American depositary shares on the Nasdaq Stock Market LLC.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
|
| ||
☒ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | ☐ | ☒ | Other | ☐ |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 or ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
EXPLANATORY NOTE
Argo Blockchain plc (the “Company,” “we,” “our,” or “us”) is filing this Amendment No. 1 on Form 20-F/A (this “Amendment No. 1”) to its annual report on Form 20-F for the fiscal year ended December 31, 2023 (the “Original Filing”), as originally filed with the Securities and Exchange Commission (the “SEC”) on April 30, 2024, to respond to a comment letter received from the SEC in connection with its review of the Original Filing and to correct a material error in its audited consolidated financial statements as at and for the years ended December 31, 2023, 2022 and 2021. In connection therewith, the Company is filing restated audited consolidated financial statements of the Company as of and for the years ended December 31, 2023, 2022 and 2021 (the “Restated Financial Statements”), including the Report of Independent Registered Public Accounting Firm with respect thereto. In addition, the Company is including in this Amendment No. 1 its restated Operating and Financial Review and Prospects for the year ended December 31, 2023 (the “Restated OFRP”).
The Restated Financial Statements and Restated OFRP have been restated to correct a material error in the Company’s accounting for its mined cryptocurrencies. The Company accounted for these assets as current digital assets at fair value through profit or loss, when they should have been accounted for as intangible assets at fair value through other comprehensive income. The impact to the balance sheet is a change in the description of the asset from digital assets to intangible assets. The impact to the income statement is twofold:
1) | A reclassification of the change in fair value losses of digital assets from “Change in fair value of digital assets” to “Impairment in intangible assets”, and |
2) | A reclassification of fair value gains of digital assets from “Change in fair value of digital assets” to “Fair value reserve” in “Other comprehensive income”. |
While net income (loss) is improved in each year presented, there is no change to total comprehensive income (loss).
The impact to the cash flow statement is a reclassification between operating cash flow and investing cash flow. Specifically, proceeds from the sales of digital assets have been reclassified from cash flows from operations to cash flows from investing activities. There is no change to total comprehensive loss or cash.
In connection with the Restated Financial Statements and Restated OFRP, management has reassessed its evaluation of the effectiveness of its internal control over financial reporting and disclosure controls and procedures as of December 31, 2023 as further described in this Amendment No. 1. Based on such reassessment, the Company identified a material weakness in its internal control over financial reporting. Therefore, management concluded that internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2023.
Pursuant to Rule 12b-15, new certifications by our chief executive officer (“CEO”) and chief financial officer (“CFO”) are being filed as exhibits to this Amendment No. 1. The amended “Item 19. Exhibits” of Part III of the Original Filing is included in this Amendment No. 1.
This Amendment No. 1 speaks as of the filing date of the Original Filing on April 30, 2024. Other than as described above, this Amendment No. 1 does not, and does not purport to, amend, update or restate any other information or disclosure included in the Original Filing or reflect any events that have occurred after the filing of the Original Filing on April 30, 2024. Accordingly, this Amendment No. 1 should be read in conjunction with filings made with the SEC subsequent to the filing of the Original Filing.
Any consolidated financial statements and related financial information for the periods contained in the Restated Financial Statements and Restated OFRP contained in any reports filed or furnished prior to the date hereof should no longer be relied upon.
2
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Restated Financial Statements, including the notes thereto, included in this Amendment No. 1, as well as “Presentation of Financial and Certain Other Information,” Item 3.D. “Risk Factors” and Item 4.B. “Business Overview.”
The following discussion includes certain forward-looking statements. Actual results may differ materially from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Annual Report.
Overview
We are a leading blockchain technology company focused on large-scale mining of Bitcoin. We mine using purpose-built computers (or “mining machines”) to solve complex cryptographic algorithms (or “verify” or “solve” blocks) in the blockchain in exchange for rewards and fees denominated in the native token of that blockchain network.
We were founded in late 2017, and initially focused on providing our mining capacity as a service to our customers. In this initial model, customers contracted Bitcoin mining services from us for a fee, and our customers would earn the Bitcoin rewards generated from the contracted mining services directly to their cryptocurrency wallet address. Beginning in 2019, we chose to wind down our mining-as-a-service business and shifted to mining for our own account to increase our revenues and margins. In 2023, we did not have any mining-as-a service revenue.
Upon our shift to mining for our own account, we began substantially increasing our investment in mining machines, and we have our mining machines hosted in facilities operated by third parties as well as in facilities that we own and operate. As of December 31, 2023, we had approximately 2.8 exahash of mining capacity, of which approximately 0.4 exahash was located in facilities we own in Quebec, Canada, and approximately 2.4 exahash was located in hosted facilities.
In 2023, our treasury management strategy was to sell our mined Bitcoin on a weekly basis in order to fund our operating expenses and for working capital needs. Cryptocurrency held in treasury is marked to market at the end of each of our financial reporting periods, with gains and losses reflected as changes in fair value of digital currencies in our income statement. As a result, our operating results and total assets vary in direct proportion to the value of the applicable cryptocurrencies we hold in a given period, and these variations may be substantial.
In 2021, 2022 and 2023, we mined 2,045, 2,156, and 1,760 Bitcoin, respectively, and our total revenues were $98.7 million, $58.5 million, and $50.6 million, respectively. In 2022, our total comprehensive loss was $246.7 million and, in 2023, our total comprehensive loss was $32.2 million.
Our recurring losses from operations, the pending maturities of and debt service on our outstanding indebtedness, and macroeconomic conditions in the cryptocurrency markets, among other factors, raise substantial doubt about our ability to continue as a going concern. These factors and management’s assessment of our prospects to continue as a going concern are included disclosures in Note 3 of the financial statements, and our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the year ended December 31, 2023 with respect to this uncertainty. Our 2023 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. Our ability to continue as a going concern will require us to obtain additional funding. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate certain of our operations, and our stockholders could lose all, or a significant portion, of their investment in us.
3
A. Operating Results
Factors Affecting Our Results of Operations
Market Value of Bitcoin and other Cryptocurrency.
Substantially all of our current business is focused on mining Bitcoin. Our revenue is primarily comprised of the value of Bitcoin rewards and transaction fees we earn by mining the blockchain. Our operating results and financial condition are substantially affected by fluctuations and long-term trends in the value of Bitcoin. In 2022, the rapid decline in Bitcoin and other cryptocurrency pricing materially and adversely affected our revenue, financial condition and operating results, and required us to divest a substantial portion of our Bitcoin as well as our Helios mining facility in Texas in order to meet operating expenses and avoid default under our credit facilities. In 2023, Bitcoin mining economics improved, allowing us to significantly reduce our debt, deploy additional hashrate capacity in Quebec, and strengthen our balance sheet. We carefully monitor fluctuations and longer-term trends in the value of Bitcoin, which impacts the price of machines, when planning our short- and long-term operating strategies and capital expenditures. We also regularly evaluate potential innovations in geography, physical footprint, infrastructure computing technology and similar areas to improve our operations and productivity. We believe this strategy will enable us to build value over the long term, and differentiates us from competitors whose decisions, we believe, are driven principally by short-term market dynamics and opportunities.
The market for cryptocurrencies is new, rapidly evolving and subject to regulatory, tax, political and market factors beyond our control. Increased hashrate in the market resulting from the deployment of new mining machines will generally lead to increases in mining difficulty, which in turn decreases our revenue and adversely affects our mining margins. Further, reward rates for cryptocurrency are subject to adjustments at predetermined intervals. For example, for Bitcoin, the reward was initially set at 50 Bitcoin rewards per block and this was cut in half to 25 on November 28, 2012 at block 210,000, again to 12.5 on July 9, 2016 at block 420,000 and again to 6.25 on May 11, 2020 at block 630,000. The most recent halving for Bitcoin occurred on April 19, 2024 at block 840,000, when the reward was reduced to 3.125. These adjustments have had and will continue to have material effects on the economic viability of mining assets that are in production. These factors could lead to material adverse changes in the market for Bitcoin, which could in turn result in substantial damage to or even the failure of our business. See Item 3. D. “Risk Factors — Risks Related to Cryptocurrency Mining — The cryptocurrency for which we currently mine, Bitcoin, is subject to halving; the cryptocurrency reward for successfully uncovering a block will halve several times in the future and the cryptocurrency’s value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts.”
Capacity and Efficiency of Mining Machines.
The cryptocurrency mining industry is currently undergoing an arms race in mining technology and increased capacity, as miners need to deploy increasingly sophisticated mining machines in ever greater quantities to remain competitive. While many of our competitors have embraced a “bigger is better” growth strategy, we believe that our commitment to mining efficiency and return on investment in mining machines will remain our competitive advantage. To maintain this competitive advantage over the long term, we must develop and maintain strong relationships across the mining machine supply chain, strategically invest in state-of-the art mining machines at attractive prices, and effectively manage our fleet as it ages along the obsolescence curve.
Cost and Source of Power.
Mining cryptocurrency is a power-intensive process, with electrical power required both to operate the mining machines and to dissipate the significant amount of heat generated by operating the machines. We believe the combination of the increasing difficulty of successfully mining rewards, driven by greater hashrates, and the periodic adjustment of reward rates, such as the halving of Bitcoin rewards, will drive the increasing importance of power efficiency in cryptocurrency mining over the long term. Moreover, we believe that cryptocurrency miners have a social responsibility to obtain the power required for their operations from clean power sources as much as possible. However, there is no guarantee that we will be able to negotiate these power agreements on these terms, or at all, including for example, due to limitations in availability and fluctuations in the cost of electricity. See Item 3. D. “Risk Factors — Risks Related to Cryptocurrency Mining — We may not be able to secure access to electricity on a sufficiently firm and unrestricted basis or at a price that we are willing to pay” and “Risk Factors — Risks Related to Cryptocurrency Mining — We may be affected by price fluctuations in the wholesale and retail power markets.”
4
Competition.
Our business environment is constantly evolving, and cryptocurrency miners can range from individual enthusiasts to professional mining operations with dedicated mining facilities. We compete with other companies that focus all or a portion of their activities on mining activities at scale. We believe that the trend of increasing market prices for Bitcoin and other major cryptocurrencies we observed beginning in the third quarter of 2020 has resulted in an increase in the scale and sophistication of competition in the cryptocurrency mining industry, with new entrants and existing competitors gaining access to substantial capital resources to build ever larger mining operations. To the extent the market price for Bitcoin increases, we believe many new and existing competitors may be encouraged to build or expand Bitcoin mining operations.
Key Indicators of Performance and Financial Condition and Non-IFRS Financial Measures
Key operating and financial metrics that we use, in addition to our IFRS consolidated financial statements, to assess the performance of our business are set forth below for the years ended December 31, 2023, 2022, and 2021, along with the most comparable IFRS measures:
YEAR ENDED DECEMBER 31, |
| |||||||||
| 2023 |
| 2022 |
| 2021 |
| ||||
(Restated, Note 2) | (Restated, Note 2) | (Restated, Note 2) | ||||||||
Bitcoin Mined |
| 1,760 |
| 2,156 |
| 2,045 | ||||
Gross Margin |
| 6 | % | 19 | % | 70 | % | |||
Mining Profit Margin |
| 43 | % | 54 | % | 85 | % | |||
Average Total Cost Per Bitcoin Mined |
| $ | 26,964 |
| $ | 21,905 | $ | 14,437 | ||
Average Direct Cost Per Bitcoin Mined |
| $ | 16,364 |
| $ | 12,411 | $ | 7,425 | ||
Net Income/(Loss) ($000s) | $ | (34,637) | $ | (228,961) | $ | 39,074 | ||||
Adjusted EBITDA ($000s) | $ | 7,682 | $ | (43,446) | $ | 73,483 | ||||
Mining Profit Margin, Average Total Cost per Bitcoin Mined, Average Direct Cost Per Bitcoin Mined, EBITDA, and Adjusted EBITDA are not measures defined by IFRS. Average Total Cost Per Bitcoin Mined equals direct costs divided by total bitcoin mined. The other key measures are defined below.
These measures should not be considered as an alternative to IFRS measures, and they are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider these measures in isolation from, or as a substitute analysis for, our gross margin or net income/(loss), as applicable, as determined in accordance with IFRS.
Bitcoin Mined
We measure the production of our mining activities in a given period as Bitcoin Mined. In prior years, Bitcoin Mined included rewards and transaction fees for mining Bitcoin and other cryptocurrencies. We generally exchange forms of cryptocurrency other than Bitcoin into Bitcoin in the period in which such currency is earned, and we hold Bitcoin in treasury that we do not otherwise sell to fund our operating expenses. As such, we believe that the number of Bitcoin that we mine is a useful metric for investors to measure our mining activity.
5
Mining Profit Margin
We define Mining Profit Margin as the difference between cryptocurrency mining revenue and our direct costs (excluding depreciation of mining equipment), divided by cryptocurrency mining revenue, expressed as a percentage. We use this measure, and believe it is meaningful to investors, because it is reflective of the return on marginal investment of mining Bitcoin. In addition, because we have generally recovered the original cost of our mining machines in advance of their thirty-six to forty-eight month accounting depreciation curve, once machines are installed and operating we internally monitor Mining Profit to obtain what we believe to be an accurate reflection of the profitability of our core mining operations. Mining Profit Margin is a supplemental measure of our performance that is not required by, or presented in accordance with, IFRS. This measure should not be considered as an alternative to gross margin determined in accordance with IFRS. The decrease in mining margin from 2022 was driven primarily by the 71% increase in average network difficulty in 2023. The table below reconciles Mining Profit to gross profit, the most directly comparable IFRS measure:
YEAR ENDED DECEMBER 31 |
| ||||||
| 2023 |
| 2022 |
| 2021 |
| |
(Restated, Note 2) | (Restated, Note 2) | (Restated, Note 2) | |||||
(in $’000’s) |
| ||||||
Gross profit (loss) |
| 3,101 |
| 11,355 |
| 69,224 | |
Gross margin |
| 6 | % | 19 | % | 70 | % |
Depreciation of mining equipment |
| 18,656 |
| 20,469 |
| 14,339 | |
Non-mining revenue |
| — |
| (119) |
| (5,162) | |
Mining Profit |
| 21,757 |
| 31,705 |
| 78,401 | |
Mining Profit Margin |
| 43 | % | 54 | % | 85 | % |
Average Direct Cost per Bitcoin Mined.
We define the Average Direct Cost per Bitcoin Mined as the total direct costs of mining at both our owned facilities and hosted facilities (excluding depreciation of mining equipment), divided by total Bitcoin Mined over a given period. For mining at owned facilities, direct mining expenses are inclusive of power costs. For mining at hosted facilities, direct mining expenses are inclusive of the all-in hosting fee that is charged as well as any related service fees. We believe this measure is a useful complement to Mining Profit, as it reflects the average marginal direct cost of each reward earned irrespective of the value of such reward at the time it is earned. Average Direct Cost per Bitcoin Mined excludes the depreciation of mining equipment and so does not reflect the full cost of our mining operations. In addition, Average Direct Cost per Bitcoin Mined or similar non-IFRS measures are utilized by analysts in the cryptocurrency mining industry to compare results across peer companies, and accordingly we believe that excluding the depreciation of mining equipment from Average Direct Cost per Bitcoin Mined is appropriate to facilitate accurate comparisons to the financial performance of other industry participants. Average Direct Cost per Bitcoin Mined is a supplemental measure of our performance that is not required by, or presented in accordance with, IFRS. This measure should not be considered as an alternative to IFRS measures. The table below reconciles Average Direct Cost Per Bitcoin Mined to Average Total Cost Per Bitcoin Mined, the most directly comparable IFRS measure:
YEAR ENDED DECEMBER 31 | ||||||
| 2023 |
| 2022 |
| 2021 | |
Bitcoin Mined (number of Bitcoin) |
| 1,760 |
| 2,156 |
| 2,045 |
Total Cost of Bitcoin Mined ($000s) |
| 47,457 |
| 47,228 |
| 29,524 |
Average Total Cost Per Bitcoin Mined ($) |
| 26,964 |
| 21,905 |
| 14,437 |
Depreciation of mining equipment ($000s) |
| (18,656) |
| (20,469) |
| (14,339) |
Direct Cost of Bitcoin Mined ($000s) |
| 28,801 |
| 26,762 |
| 15,185 |
Average Direct Cost Per Bitcoin Mined ($) |
| 16,364 |
| 12,411 |
| 7,425 |
6
EBITDA
We define EBITDA as our operating income plus depreciation and amortization. As a capital intensive business, EBITDA removes the cost of depreciation of mining equipment. This metric allows us to monitor the profitability of our underlying business on a current basis, and we believe it provides a useful metric for comparing our performance to those of similar companies.
Adjusted EBITDA
Adjusted EBITDA provides this same indicator of Argo’s EBITDA from operations but additionally excludes any unrealized foreign exchange gains or losses, stock-based compensation charges, restructuring charges, and other one-time impairments and costs that are not expected to be repeated in order to provide greater insight into the cash flow being produced from our operating business, without the influence of extraneous events.
EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, IFRS. This measure should not be considered as an alternative to operating income/(loss) determined in accordance with IFRS. The table below reconciles Adjusted EBITDA to net income/(loss), the most directly comparable IFRS measure:
YEAR ENDED DECEMBER 31, | ||||||
| 2023 |
| 2022 |
| 2021 | |
(Restated, Note 2) | (Restated, Note 2) | (Restated, Note 2) | ||||
(in $’000’s) | ||||||
Net income/(loss) | (34,637) | (228,961) | 39,074 | |||
Interest expense |
| 11,556 |
| 22,661 |
| 2,935 |
Depreciation / amortization |
| 20,129 |
| 29,003 |
| 14,904 |
Taxation |
| — |
| (11,731) |
| 11,319 |
EBITDA |
| (2,952) |
| (189,028) |
| 68,232 |
Impairment of tangible fixed assets | 855 | 55,838 | — | |||
Impairment of intangible assets | 1,082 | 5,300 | — | |||
(Gain) loss on disposal of intangible fixed assets | (1,166) | 53,833 | (299) | |||
Gain on sale of subsidiary and investments | (36) | 55,418 | 837 | |||
Loss/(gain) on sale of fixed assets | — | 23,228 | (244) | |||
Foreign exchange | (1,914) | (21,337) | 784 | |||
Restructuring and transaction-related fees | 4,969 | 11,862 | — | |||
Share based payment charge | 3,892 | 6,096 | 2,579 | |||
Equity accounted loss from associate | 716 | 6,027 | 1,594 | |||
Write off of investment | 2,236 | — | — | |||
Adjusted EBITDA | 7,682 | 7,237 | 73,483 | |||
7
Supplemental Information
YEAR ENDED DECEMBER 31, | ||||||
| 2023 |
| 2022 |
| 2021 | |
(in $000’s, except “per Bitcoin” figures, Bitcoin price, and deployed miners) |
|
|
|
|
|
|
Number of Bitcoin Mined |
| 1,760 |
| 2,156 |
| 2,045 |
Total revenue |
| 50,558 |
| 58,583 |
| 98,748 |
Non-mining revenue |
| — |
| 119 |
| 5,162 |
Mining revenue |
| 50,558 |
| 58,464 |
| 93,586 |
Mining revenue per Bitcoin Mined |
| 28,723 |
| 27,117 |
| 45,763 |
Average Direct Cost per Bitcoin Mined (excludes depreciation of mining machines) |
| 16,364 |
| 12,411 |
| 7,425 |
Average Mining Profit per Bitcoin Mined (excludes depreciation of mining machines) |
| 12,362 |
| 14,705 |
| 38,338 |
Average Total Cost per Bitcoin Mined |
| 26,964 |
| 21,905 |
| 14,437 |
Average Mining Profit Per Bitcoin |
| 1,762 |
| 5,212 |
| 31,326 |
Maximum Bitcoin price during the period ($)(1) |
| 44,202 |
| 47,816 |
| 67,617 |
Minimum Bitcoin price during the period ($)(1) |
| 16,616 |
| 15,742 |
| 29,352 |
Time-weighted average Bitcoin price during the period ($)(2) |
| 28,864 |
| 28,215 |
| 47,489 |
Data miners deployed at the end of the period(3) |
| 33,750 |
| 31,000 |
| 24,000 |
Notes
(1) | Source – Closing price of Bitcoin as reported on CoinGecko.com |
(2) | Calculated by taking the yearly average of the daily closing price of Bitcoin as reported on CoinGecko.com |
(3) | Includes all miners contained at our self-mined sites of Baie Comeau and Mirabel and miners that are hosted at the Helios site. |
Components of Our Results of Operations
Total revenue
Our revenues primarily consist of cryptocurrency that we mine. In 2021, 2022 and 2023, we principally focused on mining Bitcoin. We participate in mining pools, with the pool’s performance obligation being the delivery of cryptocurrency into our wallet once an algorithm has been solved by the pool. Our mining revenue consists of our share of the block reward the pool earns for solving the block, and our share of transaction fees associated with the transactions comprising the block. Our share of the block reward and related transaction fees is determined by the proportion of hash power we contribute toward the pool as a whole. The block reward is pre-determined and hard coded into the protocol governing the relevant blockchain, while the transaction fees are the aggregate fees paid by parties whose transactions are included in the block. In 2023, transaction fees represented approximately 6% of our Bitcoin mining revenue. Over time, as the block reward decreases (including as a result of block reward halving events) transaction fees will become a larger proportion of our revenue. The block reward and transaction fees are paid in-kind in the native digital currency of the blockchain.
Power and hosting costs
Direct costs of mining revenue are comprised of power costs and the fees we pay to third parties to host, operate and maintain our mining machines.
8
Power credits
The hosting agreement with Galaxy allows Argo to share in the proceeds from economic curtailment, which occurs when Helios monetizes its fixed-price PPA during periods of high power prices.
Change in fair value of digital currencies and realized loss on sale of digital currencies
In all periods presented, we have mined cryptocurrency and sold portions of the cryptocurrencies mined in exchange for fiat currency to fund our operating expenses. As such, we were mining to sell, and the cryptocurrency we earned from mining was recorded as a current asset on our balance sheet. Change in fair value of digital currencies consists of the net change in the value of cryptocurrency assets held in treasury due to fluctuations in the market of those assets. In each of the periods presented, cryptocurrency held in treasury was marked to market at either the date on which such currency was disposed or, if not disposed, at the end of such period, with gains and losses reflected as change in fair value of digital currencies or realized loss on sale of digital currencies in our income statement. In recent periods, these fluctuations have materially affected our operating results and we expect this to continue for the foreseeable future.
Depreciation of mining equipment
We capitalize the cost of our mining machines and record depreciation expense on a straight-line basis over the estimated useful life of the machines, which is generally 36 to 48 months.
Operating expenses
General and administrative expenses represent salary and other employee costs, restructuring costs, insurance fees, non-mining depreciation and amortization, legal and professional fees, regulatory fees, consulting fees, foreign exchange gains and losses, and other expenses.
Income tax expense
We are liable to pay tax in a number of jurisdictions, including the United Kingdom, Canada and the United States. Our effective tax rate represents the weighted average of the tax rates for which we are liable in those jurisdictions. We did not occur any income tax expense in any of the jurisdictions that we operate.
9
Results of Operations
The following table sets forth our results of operations for the years ended December 31, 2023, 2022 and 2021:
| 2023 |
| 2022 |
| 2021 | ||
(Restated, Note 2) | (Restated, Note 2) | (Restated, Note 2) | |||||
(in $’000’s) | |||||||
Revenues |
| 50,558 | 58,583 | 98,748 | |||
Power and hosting costs |
| (35,964) | (26,759) | (15,185) | |||
Power credits |
| 7,163 | — | — | |||
Depreciation of mining equipment |
| (18,656) | (20,469) | (14,339) | |||
Gross profit (loss) |
| 3,101 | 11,355 | 69,224 | |||
Operating expenses |
| (18,949) | (34,057) | (11,743) | |||
Gain on hedging |
| — | 2,097 | — | |||
Share based payment charge |
| (3,892) | (6,096) | (2,579) | |||
Operating profit (loss) | (19,740) | (26,701) | 54,902 | ||||
Gain/(loss) on sale of investments |
| 36 | — | (837) | |||
Loss on sale of subsidiary |
| — | (55,418) | — | |||
Write off of investment |
| (2,236) | — | — | |||
Loss on disposal of fixed assets |
| — | (23,228) | — | |||
Investment fair value movement | — | (406) | 244 | ||||
Finance costs |
| (11,556) | (22,661) | (2,935) | |||
Other income |
| 346 | 3,726 | — | |||
Impairment of tangible fixed assets |
| (855) | (55,838) | — | |||
Gain/(loss) on disposal of Intangible Assets (current) | 738 | (53,833) | 299 | ||||
Gain on disposal of intangible assets (non-current) | 428 | — | — | ||||
Impairment of intangible assets (current) |
| — | (145) | — | |||
Impairment of intangible assets (non-current) | (1,082) | (5,155) | — | ||||
Equity accounted loss from associate |
| (716) | (6,027) | (1,594) | |||
Revaluation of contingent consideration | — | 4,994 | 314 | ||||
Profit (loss) before taxation | (34,637) | (240,692) | 50,393 | ||||
Income tax expense (recovery) | — | 11,731 | (11,319) | ||||
Profit (loss) after taxation |
| (34,637) | (228,961) | 39,074 | |||
Other comprehensive income –currency translation reserve | (1,175) | (20,639) | (8,834) | ||||
Other comprehensive income – equity accounted OCI from associate | — | (8,744) | 8,744 | ||||
Other comprehensive income – fair value reserve | — | (551) | 2,419 | ||||
Total comprehensive income (loss) |
| (35,813) | (258,895) | 41,403 |
Comparison of the years ended December 31, 2023 and 2022 (in ‘000’s)
Total revenue
Total revenue decreased by $8,026 to $50,558 for the year ended December 31, 2023 from $58,583 for the year ended December 31, 2022. This decrease was primarily driven by the increase in the global network hashrate and the associated 71% increase in average network difficulty in 2023 compared to 2022, which resulted in a 40% decrease in hashprice. In 2023 we mined 1,760 bitcoin and realized $28,723 per bitcoin as compared to 2,156 and $27,117 in 2022, respectively.
Power and hosting costs
Power and hosting costs increased by $9,205 to $35,964 for the year ended December 31, 2023 from $26,759 for the year ended December 31, 2022. This increase was primarily driven by higher power and hosting costs in Texas due to a full year’s production at in 2023 compared to a partial year of production in 2022.
10
Power credits
The hosting agreement with Galaxy allows Argo to share in the proceeds from economic curtailment, which occurs when Helios monetizes its fixed-price PPA during periods of high power prices. During the year, Argo generated approximately $7.2 million in power credits, with $3.8 million generated in the month of August during a state-wide heat wave. Not only does the ability to curtail operations benefit Argo economically, but it greatly enhances the stability of the Texas grid.
Depreciation of mining equipment
Depreciation of mining equipment decreased by $1,813 to $18,656 for the year ended December 31, 2023 from $20,469 for the year ended December 31, 2022. This decrease was primarily driven by the lower book value of our machines in 2023 after accounting for impairments in 2022, partially offset by new mining machines energized in 2023.
Operating expenses
Operating expenses decreased by $15,029 to $18,949 for the year ended December 31, 2023 from $34,057 for the year ended December 31, 2022. Note 8 of our consolidated financial statements details our operating expenses for 2023 and 2022. The decrease over 2022 was primarily driven by the sale of the Helios facility in December 2022, which significantly decreased the Company’s headcount and salary costs, and reduced other non-mining operating expenses such as restructuring costs, depreciation and amortization, and insurance fees.
Share based payment
Share based payment decreased to $3,892 for the year ended December 31, 2023 from $6,096 for the year ended December 31, 2022. This decrease was driven by the large number of options that lapsed early in 2023 with the reduction in work force and the higher share price associated with options granted in 2021 and 2022 as compared to the restricted and performance share units granted in 2023.
Interest expense
Interest expense decreased by $11,105 to $11,556 for the year ended December 31, 2023 from $22,661 for the year ended December 31, 2022. This decrease was primarily driven by the significant reduction of debt that occurred in conjunction with the sale of the Helios facility to Galaxy in December 2022.
Comparison of the years ended December 31, 2022 and 2021 (in ‘000’s)
Total revenue
Total revenue decreased by $40,165 to $58,583 for the year ended December 31, 2022 from $98,748 for the year ended December 31, 2021. This decrease was primarily driven by the overall decrease in the price of Bitcoin (average for Q4 2021 of $54,804 per Bitcoin and average of Q4 2022 of $18,066).
Power and hosting costs
Power costs increased by $11,574 to $26,759 for the year ended December 31, 2022 from $15,185 for the year ended December 31, 2021. This increase was primarily driven by higher power costs in Texas due to the opening of the Helios facility during 2022.
Depreciation of mining equipment
Depreciation of mining equipment increased by $6,130 to $20,469 for the year ended December 31, 2022 from $14,339 for the year ended December 31, 2021. This increase was primarily driven by continued investment in the expansion of our mining fleet and the resulting depreciation of those capital investments.
11
Operating expenses
Operating expenses increased by $22,314 to $34,057 for the year ended December 31, 2022 from $11,743 for the year ended December 31, 2021. This increase was primarily driven by increased salary costs and other non-mining operating expenses such as insurance and depreciation and amortization as the Group energized its Helios facility. Operating expenses such as legal and directors and officers insurance also increased as a result of operating as a public company listed in the U.S.
Share based payment
Share based payment increased to $6,096 for the year ended December 31, 2022 from $2,579 for the year ended December 31, 2021. This increase was driven by the increase in options granted during the year, the increase in share price, and the material nature of the charge calculated thereon.
Interest expense
Interest expense increased by $19,726 to $22,661 for the year ended December 31, 2022 from $2,935 for the year ended December 31, 2021. This increase was primarily driven by the lease costs related to the S19 and S19 Pro machine purchase where payment began in January 2021, interest on the Galaxy Term Loan, bond interest, and interest resulting from prepaying loans during the year.
B. Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through cash generated by sales of cryptocurrency, sales of equity securities, issuing bonds and incurring debt. In 2022, the rapid decline in Bitcoin price adversely affected our revenue, financial condition and operating results, and required us to divest a substantial portion of our Bitcoin as well as our Helios mining facility in Texas in order to meet operating expenses and avoid default under our credit facilities. In 2023, Bitcoin mining economics improved, allowing us to significantly reduce our debt, deploy additional hashrate capacity in Quebec, and strengthen our balance sheet. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. We believe that our sources of liquidity and capital resources will be sufficient to meet our existing business needs for at least the next 12 months. However, our recurring losses from operations, our debt service obligations, and the volatility in Bitcoin prices do raise substantial doubt about our ability to continue as a going concern. As a result, management has included disclosures in Note 3 of the financial statements and our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the year ended December 31, 2023 with respect to this uncertainty. From time to time, we may raise additional capital through the issuance of debt or equity securities or additional borrowings to the extent required, or to the extent that we believe such capital is available on favorable terms. Our primary sources of liquidity are our cash and cash equivalents and cryptocurrency held in treasury.
During the course of 2023, our treasury management strategy was to sell our mined cryptocurrency assets on a weekly basis in order to fund our operating expenses and for working capital needs. In the future, as with any business which mines a commodity, we expect to sell Bitcoin to satisfy our fiat cash requirements.
In March 2022, we entered into an equipment financing agreement (the “Financing Agreement”) with NYDIG, a wholly owned subsidiary of New York Digital Investment Group LLC. As part of the Financing Agreement, NYDIG loaned Argo an aggregate principal amount of $27 million to recapitalize the purchase of electrical infrastructure equipment for the Helios facility in Dickens County, Texas. Outstanding borrowings under the Financing Agreement were secured by the infrastructure financed equipment and the contracts to acquire the infrastructure financed equipment. In April 2022, we entered into additional equipment financing with NYDIG under which NYDIG agreed to loan to Argo, in a series of loans from April to September 2022, an aggregate principal amount of up to $71 million to recapitalize the purchase of digital asset mining equipment for the Helios facility. Additional borrowings under the Financing Agreement were secured by the mining financed equipment and the contracts to acquire the mining financed equipment. The equipment financing agreements entered into with NYDIG were repaid in full in December 2022.
12
On December 28, 2022, we announced a series of transactions with Galaxy that strengthened our balance sheet, improved our liquidity position, and enabled us to continue mining operations. As part of the transactions, we sold the Helios facility and real property in Dickens County, Texas to Galaxy for $65 million and refinanced existing asset-backed loans via a new $35 million, three-year asset-backed loan with Galaxy (the “Galaxy ABS Loan”). The Galaxy ABS Loan also includes events of default, which are customary for facilities of this type (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all amounts outstanding under the Galaxy ABS Loan may be accelerated. The Galaxy ABS Loan contains usual and customary limitations on indebtedness, liens, restricted payments, acquisitions and asset sales in the form of affirmative, negative and financial covenants, which are customary for financings of this type. The Galaxy ABS Loan is secured by a collateral package that includes 23,619 Bitmain S19J Pro mining machines currently operating at the Helios facility and certain machines located at Argo’s Canadian data centers. The term of the Galaxy ABS Loan is 18 months with an option to extend for another 18 months if certain financial thresholds are met. The interest rate is SOFR plus 11% with a 1.5% renewal fee in the event the maturity is extended. The cash proceeds received from the sale of the Helios facility, along with a portion of the borrowings under the Galaxy ABS Loan, were used to repay all existing indebtedness, prepayment interest, and other fees of approximately $84 million owed to NYDIG and other existing indebtedness. The transactions reduced total indebtedness by $41 million and allowed us to simplify our operating structure.
On July 19, 2023, the Company raised $7.5 million of gross proceeds via a non-preemptive placing of 57,500,000 new ordinary shares to both institutional and retail investors in the UK. The proceeds were used for general corporate purposes and to repay a portion of the Galaxy ABS Loan.
On January 8, 2024, the Company raised $9.9 million of gross proceeds via a non-preemptive placing of 38,064,000 new ordinary shares to institutional investors in the UK. The proceeds were used for general corporate purposes and to repay a portion of the Galaxy ABS Loan.
At any time and from time to time, we may repay or redeem our outstanding debt, including purchases of our outstanding bonds in the open market, through privately negotiated transactions or a combination thereof, in each case using cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt or equity or proceeds from asset divestitures. Any repayment or redemption of our debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In connection with such repurchases or redemptions, we may incur cash and non-cash charges, which could be material in the period in which they are incurred.
The following table summarizes our contractual obligations and other commitments (in thousands) as of December 31, 2023, and the years in which these obligations are due:
Total | Less than 1 Year | 1 – 3 Years | ||||
(in ’000’s) | $ | $ | $ | |||
Bonds | 38,170 | — | 38,170 | |||
Galaxy Term Loan | 22,674 | 13,444 | 9,230 | |||
Mortgages | 1,397 | 600 | 797 | |||
Liabilities Held for Sale | 2,090 | 538 | 1,552 | |||
Other | 277 | 277 | — |
During the periods presented, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
13
Cash Flows
The table below summarizes our cash flows for the periods presented:
| 2023 |
| 2022 |
| 2021 | |
(Restated, Note 2) | (Restated, Note 2) | (Restated, Note 2) | ||||
(in ’000’s) | $ | $ | $ | |||
Net cash flow from / (used in) operating activities. |
| (47,956) | (101,237) | (37,019) | ||
Net cash from/(used in) investing activities |
| 50,804 | 17,325 | (183,066) | ||
Net cash generated from / (used in) financing activities |
| (15,778) | 84,177 | 233,062 | ||
Net increase / (decrease) in cash and cash equivalents |
| (12,930) | 265 | 12,977 |
Operating Activities
Net cash used in operating activities of $47,956 in the year ended December 31, 2023 was comprised of our net loss before tax of $34,637 and working capital changes, reduced by non-cash addbacks for finance costs, impairments, depreciation, foreign exchange and investment write offs.
Net cash used in operating activities of $101,237 in the year ended December 31, 2022 was comprised of our net loss before tax of $240,692 and working capital changes, reduced by non-cash addbacks for impairments, loss on sale of subsidiary, foreign exchange and digital currency revaluations.
Net cash used in operating activities of $37,019 in the year ended December 31, 2021 was comprised of our operating profit of $53,067, reduced by working capital changes.
Investing Activities
Net cash generated from investing activities in the year ended December 31, 2023 was $50,804, which was comprised principally $1,112 for the purchase of tangible fixed assets.
Net cash generated from investing activities in the year ended December 31, 2022 was $17,325, which was comprised principally of $108 million for the purchase of tangible fixed assets and $12.4 million for the disposal of tangible fixed assets.
Net cash used in investing activities in the year ended December 31, 2021 was $183,066, which was comprised principally of $105.1 million for purchase of mining machines and build out of the Helios facility and $63.1 million in mining equipment prepayment.
Financing Activities
Net cash used in financing activities in the year ended December 31, 2023 was $15,778, which was comprised principally of $14,064 of loan repayments and $10,661 of interest payments, partially offset by $7,518 of proceeds from shares issued.
Net cash generated from financing activities in the year ended December 31, 2022 was $84,177 which was comprised principally of $106,931 in loan proceeds partially offset by $22,661 in interest costs.
Net cash generated from financing activities in the year ended December 31, 2021 was $233,062 and was comprised principally of $179.2 million of proceeds from shares issued and $35.8 million in loan proceeds.
Capital Expenditures
Historically, our capital expenditures have consisted primarily of purchasing mining machines and computer equipment and improvements to the mining facilities in which we operate. Our capital expenditures during the year ended December 31, 2020 were principally for purchasing mining machines. Beginning in 2021 and continuing into 2022, in addition to the acquisition of mining machines, our capital expenditures expanded to include acquiring and building mining facilities that we planned to own and operate. Our capital expenditures including mining machine prepayments, net of disposals, were $168.2 million, $95.6 million, and $1.1 million in 2021, 2022 and 2023, respectively.
14
C. Research and development, patents and licenses, etc.
We have developed and may continue to research and develop certain proprietary technologies for purposes of optimizing and enhancing our cryptocurrency mining operations. Research and development have not been significant components of our business and have been immaterial to our financial condition and results of operations, however such activities may become more significant in the future.
D. Trend Information
Please refer to our disclosures set forth under Item 3.D “Risk Factors,” Item 4 “Information on the Company,” and elsewhere in this Item 5 “Operating and Financial Review and Prospects” for information regarding the material risks, business developments and strategies, factors, and trends that are most likely to affect our business and results of operations through 2024.
E. Critical Accounting Estimates
Not applicable.
Item 15. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15 or 15d-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report, that being as at December 31, 2023. This evaluation was carried out by our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). Based upon that evaluation, our CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2023.
It should be noted that while our CEO and CFO believed that the Company’s disclosure controls and procedures provided a reasonable level of assurance that they are effective, they did not expect that the Company’s disclosure controls and procedures would prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
In connection with the preparation of this Amendment No.1, our management, including our CEO and CFO, re-evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. This re-evaluation was conducted after the identification of a material weakness in internal control over financial reporting, as discussed below.
As a result of this reassessment, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of December 31, 2023, due to the existence of a material weakness in our accounting for mined cryptocurrencies, which resulted in a restatement of prior financial statements.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Exchange Act Rules 13a-15(f) and 15d-15(f) define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with (a) UK-adopted International Accounting Standards; and (b) International Financial Reporting Standards (“IFRS”), including interpretations issued by the IFRS Interpretations Committee.
In connection with the preparation of the Original Filing, under the supervision and with the participation of our CEO and CFO, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria, established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that assessment, at the time the Original Filing was filed, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023. Subsequent to that assessment, our management, including our CEO and CFO, conducted a re-assessment and concluded that our internal control over financial reporting was ineffective as of December 31, 2023, due to the material weakness identified below.
15
Identified Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
During our re-assessment, we identified a material weakness in our accounting for mined cryptocurrencies. We accounted for these assets as inventory, when they should have been accounted for as intangible assets. The impact to the balance sheet is a change in the description of the asset from digital assets to intangible assets. The impact to the income statement is a reclassification of the change in fair value to impairment in intangible assets/ intangible fixed assets. The impact to the cash flow statement is reclassification between operating cash flow and investing cash flow.This accounting error resulted in a restatement of our consolidated financial statements for the fiscal years ended December 31, 2023, 2022, and 2021.
The material weakness was attributable to inadequate technical review over our accounting policy for mined cryptocurrencies. As a result, we have concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2023.
Management’s Plan to Remediate the Identified Material Weakness
The above-described material weakness has been remediated as of the filing of this Amendment No. 1. Since identifying this material weakness, management, with oversight from the Audit Committee, has implemented and continues to implement enhanced internal control procedures, including:
1. | Enhanced Internal Review Processes |
a. | Strengthened management-level review and oversight over accounting policies. |
2. | Increased IFRS Technical Training |
a. | Provided enhanced IFRS training to our finance and accounting personnel, focusing on the classification of cash flows related to digital assets. |
b. | Ensured that our team remains updated on IFRS guidance and evolving industry standards for digital asset accounting. |
3. | Formalized Controls Testing |
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to auditor attestation, as the SEC permits the Company to provide only management’s report in this filing.
16
Changes in Internal Control Over Financial Reporting
Other than the material weakness and remediation plan discussed above, during the period ended December 31, 2023, there were no other changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Clawback Policy Disclosure
In accordance with SEC Rule 10D-1 and the Nasdaq Listing Standards, the Company has adopted a clawback policy that provides for the recovery of erroneously awarded incentive-based compensation in the event of a material financial restatement. The policy applies to current and former executive officers who received incentive-based compensation that was calculated based on financial results that were subsequently restated.
As part of our evaluation of the financial restatement disclosed in this Amendment No. 1, management has determined that no incentive-based compensation was awarded or paid based on misstated financial results. Accordingly, no clawback actions are required under our policy in connection with this restatement.
We remain committed to ensuring strong financial reporting controls and executive accountability in compliance with regulatory requirements.
Item 18. Financial Statements
The audited restated consolidated financial statements as required under Item 18 are attached hereto starting on page F-1 of this Amendment No. 1.
Item 19. Exhibits
A list of exhibits included as part of this Annual Report is set forth in the Index to Exhibit immediately following this Item 19.
17
18
21.1 | ||
97.1 | ||
101.INS | XBRL Instance Document (incorporated by reference to Exhibit 101. INS to thhe Registrant's Form 20-F filed on April 30, 2024) | |
101.SCH | XBRL Taxonomy Extension Schema Document (incorporated by reference to Exhibit 101. SCH to the Registrant’s Form 20-F filed on April 30, 2024) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (incorporated by reference to Exhibit 101. CAL to the Registrant’s Form 20-F filed on April 30, 2023) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (incorporated by reference to Exhibit 101. DEF to the Registrant’s Form 20-F filed on April 30, 2024) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (incorporated by reference to Exhibit 101. LAB to the Registrant’s Form 20-F filed on April 30, 2024) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (incorporated by reference to Exhibit 101. PRE to the Registrant’s Form 20-F filed on April 30, 2024) | |
104 | * | Cover page interactive data (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
# Portions of the exhibit have been or will be excluded because it is both not material and is the type of information that the registrant treats as private or confidential.
19
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Amendment No. 1 on Form 20-F/A on its behalf.
|
| ARGO BLOCKCHAIN PLC | |
|
| ||
| /s/ Jim MacCallum | ||
| Name: Jim MacCallum | ||
| Title: Chief Financial Officer | ||
| |||
Dated: April 22, 2025 | |||
20
INDEX TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
Report of Independent Registered Public Accounting Firm (PCAOB ID | F-2 | |
Restated Consolidated Financial Statements: | ||
F-5 | ||
F-6 | ||
F-7 | ||
F-8 | ||
F-10 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Argo Blockchain plc
Opinion on the Financial Statements
We have audited the accompanying group statements of financial position of Argo Blockchain plc and its subsidiaries (the “Group”) as of December 31, 2023 and 2022, and the group statements of comprehensive income, group statements of cash flows and group statements of changes in equity for each of the three years ended December 31, 2023, 2022 and 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years ended December 31, 2023, 2022 and 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going concern uncertainty
We draw attention to note 3 in the financial statements, which indicates that due to the group’s debt service obligations and the exposure to Bitcoin, power and hashprice price which have shown significant volatility over recent years, resulting in a current loss recorded for the year. In addition to this, the group needs to raise further funding during the assessment period, in order to meet liabilities as they fall due for the foreseeable future. As stated in note 3, these events or conditions, along with the other matters as set forth in note 3, raise substantial doubt about the Group’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included a review of management’s cash flow forecasts to June 2025, along with an assessment of the “downside case” forecast as well as its likelihood. The audit team performed sensitivity analysis on the hashprice applied throughout the assessment period and the refinancing of the debt position. We have reviewed all key inputs into the cash flow forecasts, with particular emphasis on those areas of judgement and estimation uncertainty such as the hashprice, power costs, loan repayments and hashpower, and ensured they are appropriate and no evidence of management bias exists.
Basis for opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters do not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, in addition to the going concern uncertainty, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Critical Audit Matter | How our scope addressed this matter |
Carrying value of mining machines (Note 19) The group holds a significant value of mining machines at the year end totaling $51,158k (2022: $65,358k), which is made up of newly acquired machines in the year as well as those in place from prior periods. The machine prices fluctuate based on their hashpower rating and the price of bitcoin. Although the bitcoin price has recovered during the current year, there are numerous factors which indicate a potential impairment under IAS 36. These factors include, but are not limited to: bitcoin halving, power costs, curtailments and machine uptime. Where an impairment indicator exists, management are required to prepare an assessment of the recoverable amount of said machines, being the higher of their fair value less costs to sell and the value in use. The key assumptions and inputs underlying the Value in Use (‘VIU’) calculations, including the cash flow forecasts and discount rates, require significant judgement and estimation by management and therefore this has been assessed as a key audit matter. | In responding to the identified key audit matter we completed the following audit procedures: ●Reviewing management’s VIU calculations and challenging the key assumptions made, including obtaining both corroborative and contradictory evidence of the key inputs; ●Evaluating the allocation of relevant costs relating to mining machines and ensuring completeness and reasonableness of the key inputs; ●Ensuring mathematical accuracy of the VIU calculations; ●Obtaining evidence of current selling prices of new and used machines in order to assess the recoverable value if the machines were to be sold to a third party and to also assess the validity of the salvage value as part of the VIU calculation; ●Performing sensitivity analysis on the key inputs in the VIU calculations prepared, and assessing the accuracy of previous forecasts to actual results; ●Engaging our internal valuation specialists to perform a Weighted Average Capital Cost calculation to compare against the discount rate applied by management in their assessment; ●Performing physical verification checks of the mining machinery to assess for any indicators of impairment; ●Reviewing management’s assessment of the useful life of mining machinery and ensuring this is appropriate; and ●Reviewing the disclosures in the financial statements and ensuring they provide a true and fair view of management’s assessment performed. Key observations: We are satisfied that management’s impairment assessment and key assumptions applied in the VIU calculation are reasonable. |
F-3
Restatement of Previously Issued Financial Statements
As discussed in Note 2 to the consolidated financial statements, the December 31, 2023, 2022 and 2021 consolidated financial statements have been restated to correct a misstatement.
/s/
We have served as the Company’s auditor since 2019.
Date: 30/04/2024, except for the effects of the restatement as discussed in Note 2 to the consolidated financial statements, as to which the date is 22/04/2025.
F-4
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME (RESTATED)
|
|
| Year ended |
| Year ended |
| Year ended | |
December | December | December | ||||||
2023 | 2022 | 2021 | ||||||
(Restated, | (Restated, | (Restated, | ||||||
Note 2) | Note 2) | Note 2) | ||||||
Continuing operations |
| Note |
| $’000 |
| $’000 |
| $’000 |
Revenues |
| 7 |
| | | | ||
Power and hosting costs | 7 | ( | ( | ( | ||||
Power Credits | 7 | | — |
| — | |||
Depreciation – mining hardware | 19 | ( | ( | ( | ||||
Gross profit (loss) |
|
| |
| |
| | |
Operating costs |
| 8 |
| ( |
| ( |
| ( |
Gain on hedging |
|
| — |
| |
| — | |
Share based payment charge | 22 | ( | ( | ( | ||||
Operating loss |
|
| ( |
| ( |
| | |
Gain/(loss) on sale of investments | | — | ( | |||||
Loss on sale of subsidiary | 14 | — | ( | — | ||||
Write off of investment | 17 | ( | — | — | ||||
Loss on disposal of fixed assets | — | ( | | |||||
Investment fair value movement | 16 | — | ( | — | ||||
Finance costs |
| 8 |
| ( |
| ( |
| ( |
Other income | | | — | |||||
Impairment of tangible fixed assets | 19 | ( | ( | — | ||||
Gain/(loss) on disposal of intangible assets (current) | 18 | | ( | | ||||
Gain/(loss) on disposal of intangible assets (non-current) | | — | — | |||||
Impairment of intangible assets (current) | 18 | — | ( | — | ||||
Impairment of intangible assets (non-current) | ( | ( | — | |||||
Equity accounted loss from associate | 17 | ( | ( | ( | ||||
Revaluation of contingent consideration | — | | | |||||
Loss before taxation |
|
| ( |
| ( |
| | |
Tax credit (expense) |
| 13 |
| — |
| |
| ( |
Loss after taxation |
|
| ( |
| ( |
| | |
Other comprehensive income | ||||||||
Currency translation reserve |
|
| ( |
| ( |
| ( | |
Equity accounted OCI from associate | 17 | — | ( | | ||||
Fair value reserve | — | ( | | |||||
Total other comprehensive loss |
|
| ( |
| ( |
| | |
Total comprehensive loss attributable to the equity holders of the Company |
|
| ( |
| ( |
| | |
Loss per share attributable to equity owners (cents) |
|
|
|
| ||||
Basic and diluted earnings/(loss) per share |
| 12 |
| ( |
| ( |
| |
F-5
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF FINANCIAL POSITION (RESTATED)
|
| As at | As at |
| As at | |||
31 December | 31 December | 1 January | ||||||
2023 | 2022 | 2022 | ||||||
(Restated, | (Restated, | |||||||
Note 2) | Note 2) | |||||||
| Note |
| $’000 | $’000 |
| $’000 | ||
ASSETS |
|
|
|
|
|
| ||
Non-current assets |
|
|
|
|
| |||
Investments at fair value through income or loss |
| 16 |
| | |
| | |
Investments accounted for using the equity method |
| 17 |
| — | |
| | |
Intangible fixed assets |
| 18 |
| | |
| | |
Property, plant and equipment |
| 19 |
| | |
| | |
Right of use assets |
| 19 |
| — | |
| | |
Total non-current assets |
|
| | |
| | ||
Current assets |
|
|
|
|
| |||
Trade and other receivables |
| 20 |
| | |
| | |
Prepaids | 20 | | | | ||||
Intangible assets |
| 21 |
| | |
| | |
Cash and cash equivalents |
| 27 |
| | |
| | |
| | | ||||||
Assets Held for sale | 15 | | — | — | ||||
Total current assets |
|
| | |
| | ||
Total assets |
|
| | |
| | ||
EQUITY AND LIABILITIES |
|
|
| |||||
Equity |
|
|
| |||||
Common Stock | 23 | | | | ||||
Additional paid-in capital | 23 | | | | ||||
Share based payment reserve |
| 24 |
| | |
| | |
Currency translation reserve |
| 24 |
| ( | ( |
| ( | |
Fair value reserve | — | — | | |||||
Other comprehensive income of equity accounted associates | — | — | | |||||
Accumulated surplus (loss) |
| 24 |
| ( | ( |
| | |
Total equity |
|
| | |
| | ||
Current liabilities |
|
|
| |||||
Trade and other payables | 25 | | | | ||||
Income Tax |
|
| — | — |
| | ||
Deferred Tax | 13 | — | — | | ||||
Contingent consideration |
|
| — | — |
| | ||
Loans and Borrowings | 26 | | | | ||||
Lease liability |
| 26 | — | |
| | ||
| | | ||||||
Liabilities held for sale |
| 15 |
| | — |
| — | |
Total current liabilities | | | | |||||
Non-current liabilities | ||||||||
Deferred tax | 13 | — | — | | ||||
Issued debt - bond | 4 | | | | ||||
Loans |
| 26 |
| | |
| | |
Lease liability | 26 |
| — | |
| | ||
Total liabilities |
| | |
| | |||
Total equity and liabilities |
| | |
| |
The Group financial statements were approved by the Board of Directors on 24 April 2024 and authorised for issue; they are signed on its behalf by:
Thomas Chippas Chief Executive Officer
The accounting policies and notes form part of the financial statements. Registered number: 11097258
F-6
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
| Share |
| ||||||||
Additional | Currency | based | Accumulated |
| ||||||||
Common | paid in | translation | payment | surplus/ |
| |||||||
Stock | Capital | reserve | reserve | (deficit) |
| Total | ||||||
| $’000 |
| $’000 |
| $’000 |
| $’000 |
| $’000 |
| $’000 | |
Balance at 1 January 2023 |
| |
| |
| ( | | ( | | |||
Total comprehensive loss for the period: |
| |||||||||||
Loss for the period |
| — |
| — |
| — | — | ( | ( | |||
Other comprehensive loss |
| — |
| — |
| ( | — | — | ( | |||
Total comprehensive loss for the period |
| — |
| — |
| ( | — | ( | ( | |||
Transactions with equity owners: |
|
|
| |||||||||
Common Stock Issued |
| |
| |
| — | — | — | | |||
Share based compensation charge |
| — | — | — | | — | | |||||
Share RSUs vested | — | — | — | ( | — | ( | ||||||
Total transactions with equity owners |
| |
| |
| — | | — | | |||
Balance at 31 December 2023 | | | ( | | ( | |
|
|
| Share |
|
| Other |
| |||||||||
Additional | Currency | based | Fair | comprehensive | Accumulated | |||||||||||
Common | paid in | translation | payment | Revaluation | income of | surplus/ | ||||||||||
| Stock |
| Capital |
| reserve | reserve |
| Reserve |
| associates |
| (deficit) |
| Total | ||
$’000 | $’000 | $’000 |
| $’000 | $’000 | $’000 | $’000 | $’000 | ||||||||
Balance at 1 January 2022 |
| |
| |
| ( |
| |
| |
| | |
| | |
Total comprehensive loss for the period: |
|
|
|
|
|
|
| |||||||||
Loss for the period |
| — |
| — |
| — |
| — |
|
| — | ( |
| ( | ||
Other comprehensive loss |
| — |
| — |
| ( |
| — |
| ( |
| ( | — |
| ( | |
Total comprehensive loss for the period |
| — |
| — |
| ( |
| — |
| ( |
| ( | ( |
| ( | |
Transfers between reserves: | ||||||||||||||||
Transfer from revaluation reserve | ( | | — | |||||||||||||
Transactions with equity owners: |
|
|
|
|
|
|
| |||||||||
Common Stock Issued | | | — | — | — | — | — | | ||||||||
Share based compensation charge | — | — | — | | — | — | — | | ||||||||
Common stock options/warrants exercised | — | — | — | ( | — | — | — | ( | ||||||||
Total transactions with equity owners | | | — | | — | — | — | | ||||||||
Balance at 31 December 2022 |
| |
| |
| ( |
| |
| — |
| — | ( |
| |
|
|
|
| Share |
| Other |
| |||||||||
Currency | based | Fair | comprehensive | Accumulated | ||||||||||||
Common | Share | translation | payment | Revaluation | income of | surplus/ | ||||||||||
| Stock |
| Premium |
| reserve |
| reserve |
| Reserve | associates | (deficit) |
| Total | |||
| $’000 |
| $’000 |
| $’000 |
| $’000 |
| $’000 |
| $’000 |
| $’000 |
| $’000 | |
Balance at 1 January 2021 | | | | | | — | | | ||||||||
Total comprehensive loss for the period: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loss for the period |
| — |
| — |
| — |
| — |
| — | — | |
| | ||
Other comprehensive loss |
| — |
| — |
| ( |
| — |
| | | — |
| | ||
Total comprehensive loss for the period |
| — |
| — |
| ( |
| — |
| | | |
| | ||
Transfers between reserves: | ||||||||||||||||
Transfer from revaluation reserve | — | — | — | — | ( | — | | — | ||||||||
Transactions with equity owners: |
|
|
|
|
|
|
|
|
|
|
| |||||
Common Stock issued |
| |
| |
| — |
| — |
| — | — | — |
| | ||
Share based compensation charge |
| — |
| — |
| — |
| |
| — | — | — |
| | ||
Common stock options/warrants exercised |
| — |
| — |
| — |
| ( |
| — | — | — |
| ( | ||
Total transactions with equity owners |
| |
| |
| — |
| |
| — | — | — |
| | ||
Balance at 31 December 2021 |
| |
| |
| ( |
| |
| | | |
| |
F-7
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CASHFLOWS (RESTATED)
|
|
| Year ended |
| Year ended |
| Year ended | |
December | December |
| December | |||||
(Restated, | (Restated, | (Restated, | ||||||
Note 2) | Note 2) | Note 2) | ||||||
| 2023 | 2022 |
| 2021 | ||||
| Note |
| $’000 |
| $’000 | $’000 | ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Income (Loss) before tax |
|
|
| ( |
| ( | | |
Adjustments for: |
|
|
|
| ||||
Depreciation and amortisation |
| 18,19 |
| |
| | | |
Foreign exchange movements |
|
|
| ( |
| ( | | |
Loss on disposal of tangible assets | — | | ||||||
Finance cost | 8 | | | | ||||
Loss on sale of subsidiary and investment | — | | | |||||
Gain/(loss) on disposal and impairment of intangible assets (current) | 21 | ( | | ( | ||||
Digital assets earned | 21 | ( | ( | ( | ||||
Impairment of intangible digital assets | 18 | | | | ||||
Impairment of property, plant and equipment | 19 | | | |||||
Investment fair value movement | 17 | — | | ( | ||||
Write off of investment | 17 | | — | |||||
Share of loss from associate | | | | |||||
Non-cash settlement of management fees | — | — | ( | |||||
Gain on sale of investment | ( | — | ||||||
Revaluation of contingent consideration | — | ( | ( | |||||
Derecognition of contingent consideration | — | — | ( | |||||
Hedging gain | — | ( | ||||||
Stock based compensation expense |
| 10 |
| |
| | | |
Working capital changes: |
|
|
|
| ||||
(Increase)/decrease in trade and other receivables |
| 20 |
| ( |
| ( | ( | |
Increase/(decrease) in trade and other payables |
| 25 |
| |
| ( | | |
Net cash generated from (used in) operating activities |
|
|
| ( |
| ( | ( | |
Investing activities |
|
|
|
|
| |||
Investments at fair value through profit or loss | — | — | ( | |||||
Investment in associate | — | — | ( | |||||
Acquisition of subsidiary, net of cash acquired |
|
| — |
| — | ( | ||
Mining equipment prepayment | — | — | ( | |||||
Cash transferred on disposal of subsidiary | — | ( | — | |||||
Proceeds from sale of investment | 16 | | — | | ||||
Purchase of intangible assets |
|
| — |
| — | ( | ||
Proceeds from sale of intangible assets | 21 | | | | ||||
Purchase of tangible fixed assets | 19 | ( | ( | ( | ||||
Proceeds from disposal of tangible fixed assets | — | | — | |||||
Net cash used in investing activities |
|
|
| |
| | ( | |
Financing activities |
|
|
|
|
| |||
Increase in loans | 26 | | | | ||||
Lease payments |
| 27 |
|
| ( | ( | ||
Loan repayments | 26 | ( | — | ( | ||||
Interest paid |
|
|
| ( |
| ( | ( | |
Proceeds from issue of loan in conjunction with the disposal of subsidiary | — | | — | |||||
Proceeds from debt issue | — | — | | |||||
Proceeds from common stock issued – net of issue costs |
| 24 |
| |
| — | | |
Net cash (used in) generated from financing activities |
|
|
| ( |
| | | |
Net (decrease) increase in cash and cash equivalents |
|
|
| ( |
| | | |
Effect of foreign exchange on cash and cash equivalents | | | | |||||
Cash and cash equivalents at beginning of period |
|
|
| |
| | | |
Cash and cash equivalents at end of period |
|
|
| |
| | |
F-8
ARGO BLOCKCHAIN PLC
Material non-cash movements:
| ● | The Group sold its Helios facility in December 2022, in exchange for paying down existing debt and obtaining new debt. See Note 20 for additional details. |
| ● | In March 2022, the Group entered into an agreement to exchange mining machines and terminate a hosting agreement. See Note 20 for additional details. |
| ● | During the period, the Group utilised “Prepayments for mining machines” amounting to $ |
|
|
| Year ended |
| Year ended | |
31 December | 31 December | |||||
2023 | 2022 | |||||
Group - net debt reconciliation | $’000 | $’000 | ||||
Current loans and borrowings |
| 27 |
| ( |
| ( |
Non-current issued debt – bonds |
| 27 |
| ( |
| ( |
Non-current loans and borrowings |
| 27 |
| ( |
| ( |
Lease liability |
|
| — |
| ( | |
Cash and cash equivalents | | | ||||
Total net debt |
|
| ( |
| ( |
F-9
ARGO BLOCKCHAIN PLC
NOTES TO THE FINANCIAL STATEMENTS (RESTATED)
1.COMPANY INFORMATION
Argo Blockchain PLC (“the company”) is a public company, limited by shares, and incorporated in England and Wales. The registered office is Eastcastle House, 27-28 Eastcastle Street, London, W1W 8DH. The company was incorporated on 5 December 2017 as GoSun Blockchain Limited and changed its name to Argo Blockchain Limited on 21 December 2017. Also on 21 December 2017, the company re-registered as a public company, Argo Blockchain plc. Argo Blockchain plc acquired a
On 4 March 2022 the Group acquired
On 11 May 2022 the Group acquired
On 22 November 2022, the Group formed Argo Operating US LLC and Argo Holdings US Inc.
On 21 December 2022, Argo Innovation Facilities (US) Inc became Galaxy Power LLC. On 28 December 2022, the Group sold Galaxy Power LLC.
The principal activity of the group is that of Bitcoin mining.
The common shares of the Group are listed under the trading symbol ARB on the London Stock Exchange. The American Depositary Receipt of the Group are listed under the trading symbol ARBK on Nasdaq. The Group bond is listed on the Nasdaq Global Select Market under the trading symbol ARBKL.
The financial statements cover the year ended 31 December 2023.
2.BASIS OF PREPARATION
The financial statements have been prepared in accordance with international financial reporting standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Standards Interpretations Committee (“IFRIC”). The financial statements have been prepared under the historical cost convention, except for the measurement to fair value certain financial and digital assets and financial instruments as described in the accounting policies below.
During 2023, the Group changed its reporting currency to US dollars as further described in Note 3. Monetary amounts in these financial statements are rounded to the nearest thousand US dollars. Argo Blockchain PLC’s functional currency is GBP. Argo Innovations Labs Inc., 9377-2556 Quebec Inc, and 9366-5230 Quebec Inc.’s functional currency is Canadian Dollars; Argo Operating US LLC and Argo Holdings US Inc.’s functional currency is United States Dollars; all entries from these entities are presented in the Group’s presentational currency of US dollars. This change in accounting policy applied retrospectively requires a third balance sheet as at the beginning of the preceding comparative period to be reported Where the subsidiary's functional currency is different from the parent, the assets and liabilities presented are translated at the closing rate as at the Statement of Financial Position date. Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions).
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty are disclosed in Note 6.
F-10
ARGO BLOCKCHAIN PLC
Current year restatement (2023)
Subsequent to filing the Group’s 2023 20-F, the Group determined that it incorrectly accounted for its mined cryptocurrencies. The Group accounted for these assets as inventory, when they should have been accounted for as intangible assets. The impact to the balance sheet is a change in the description of the asset from digital assets to intangible assets.
The impact to the income statement is twofold:
| 1) | A reclassification of the change in fair value of digital assets from “Change in fair value of digital assets” to “Impairment in intangible fixed assets” and/or realized gains/losses on intangible assets, and |
| 2) | A reclassification of fair value gains of digital assets from “Change in fair value of digital assets” to “Other comprehensive income” and/or realized gains/losses on intangible assets. |
While net income (loss) is improved in each year presented, there is no change to comprehensive income (loss).
The impact to the cash flow statement is reclassification between operating cash flow and investing cash flow.
The numerical impacts to the cash flows and income statements are summarized below.
| 2023-original |
| 2023-restated |
| 2022–original |
| 2022-restated |
| 2021-original |
| 2021-restated | |
Net cash generated from (used in) operating activities |
| |
| ( |
| |
| ( |
| ( |
| ( |
Net cash (used in) generated from investing activities |
| ( |
| |
| ( |
| |
| ( |
| ( |
Net Income (loss) |
| ( |
| ( |
| ( |
| ( |
| |
| |
Prior year restatement (2022)
The 2022 income tax accounting was completed based on preliminary information at the time of the financial statement completion. When updating the income taxes for 2023 it was determined that the 2022 estimates were inaccurate and have been restated.
The impact on the 2022 financial statements are as follows:
Income tax recovery increased by $ |
Cumulative translation adjustment increased by $ |
Net loss decreased by $ |
Deferred tax liability decreased by $ |
Statement of Cashflows reclassification
Proceeds from the sale of digital assets were reclassified from investing cashflows to operating cashflows in the 2022 Statements of Cashflows, amongst other presentational changes in 2022 in order to ensure comparability with the presentation and classification in the current year.
F-11
ARGO BLOCKCHAIN PLC
3.ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are below.
Change in Presentation Currency
The Group changed its presentational currency to US Dollars during 2023 due to the fact its revenues, direct costs, capital expenditures and debt obligations are predominantly denominated in US Dollars. In order to satisfy the requirements of IAS 21 with respect to a change in the presentation currency, the financial information as previously reported in the Group’s Annual Reports have been restated from GBP into US Dollars using the procedures outlined below:
| ● | Assets and liabilities were translated to US Dollars at the closing rates of exchange at each respective balance sheet date |
| ● | Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions |
| ● | Income and expenses were translated to US Dollars at an average rate at each of the respective reporting years |
| ● | Differences resulting from the retranslation were taken to reserves |
| ● | All exchange rates used were extracted from the Group’s underlying financial records |
Going Concern
The preparation of consolidated financial statements requires an assessment on the validity of the going concern assumption.
On 28 December 2022, the Group announced a series of transactions with Galaxy Digital Holdings, Ltd. (“Galaxy”) that improved the Group’s liquidity position and enabled the Group to continue its mining operations. As part of the transactions, Argo sold the Helios facility and real property in Dickens County, Texas to Galaxy for $
1. | The Group’s debt service obligations as of reporting date are approximately $ |
2. | The Group’s exposure to Bitcoin prices, power prices, and hashprice, each of which have shown volatility over recent years and have a significant impact on the Group’s future profitability. The Group may have difficulty meeting its liabilities if there are significant declines to the hashprice assumption or significant increases to the power price, particularly where there is a combination of both factors. The recent April 2024 Bitcoin halving has created pressure on the hashprice. The Directors’ assessment of going concern includes forecasted scenarios drawn up to 30 June 2025 using the Group’s estimate of potential hashprices and power costs. |
Offsetting these potential risks to the Group’s cash flow are the Group’s current cash balance, cash generated from operations and the Group’s ability to generate additional funds by issuing equity for cash proceeds.
F-12
ARGO BLOCKCHAIN PLC
Based on information from Management, as well as independent advisors, the Directors have considered the period to 30 June 2025, as a reasonable time period given the variable outlook of cryptocurrencies and the Bitcoin halving in April 2024. Based on the above considerations, the Board believes it is appropriate to adopt the going concern basis in the preparation of the Financial Statements. However, the Board notes that the significant debt service requirements and the volatile economic environment, indicate the existence of material uncertainties that may cast significant doubt regarding the applicability of the going concern assumption and the auditors have made reference to this in their audit report.
Revenue and Other Income Recognition
Mining Revenue
The provision of hash calculation services is an output of our ordinary activities from the Company’s mining equipment. The Company has entered into arrangements with a Mining pool and has undertaken the performance obligation of providing computing power used for hashing calculations to the Mining pool in exchange for noncash consideration in the form of cryptocurrency, which is variable consideration. Providing our computing power is at the Company’s discretion and our enforceable right to compensation begins when, and continues for as long as, services are provided. The cryptocurrency earnings are calculated based on a formula which, in turn, is based on the hashrate contributed by the Company’s provided computing power used for hashing calculations allocated to the Mining pool, assessed over a 24-hour period, and distributed daily based on the Full Pay Per Share (“FPPS”) methodology. The Company assesses the estimated amount of the variable non-cash consideration to which it expects to be entitled for providing computational power used for hashing calculations at contract inception and subsequently measures if it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The uncertainties regarding the daily variable consideration to which the Company is entitled for providing its computational power used for hashing calculations are no longer constrained at 23:59:59 UTC regardless of the timing of the BTC received. The amount earned is calculated based on the Company's computing power used for hashing calculations provided to the Mining pool and the estimated (i) block subsidies and (ii) daily average transaction fees which the Mining Pool expects to earn, less (iii) a Mining pool discount.
1. | Block subsidies refers to the block reward that are expected to be generated on the BTC network as a whole. The fee earned by the Company is first calculated by dividing (a) the total amount of hashrate the Company provides to the Mining pool operator, by (b) the total BTC network’s implied hashrate (as determined by the BTC network difficulty), multiplied by (c) the total amount of block subsidies that are expected to be generated on the BTC network as a whole. |
2. | Transaction fees refer to the total fees paid by users of the network to execute transactions. The fee paid out by the Mining pool operator to the Company is further calculated by dividing (a) the total amount of transaction fees that are actually generated on the BTC network as a whole less the 3 largest and 3 smallest transactions per block, by (b) the total amount of block subsidies that are actually generated on the BTC network as a whole, multiplied by (c) the Company’s fee earned as calculated in (i) above. The Company is entitled to its relative share of consideration even if a block is not successfully added to the blockchain by the mining pool. |
3. | Mining pool discount refers to the discount applied to the total FPPS payout otherwise attributed to computing power service providers for their sale of computing power used for hashing calculations as defined in the rate schedule of the agreement with the Mining pool operator. |
The Company is entitled to the fee from the Mining Pool as calculated above regardless of the actual performance of the Mining Pool operator. Therefore, even if the Mining Pool does not successfully add any block to the blockchain in a given contract period, the fee remains payable by the Mining Pool to the Company. Accordingly, the Company is not sharing in the earnings of the Mining pool operator.
F-13
ARGO BLOCKCHAIN PLC
The Company’s agreements with the Mining pool operator provide the Mining pool operator and the Company with the enforceable right to terminate the contract at any time without substantively compensating the other party for the termination. Upon termination, the Mining pool operator is required to pay the Company the amount due related to previously satisfied performance obligations. As a result, the Company has determined that the duration of the contract is less than 24 hours and the contract is continuously renewed throughout the day. The Company has also determined that the Mining pool operator’s renewal right is not a material right as the terms, conditions, and compensation amounts are at then-current market rates.
The cryptocurrency earned is received in full and can be paid in fractions of cryptocurrency. Revenues from providing cryptocurrency computational power used for hashing calculations are recognized upon delivery of the service over a 24-hour period, which generally coincides with the receipt of crypto assets in exchange for the provision of computational power used for hashing calculations and the contract inception date. The Company updates the estimated transaction price of the non-cash consideration received at its fair market value. Management estimates fair value daily based on the quantity of cryptocurrency received multiplied by the price quoted from Coingecko on the day it was received. Management considers the prices quoted on Coingecko to be a level 1 input under IFRS 13, Fair Value Measurement.
Power Credits-Power credits are credits we receive in Texas when we curtail our mining production and sell the power back to the grid. The hosting agreement with Galaxy allows Argo to share in the proceeds from these curtailments, which occurs when the Helios facility monetizes its fixed-price PPA during periods of high power prices. The Company records power credits in the period they are earned provided they are estimable and recoverable.
Management fees: In 2022, the Group recognised management fees on the services provided to third parties for management of mining machines on their behalf, ensuring the machines are optimised and mining as efficiently as possible. The performance obligation is identified as the services are performed, and thus revenue is recorded over time.
Other Income: The Group receives credits and or coupons for the purchase and use of “Application-Specific Integrated Circuits (“ASICs”) on a periodic basis for Bitcoin Mining. These credits are provided to the Group after it purchases ASICs based on the variance between the price paid by the Group versus the reduction in ASIC prices. The credits are transferable. The Group elects to sell the credits at the market rate to willing buyers upon receipt of the credits. Other income is recognised at the date the sale is completed.
Derivative Contracts – Hedging: In 2022, the Group used derivatives contracts in connection with some of its lending activities and its treasury management. Derivative contracts are susceptible to additional risks that can result in a loss of all or part of the investment. The Group’s derivative activities and exposure to derivative contracts are subject to interest rate risk, credit risk, foreign exchange risk, and macroeconomic risks. In addition, Argo is also subject to additional counterparty risks due to the potential inability of its counterparties to meet the terms of their contracts. There were no hedging contracts in 2023.
Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
The group consists of Argo Blockchain plc and its wholly owned subsidiaries Argo Innovation Labs Inc, Argo Operating US LLC and Argo Holdings US Inc., 9366-5230 and 9377-2556 and Argo Innovation Labs Ltd. Argo Innovation Labs Ltd has been dormant since incorporation.
F-14
ARGO BLOCKCHAIN PLC
In the parent company financial statements, investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.
The consolidated financial statements incorporate those of Argo Blockchain plc and all of its subsidiaries (i.e., entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.
Business Combinations
The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquisition and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equal or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of associates in the income statement.
Segmented reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the CEO or equivalent. The directors consider that the Group has only
F-15
ARGO BLOCKCHAIN PLC
Loans and issued debt
Loans and issued debt are recognised initially at fair value, net of transaction costs incurred. Loans and issued debt are subsequently carried at amortised cost; any difference between the proceeds and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method. Loans and issued debt are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. Loans and borrowings and issued debt are classified as current liabilities unless the Group has an unconditional right to defer settlement of a liability for at least 12 months after the end of the reporting period.
Intangible fixed assets
Intangible fixed assets comprise of the Group’s website and digital assets that were not mined by the Group and are held by Argo Labs (our internal team) as investments. The Group’s website is recognised at cost and is amortised over its useful life. Amortisation is recorded within administration expenses. Digital assets recorded under IAS 38 have an indefinite useful life initially measured at cost, and subsequently measured at fair value.
Argo’s primary business is focused on cryptocurrency mining. Argo Labs is an in-house innovation arm focused on identifying opportunities within the disruptive and innovative sectors of the broader cryptocurrency ecosystem. Argo Labs uses a portion of Argo’s crypto assets to deploy into various blockchain projects.
Increases in the carrying amount arising on revaluation of digital assets are credited to other comprehensive income and shown as other reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against the fair value reserve directly in equity; all other decreases are charged to the income statement.
The fair value of intangible cryptocurrencies on hand at the end of the reporting period is calculated as the quantity of cryptocurrencies on hand multiplied by price quoted on www.coingecko.com, one of the leading crypto websites, as at the reporting date.
Goodwill is initially measured at cost (being the excess of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held of the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the difference is recognised in profit or loss.
Tangible fixed assets
Tangible fixed assets are comprised of right of use assets, office equipment, mining and computer equipment, data centres, leasehold improvements, and electrical equipment.
Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of the right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right of use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
Office equipment assets are measured at cost, less any accumulated depreciation and impairment losses. Office equipment is depreciated over
Mining and computer equipment and leasehold improvements: Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their estimated useful lives. It is
F-16
ARGO BLOCKCHAIN PLC
Data centres: Depreciation on the data centres is recognised so as to write off the cost or valuation of assets less their residual values over their estimated useful lives of
Electrical equipment: Depreciation is recognised on a straight-line basis to write off the cost less their residual values over their estimated useful lives of
Management assesses the useful lives based on historical experience with similar assets as well as anticipation of future events which may impact their useful life.
Assets Held for Resale
An asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, which is when the sale is highly probable, and it is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. Assets classified as held for sale are measured at the lower of the carrying amount upon classification and the fair value less costs to sell. Assets classified as held for sale and the associated liabilities are presented separately from other assets and liabilities in the Consolidated Balance Sheet. Once assets are classified as held for sale, property, plant and equipment and intangible assets are no longer subject to depreciation or amortisation.
Impairment of non-financial assets
At each reporting period end date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group and Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets
Cryptocurrency mined by the Company and on hand at the end of a reporting period, is accounted for under IAS 38, Intangible Assets, as an intangible asset with an indefinite useful life initially measured at cost, deemed to be the fair value upon receipt as described above, and subsequently measured under the revaluation model. Under the revaluation model, increases in the cryptocurrency’s carrying amount, determined as the excess of fair value on revaluation over the weighted average cost, are recognized in other comprehensive income, except to the extent that they reverse a revaluation decrease previously recognized in profit or loss. Decreases are recognized in profit or loss, except to the extent that they reverse a revaluation increase previously recognized in other comprehensive income. Once the cryptocurrency is sold, the revaluation increase related to it is transferred from revaluation surplus to retained earnings. The Company revalues its cryptocurrency on hand on a monthly basis and following any significant fair value fluctuations. The fair value of cryptocurrency on hand at the end of the reporting period is calculated as the quantity of cryptocurrency on hand multiplied by the price quoted on CoinGecko.com as of the reporting date.
The Company reports cryptocurrency on hand at the end of the reporting period as intangible assets, which are classified as current assets as the Company has determined that the cryptocurrency on hand at the end of the reporting period has markets with sufficient liquidity to allow conversion within the Company's normal operating cycle and the Company expects to realize the digital asset within twelve months after the reporting period.
Cryptocurrencies not mined by the Group are recorded as Intangible Fixed Assets (see note 18).
F-17
ARGO BLOCKCHAIN PLC
Cash and cash equivalents
Cash and cash equivalents are comprised of cash held at banks with high credit ratings. The Group considers the credit risk on cash and cash equivalents to be limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
Financial instruments
Financial assets: Financial assets are recognised in the Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition. Financial assets are subsequently measured at amortised cost, fair value through OCI, or fair value through profit and loss.
The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement: For purposes of subsequent measurement, financial assets are classified in four categories:
| ● | Financial assets at amortised cost |
| ● | Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) |
| ● | Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) |
| ● | Financial assets at fair value through profit or loss |
Equity Instruments: The Group subsequently measures all equity investments at fair value. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable.
Financial assets at amortised cost (debt instruments): This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:
| ● | The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and |
| ● | The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
F-18
ARGO BLOCKCHAIN PLC
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Interest received is recognised as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost include other receivables and cash and cash equivalents.
Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated Balance sheet) when:
| ● | The rights to receive cash flows from the asset have expired; or |
| ● | The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset |
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Impairment of financial assets: The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity.
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Company has an Intercompany loan due from its
Financial liabilities: Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans.
Subsequent measurement: The measurement of financial liabilities depends on their classification, as described below:
Loans and trade and other payables: After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income. This category generally applies to trade and other payables.
F-19
ARGO BLOCKCHAIN PLC
Derecognition: A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss or other comprehensive income.
Equity instruments: Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Taxation
The tax expense or recovery represents the sum of tax currently payable or receivable and deferred tax.
Current tax: The tax currently payable or receivable is based on taxable profit or loss for the year. Taxable profit or loss differs from net profit or loss as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
F-20
ARGO BLOCKCHAIN PLC
Deferred tax: Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The group does not have any pension schemes.
Share-based payments
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
Cancellations or settlements are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
RSUs (Restricted Stock Units)
Where RSUs are granted to employees, the fair value of the RSUs at grant date is based upon the market price of the shares underlying the awards and is charged to the Statement of Comprehensive Income over the vesting period. The expense charged is adjusted based on actual forfeitures.
Foreign exchange
Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are determined in foreign currencies are retranslated at the rates prevailing on the reporting end date-Gains and losses arising on translation are included in the income statement for the period. At each reporting end date, non-monetary assets and liabilities that are determined in foreign currencies are retranslated at the rates prevailing on the opening balance sheet date. Gains and losses arising on translation of subsidiary undertakings are included in other comprehensive income and contained within the foreign currency translation reserve.
F-21
ARGO BLOCKCHAIN PLC
Earnings per share
Basic earnings per share is calculated by dividing:
| ● | the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares; |
| ● | by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. |
| ● | Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: |
| ● | the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and |
| ● | the weighted average number of additional ordinary shares that would have been outstanding, assuming the conversion of all dilutive potential ordinary shares. |
4.FINANCIAL RISK FACTORS
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is undertaken by the Board of Directors.
Market Risk
The Group is dependent on the state of the cryptocurrency market, sentiments of crypto assets as a whole, as well as general economic conditions and their effect on exchange rates, interest rates and inflation rates. During the year the Group sold its digital assets held at 31 December 2022 at a loss. The Group now sells its Bitcoin production as it is mined to reduce the impact of Bitcoin prices.
The Group is also subject to market fluctuations in foreign exchange rates. The subsidiary (Argo Innovation Labs Inc.) is based in Canada, and transacts in CAD$, USD$ and GBP. 9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are based in Canada and transact in CAD. Argo Innovations Facilities (US) Inc., Argo Holdings US Inc. and Argo Operating US LLC are located in the United States of America and transacts in USD. The Group bond is denominated in USD. Cryptocurrency is primarily convertible into fiat through USD currency pairs and through USD denominated stable coins and is the primary method for the Group for conversion into cash. The Group maintains bank accounts in all applicable currency denominations.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonable possible change in GBP and CAD exchange rates, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities.
|
| Effect on profit | ||
Change in GBP | before tax | |||
rate | $’000 | |||
2023 |
| +/- | +/- | |
2022 |
| +/- | +/- |
F-22
ARGO BLOCKCHAIN PLC
|
| Effect on profit |
| Effect on pre- | ||
Change in CAD | before tax | tax equity | ||||
rate | $’000 | $’000 | ||||
2023 |
| +/- | +/- |
| — | |
2022 |
| +/- | +/- |
| +/- |
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in interest rates on the portion of the loans and borrowings affected. With other variables held constant, the impact on the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows.
|
| Effect on | ||
Increase/decrease | profit before tax | |||
in basis points | $’000 | |||
2023 | +/- | +/- | ||
2022 |
| +/- | +/- |
Credit risk
Credit risk arises from cash and cash equivalents as well as any outstanding receivables. Management does not expect any losses from non-performance of these receivables. The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board.
The Group considers the credit risk on cash and cash equivalents to be limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The carrying amount of financial assets recorded in the financial statements represents the Group’s and Company’s maximum exposure to credit risk. The Group and Company do not hold any collateral or other credit enhancements to cover this credit risk.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
Management updates cashflow projections on a regular basis and closely monitors the cryptocurrency market on a daily basis. Accordingly, the Group’s controls over expenditure are carefully managed, in order to maintain its cash reserves. The Treasury committee meets on a weekly basis to make decisions around future cashflows and working capital requirements. Decisions may include considering debt/equity options alongside selling Bitcoin.
The table below analyses the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings, based on the remaining period at the Statement of Financial Position to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.
F-23
ARGO BLOCKCHAIN PLC
The Group complied with all covenants during the year and through to the reporting date.
| Less than 1 |
| Between 1 |
| Between 2 |
| ||
year | and 2 years | and 5 years | Over 5 years | |||||
At 31 December 2023 |
|
|
|
|
|
|
|
|
Loans |
| |
| |
| |
| — |
Issued debt - bonds |
| — |
| — |
| |
| — |
At December 2022 |
|
|
|
|
| |||
Loans |
| |
| |
| |
| — |
Lease liabilities | |
| |
| |
| | |
Issued debt - bonds | — |
| — |
| |
| — |
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure.
5.ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
The Group has adopted all recognition, measurement and disclosure requirements of IFRS, including any new and revised standards and Interpretations of IFRS, in effect for annual periods commencing on or after 1 January 2023. The adoption of these standards and amendments did not have any material impact on the financial result or position of the Group.
At the date of authorisation of these financial statements, the following Standards and Interpretation, which have not yet been applied in these financial statements, were in issue but not yet effective:
Standard or Interpretation |
| Description |
| Effective date for annual | |
IFRS S1 | General Requirements for Disclosure of Sustainability-related Financial Information | 1 January 2024 | |||
IFRS S2 | Climate-related Disclosures | 1 January 2024 | |||
IAS 1 (Amendments) | Classification of Liabilities as Current and Non-current | 1 January 2024 | |||
IAS 1 (Amendments) | Presentation of Non-current Liabilities with Covenants | 1 January 2024 | |||
IAS 7 and IFRS 7 (Amendments) | Disclosure on Supplier Finance Arrangements | January 2024 |
The Group has not early adopted any of the above standards and intends to adopt them when they become effective.
6.KEY JUDGEMENTS AND ESTIMATES
In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.
F-24
ARGO BLOCKCHAIN PLC
Valuation of tangible fixed assets- Note 19
The directors considered whether any impairments were required on the value of the property, plant and equipment. In doing so they made use of forecasts of revenues and expenditure prepared by the Group and came to the conclusion that impairment of those assets was required based on current forecasts. Key assumptions include Bitcoin production, hashprice, power prices and discount rate.
Share-based payments – Note 22
The company has issued options and warrants to Directors, consultants and employees which have been valued in accordance with the Black Scholes model. Significant estimation and judgement is required in determining the assumptions under the Black Scholes method. Further details of these estimates are available in note 21.
The company has issued restricted stock units (RSUs) and performance stock units (PSUs) to employees which have been valued based on the share price on the date of the award. The RSUs vest over
Taxation and Contingent liabilities – Notes 13 and 28
The Group is subject to tax liabilities (both income and excise taxes)as assessed by the tax authorities in the jurisdictions in which it operates. The Group has recorded its tax liabilities based on the information which it has available, as described in Note 13.
However, a tax authority could challenge our allocation of income, transfer pricing and eligibility for input tax credits or assert that we are subject to a tax in a jurisdiction where we believe we have not established a taxable connection. If successful, these challenges could increase our expected tax liability in one or more jurisdictions. The Group is also subject to a class action lawsuit as described in Note 29 and no accrual has been made as there is no basis to estimate any liability.
7.REVENUES
2023 | 2022 | 2021 | ||||
| $’000 | $’000 |
| $’000 | ||
Crypto currency mining - worldwide |
| | |
| | |
Crypto currency management fees – United States |
| — | |
| | |
Total revenue |
| | |
| |
Cryptocurrency mining revenues are recognised at a point in time.
Cryptocurrency management fees are services recognised over time.
Other Income
Argo held
During the year, Argo generated $
F-25
ARGO BLOCKCHAIN PLC
8.EXPENSES BY NATURE
| 2023 |
| 2022 |
| 2021 | |
(Restated, Note 2) | ||||||
Operating expenses | $’000 |
| $’000 |
| $’000 | |
Salary and other employee related costs | | | | |||
Restructuring and transaction related costs | | | ||||
Settlement re Crypto mining management fees | ( | |||||
Insurance |
| |
| |
| |
Depreciation and amortisation |
| |
| |
| |
Legal, professional and regulatory fees | | | | |||
Indirect taxes | | | — | |||
Property tax | | | — | |||
Consulting fees | | | | |||
Repairs and maintenance | | | | |||
Audit fees | | | | |||
Office general expenses |
| |
| |
| |
Public relations and associated activities | | | | |||
Travel | | | | |||
Carbon credits | | — | | |||
Bank charges | | | | |||
Derecognition of variable contingent consideration | — | — | ( | |||
Impairment of intangible assets | — | — | | |||
Hedging costs | — | — | | |||
Freight, postage and delivery | | | — | |||
Capital loss | — | | — | |||
Research costs |
| — |
| |
| — |
Foreign exchange loss | ( | ( | | |||
Total operating expenses |
| |
| |
| |
Finance costs – interest on borrowings and bond | | | | |||
Total finance costs | | | |
9.AUDITOR’S REMUNERATION
| 2023 |
| 2022 |
| 2021 | |
| $’000 |
| $’000 |
| $’000 | |
In relation to statutory audit services | | | | |||
Total auditor’s remuneration |
| |
| |
| |
F-26
ARGO BLOCKCHAIN PLC
10.EMPLOYEES
The average monthly number of persons (including directors) employed by the group during the period was:
| 2023 |
| 2022 |
| 2021 | |
| Number |
| Number |
| Number | |
Directors and employees | | | |
The aggregate remuneration (including directors) comprised of:
| 2023 |
| 2022 |
| 2021 | |
| $’000 |
| $’000 |
| $’000 | |
Wages and salaries | | | | |||
Social security costs |
| |
| |
| |
Pension costs |
| |
| |
| |
Share based payments |
| |
| |
| |
| |
| |
| |
11.DIRECTOR’S REMUNERATION
| 2023 |
| 2022 |
| 2021 | |
| $’000 |
| $’000 |
| $’000 | |
Director’s remuneration for qualifying services | | | | |||
Severance |
| |
| — |
| |
Share based payments |
| |
| |
| |
Total remuneration for directors and key management |
| |
| |
| |
Further details of Directors’ remuneration are available in note 29.
12.EARNINGS PER SHARE
The basic earnings per share are calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue.
| 2023 |
|
| |||
(Restated, Note 2) | 2022 | 2021 | ||||
Net loss for the period attributable to ordinary equity holders from continuing operations ($’000) |
| ( |
| ( |
| |
Finance Weighted average number of ordinary shares in issue (‘000) |
| |
| |
| |
Basic and diluted loss per share for continuing operations ($USD) |
| ( |
| ( |
| |
| 2023 |
|
| |||
(Restated, Note 2) | 2022 | 2021 | ||||
Net loss for the period attributable to ordinary equity holders from continuing operations ($’000) |
| ( |
| ( |
| |
Diluted number of ordinary shares in issue (‘000) |
| |
| |
| |
Diluted earnings/(loss) per share for continuing operations ($USD) |
| ( |
| ( |
| |
The diluted loss per Ordinary Share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to consider the impact of options, warrants and other dilutive securities. As the effect of potential dilutive Ordinary Shares in the current and prior year would be anti-dilutive, they are not included in the above calculation of dilutive earnings per Ordinary Share for 2023 and 2022.
F-27
ARGO BLOCKCHAIN PLC
13.TAXATION
| 2023 |
| 2022 |
| 2021 | |
Current tax: | $’000 | $’000 | $’000 | |||
Current tax recovery on loss for the year |
| — |
| ( |
| |
Total current tax |
| — |
| ( |
| |
| 2023 |
| 2022 |
| 2021 | |
Deferred tax: | $’000 | $’000 | $’000 | |||
Origination and reversal of temporary differences |
| — |
| — |
| |
Total deferred tax liability | — | — | | |||
Total tax credit |
| — |
| ( |
| |
No deferred tax has been recognised on the losses brought forward and carried forward on the UK, Canada and US losses given the uncertainty on the generation of future profits.
Income tax expense
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
2023 |
| |||||
$’000 |
| 2022 |
| 2021 | ||
| (Restated, Note 2) | $’000 |
| $’000 | ||
Profit (loss) before taxation | ( | ( | | |||
Expected tax charge (recovery) based on a weighted average of | ( | ( | | |||
Effect of expenses not deductible in determining taxable profit | | | | |||
Temporary differences | | | ( | |||
Other tax adjustments |
| |
| |
| ( |
Origination and reversal of temporary differences | — | ( | | |||
Unutilised tax losses carried forward | | | | |||
Taxation charge in the financial statements |
| — |
| ( |
| |
The group has tax losses available to be carried forward and used against trading profits arising in future periods of approximately $
The weighted average applicable tax rate was
A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, His Majesty’s Revenue & Customs (“HMRC”), the IRS or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.
F-28
ARGO BLOCKCHAIN PLC
14.INVESTMENT IN SUBSIDIARIES AND LOSS ON SALE OF SUBSIDIARY
Company
Details of the Company’s subsidiaries at 31 December 2023 are as follows:
| Country of |
| Ownership |
| Voting Power |
| Nature of | |
Name of Undertaking | Incorporation | Interest (%) | Held (%) | Business | ||||
Argo Innovation Labs Inc. |
| Canada |
| | % | | % | *** |
9377-2556 Quebec Inc. |
| Canada |
| | % | | % | ** |
9366-5230 Quebec Inc. |
| Canada |
| | % | | % | ** |
Argo Holdings US Inc. |
| USA |
| | % | | % | **** |
Argo Operating US LLC |
| USA |
| | % | | % | * |
* The provision of cryptocurrency mining services
** The provision of cryptocurrency mining sites
*** Converted from the provision of cryptocurrency mining services to cost centre in 2023
**** Holding company
| 2023 |
| 2022 | |
Investment in subsidiaries | $’000 | $’000 | ||
|
|
|
| |
At January 1 |
| |
| |
Impairment |
| ( |
| — |
Additions |
| — |
| |
Disposals |
| — |
| ( |
At 31 December |
| |
| |
Argo Holdings US Inc. was incorporated on November 22, 2023, with a registered office of 1209 Orange Street, Wilmington, Delaware, USA, 19801. The company contributed shares in Argo Innovation Facilities (US) valued at $
Argo Operations US LLC was formed on November 22, 2022, with a registered office of 1209 Orange Street, Wilmington, Delaware, USA, 19801.
Argo Innovation Facilities (US) Inc was incorporated on 25 February 2022 with a registered address of 2028 East Ben White Blvd. Austin, TX 78740. This entity held the Helios facility and real property in Dickens County, Texas. On 21 December 2023, Argo Innovation Facilities (US) Inc. was converted to Galaxy Power LLC. Galaxy Power LLC was sold on 28 December 2023 pursuant to an equity purchase agreement. The proceeds received for the sale were million against a book value of $
F-29
ARGO BLOCKCHAIN PLC
The effects of the disposal of Galaxy Power LLC on the cash flows of the Group were:
Group | ||
At 28 December | ||
2022 | ||
$000 | ||
Carrying amounts of assets and liabilities as at the date of disposal: | ||
Cash and bank balances | | |
Property, plant and equipment | | |
Trade and other debtors | | |
Total assets | | |
Trade and other creditors | | |
Total liabilities | | |
Net assets disposed of | | |
Cash flows arising from disposal: | ||
Proceeds used to paydown existing debt | | |
Proceeds used for new loans | ||
Total Proceeds | | |
Net assets disposed of (as above) | ||
Loss on disposal | ( |
15.ASSETS AND LIABLITIES HELD FOR SALE
In December 2023, the group signed an offer to purchase 9366-5230 Quebec Inc. In March 2024, a purchase and sale agreement was signed for the sale of 9366-5230 Quebec Inc. (“Mirabel”) for proceeds of $
| 2023 | |
Non-current Assets |
| $'000 |
Tangible Fixed Assets |
| |
Right of use assets | | |
Assets held for sale |
| |
| 2023 | |
Non-current liabilities | $'000 | |
Mortgage Payable |
| |
Lease Liability |
| |
Liabilities held for sale |
| |
16.INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Non-current |
| 2023 |
| 2022 |
Group | $’000 | $’000 | ||
At 1 January |
| |
| |
Foreign exchange movement |
| — |
| |
Additions |
| — |
| |
Fair value through profit or loss | — | ( | ||
Disposals | ( | — | ||
At 31 December |
| |
| |
F-30
ARGO BLOCKCHAIN PLC
17.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
| 2023 |
| 2022 | |
| $’000 |
| $’000 | |
Opening balance |
| |
| |
Share of loss |
| ( |
| ( |
Share of fair value (losses)/gains on intangible assets through other comprehensive income | — | ( | ||
Foreign exchange movement | | ( | ||
Write off of investment | ( | — | ||
Closing balance |
| — |
| |
Nature of investment in associates:
|
| % of |
|
| ||||
Address of the | ownership |
| Nature of |
| Measurement | |||
Name of entity | registered office | interest | relationship | method | ||||
Emergent Entertainment PLC Previously Pluto Digital plc) | Hill Dickinson LLP, 8th Floor The Broadgate Tower, 20 Primrose Street, London, United Kingdom, EC2A 2EW | % | Refer below | Equity |
In December 2023, Emergent Entertainment Ltd (“EEL”) announced they have engaged an insolvency advisor to place it in liquidation. On January 10, 2024, EEL appointed liquidators to voluntarily wind up the company. The Group has written off the balance of the investment in 2023.
F-31
ARGO BLOCKCHAIN PLC
18.INTANGIBLE FIXED ASSETS
| Digital |
|
| 2023 | ||||
Goodwill | assets | Website | Total | |||||
Group |
| $’000 |
| $’000 |
| $’000 |
| $’000 |
Cost | ||||||||
At 1 January 2023 | | | | | ||||
Foreign Exchange Movements |
| | |
| |
| | |
Disposals |
| — | ( |
| — |
| ( | |
At 31 December 2023 |
| | |
| |
| | |
Amortisation and impairment |
|
|
|
|
|
| ||
At 1 January 2023 | — | | | | ||||
Foreign exchange movement |
| — | |
| |
| | |
Fair value movement |
| — | |
| — |
| | |
Amortisation charged during the period |
| — | — |
| |
| | |
At 31 December 2023 |
| — | |
| |
| | |
Balance At 31 December 2023 |
| | |
| — |
| |
|
| Digital |
|
| 2022 | |||
Goodwill | assets | Website | Total | |||||
Group | $’000 | $’000 | $’000 | $’000 | ||||
Cost |
|
|
|
|
|
|
|
|
At 1 January 2022 |
| |
| |
| |
| |
Foreign Exchange movement |
| — |
| ( |
| — |
| ( |
Additions | — | | — | | ||||
Disposals |
| — |
| ( |
| — |
| ( |
At 31 December 2022 |
| |
| |
| |
| |
Amortisation and impairment |
|
|
|
|
|
|
|
|
At 1 January 2022 |
| — |
| |
| |
| |
Foreign exchange movement |
| — |
| ( |
| ( |
| ( |
Fair Value movement | — | | — | | ||||
Amortisation charged during the period |
| — |
| — |
| |
| |
At 31 December 2022 |
| — |
| |
| |
| |
Balance At 31 December 2022 |
| |
| |
| |
| |
Digital assets are cryptocurrencies not mined by the Group. The Group held crypto assets during the year, which are recorded at cost on the day of acquisition. Movements in fair value between acquisition (date mined) and disposal (date sold), and the movement in fair value in crypto assets held at the year end, impairment of the intangible assets and any increase in fair value are recorded in the fair value reserve.
F-32
ARGO BLOCKCHAIN PLC
The digital assets held below are held in Argo Labs (a division of the Group) as discussed above. The assets are all held in secure custodian wallets controlled by the Group team and not by individuals within the Argo Labs team. The assets detailed below are all accessible and liquid in nature.
|
| Fair value | ||
Crypto asset name | Coins / tokens | $’000 | ||
Polkadot – DOT |
| |
| |
Ethereum – ETH |
| |
| |
USDC (stable coin – fixed to USD) |
| |
| |
Other tokens, NFTs and other digital assets |
| N/A |
| |
As at 31 December 2023 |
| — |
| |
|
| Fair value | ||
Crypto asset name | Coins / tokens | $’000 | ||
Token Deals |
| N/A |
| |
Ethereum – ETH |
| |
| |
Polkadot – DOT |
| |
| |
Other tokens, NFTs and other digital assets |
| N/A |
| |
As at 31 December 2022 |
|
|
| |
19.TANGIBLE FIXED ASSETS
| Mining |
| Data |
|
| |||
Machinery | Centres | Equipment | Total | |||||
Group | $’000 | $’000 | $’000 | $’000 | ||||
Cost |
| |||||||
At 1 January 2023 | | |
| |
| | ||
Foreign Exchange Movement |
| | |
| |
| | |
Additions |
| | — |
| |
| | |
Transfer to Assets held for sale | — | ( | ( | ( | ||||
At 31 December 2023 |
| | |
| |
| | |
Depreciation and impairment |
|
|
|
|
|
|
| |
At 1 January 2023 |
| ( | ( |
| ( |
| ( | |
Foreign exchange movement | — | ( | ( | ( | ||||
Depreciation charged during the period |
| ( | ( |
| ( |
| ( | |
Impairment in asset | ( | — | — | ( | ||||
Transfer to Assets held for sale | — | | | | ||||
At 31 December 2023 |
| ( | ( |
| ( |
| ( | |
Carrying amount |
|
|
|
|
|
|
| |
At 1 January 2023 |
| | |
| |
| | |
At 31 December 2023 |
| | |
| |
| |
F-33
ARGO BLOCKCHAIN PLC
| Mining |
| Assets under |
| Data |
|
| |||
Machines | construction | Centres | Equipment | Total | ||||||
Group | $’000 | $’000 | $’000 | $’000 | $’000 | |||||
Cost |
|
|
|
|
| |||||
At 1 January 2022 | | | | | | |||||
Foreign exchange movement |
| |
| |
| |
| — |
| |
Additions | | — | | | | |||||
Transfers to another class – cost |
| — |
| ( |
| |
| — |
| — |
Disposals |
| ( |
| — |
| ( |
| ( |
| ( |
At 31 December 2022 |
| |
| — |
| |
| |
| |
Depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
At 1 January 2022 |
| ( |
| — |
| ( |
| — |
| ( |
Foreign exchange movement |
| ( |
| — |
| ( |
| — |
| ( |
Depreciation charged |
| ( |
| — |
| ( |
| ( |
| ( |
Impairment in asset | ( | — | ( | — | ( | |||||
Transfer to another class |
| — |
| — |
| |
| — |
| |
At 30 December 2022 |
| ( |
| — |
| ( |
| ( |
| ( |
Carrying amount |
|
|
|
|
|
|
|
|
|
|
At 1 January 2022 |
| |
| |
| |
| |
| |
At 31 December 2022 |
| |
| — |
| |
| |
| |
Acquisition of DPN LLC
On 8 March 2022 the Group completed the acquisition of DPN LLC to acquire
The acquisition of DPN LLC, effectively comprising the land acquisition in West Texas, has been treated as an asset acquisition in the financial statements. The consideration for the acquisition was an initial price of GBP
The initial issue and allotment of GBP
Consideration at 8 March 2022
| $’000 | |
Share based payment | | |
Contingent consideration to be settled in shares |
| |
Total |
| |
Allocated as follows
| $’000 | |
Tangible fixed assets (Asset under construction) | | |
Total | |
F-34
ARGO BLOCKCHAIN PLC
Property, Plant and Equipment Impairments and Loss on Sale
The Group has a single line of business, crypto mining. As such, the Group has
In assessing the fair value of Mining and Computer Equipment, the Group used readily available tera hash pricing ("hashprice") less a
Impairment of Chips
In assessing the fair value of machine components, the Group used readily available chip set prices and management’s estimate of other components in the chip sets to determine the value of chips on hand. As a result of this analysis, an impairment of $(
Loss on Sale
During 2022, the Group sold chips for proceeds of $
Mining Machine Swap
In March 2022, the Group entered into an agreement to exchange mining machines and terminate a hosting agreement. With the completion of Helios, the Group no longer required third party hosting services. The agreement provided the hosting provider with ownership of the Group's machines at their facilities in exchange for new mining machines for our Helios facility. The hash rate between the two groups of mining machines was similar.This transaction lacks commercial substance, therefore, IFRS 16 requires the mining machines acquired to be recorded at the book value of the mining machines transferred to the hosting service provider.
20.TRADE AND OTHER RECEIVABLES
| Group |
| Group | |
2023 |
| 2022 | ||
$’000 | $’000 | |||
Trade and other receivables |
| |
| — |
Prepaids | | — | ||
Mining equipment prepayments | — | | ||
Other taxation and social security |
| |
| |
Total trade and other receivables |
| |
| |
Within other taxation and social security is a provision against GST/QST/VAT receivable of $
21.INTANGIBLE ASSETS
The Group mined crypto assets during the period, which are recorded at fair value on the day of acquisition. Movements in fair value between acquisition (date mined) and disposal (date sold), and the movement in fair value in crypto assets held at the year end, are recorded in profit or loss.
F-35
ARGO BLOCKCHAIN PLC
All of the Group’s holding in crypto currencies other than Bitcoin are now classified as intangible assets.
At the period end, the Group held Bitcoin representing a fair value of $
| 2023 |
| 2022 | |
Group | $’000 | $’000 | ||
At 1 January | | | ||
Foreign Exchange Movement | | | ||
Crypto assets purchased and received | — | | ||
Crypto assets mined | | | ||
Total additions | | | ||
Disposals | ||||
Transferred to/from intangible assets | — | | ||
Crypto assets sold | ( | ( | ||
Total disposals |
| ( |
| ( |
Fair value movements | ||||
Gain/(loss) on crypto asset sales | | ( | ||
Movements on crypto assets held at the year end | — | ( | ||
Total fair value movements | | ( | ||
At 31 December |
| |
| |
As at 31 December 2023, digital assets comprised of
22.SHARE OPTIONS, RESTRICED STOCK UNITS AND WARRANTS
In 2022, the Remuneration Committee of the Board (“Committee”) approved the 2022 Equity Incentive Plan (“the Plan”). Under the Plan, the Committee, at its discretion, may issue awards, including share awards, stock options, stock appreciation rights (“SARs”), restricted stock units, performance awards and American Depository Shares to any employee of the Group. The exercise price of stock options and the base price of SARs may not be less than the market price of the underlying shares on the date of grant. Stock options and SARs may have an exercise period up to
The following table summarizes share-based compensation expense for the years ended December 31, 2023 and 2022:
| 2023 |
| 2022 | |
Stock options and warrants | ||||
Restricted stock units | — | |||
Performance stock units |
| |
| — |
| |
| |
| Number of |
| Weighted | |
options and | average exercise | |||
warrants ‘000 | price £ | |||
At 1 January 2023 |
| |
| |
Granted |
| |
| |
Exercised |
| — |
| — |
Lapsed |
| ( |
| |
Outstanding at 31 December 2023 |
| |
| |
Exercisable at 31 December 2023 |
| |
| |
F-36
ARGO BLOCKCHAIN PLC
| Number of |
| Weighted | |
options and | average exercise | |||
warrants ‘000 | price £ | |||
At 1 January 2022 |
| |
| |
Granted |
| |
| |
Exercised |
| ( |
| |
Lapsed |
| ( |
| |
Outstanding at 31 December 2022 |
| |
| |
Exercisable at 31 December 2022 |
| |
| |
The weighted average remaining contractual life of options and warrants as at 31 December 2023 is
At the grant date, the fair value of the options and warrants prior to the listing date was the net asset value and post listing determined using the Black-Scholes option pricing model. Volatility was calculated based on data from comparable listed technology start-up companies, with an appropriate discount applied due to being an unlisted entity at grant date. Risk free interest has been based on UK Government Gilt rates for an equivalent term. The inputs into the Black-Scholes model are as follows:
| 2023 |
| 2022 |
| |
Grant date share price £ |
|
| |||
Exercise price £ |
|
| |||
Volatility |
| | % | % | |
Life |
| 10 years |
| ||
Risk free rate |
| | % | % | |
Dividend yield |
| | % | | % |
Restricted Stock Units
In 2023, the Committee approved the grant of RSUs to employees. The RSUs vest quarterly beginning the sixth month after the grant date over a three-year period. The weighted average remaining vesting period is the period to the last vesting date.
| 2023 | |||||
Weighted Average | ||||||
Number of | Weighted Average | Remaining Vesting | ||||
| Awards |
| Grant Date Price £ |
| Period (months) | |
Outstanding at beginning of period |
| — |
| — |
| — |
Granted during the period |
| |
| |
| — |
Vested during the period |
| ( |
| |
| — |
Forfeited during the period |
| ( |
| |
| — |
Outstanding at the end of period |
| |
| |
| |
F-37
ARGO BLOCKCHAIN PLC
Performance Stock Units (American Depository Shares)
In 2023, the Committee approved the grant of PSUs for the American Depository Shares to the CEO of the Group. The PSUs vest annually over a
| 2023 | |||||
Weighted Average | ||||||
Number of | Weighted Average | Remaining Vesting | ||||
| Awards |
| Grant Date Price $ |
| Period (months) | |
Outstanding at beginning of the period |
| — |
| — |
| — |
Granted during the period |
| |
| |
| — |
Vested during the period |
| — |
| — |
| — |
Forfeited during the period |
| — |
| — |
| — |
Outstanding at the end of the period |
| |
| |
| |
23.ORDINARY SHARES
As at 31 | As at 31 | |||
| December 2023 |
| December 2022 | |
$’000 | $’000 | |||
Ordinary share capital |
|
| ||
Issued and fully paid |
|
| ||
| |
| | |
Issued in the period |
|
|
|
|
| |
| | |
| |
| | |
Share premium |
|
|
|
|
At beginning of the period |
| |
| |
Issued in the period |
| |
| |
Issue costs | — | — | ||
At the end of period |
| |
| |
See the subsequent events note for additional shares issued after period end.
F-38
ARGO BLOCKCHAIN PLC
24.RESERVES
The following describes the nature and purpose of each reserve:
Reserve |
| Description |
|
Ordinary Shares | Represents the nominal value of equity shares | ||
Share Premium | Amount subscribed for share capital in excess of nominal value | ||
Share based payment reserve | Represents the fair value of options and warrants granted less amounts transferred on exercise, lapse or expiry | ||
Currency translation reserve | Cumulative effects of translation of opening balances on non-monetary assets between subsidiaries functional currencies (Canadian dollars and Uk Sterling) and Group presentational currency (US Dollars). | ||
Fair value reserve | Cumulative net gains on the fair value of intangible assets | ||
Other comprehensive income of equity accounted associates | The other comprehensive income of any associates is recognised in this reserve | ||
Accumulated surplus | Cumulative net gains and losses and other transactions with equity holders not recognised elsewhere. |
25.TRADE AND OTHER PAYABLES
Group | Group | |||
2023 | 2022 | |||
| $’000 |
| $’000 | |
Trade payables | | | ||
Accruals and other payables | | | ||
Other taxation and social security |
| |
| |
Total trade and other creditors |
| |
| |
The directors consider that the carrying value of trade and other payables is equal to their fair value.
Contingent consideration
In June 2022, the Company issued
F-39
ARGO BLOCKCHAIN PLC
26.LOANS AND BORROWINGS
| As at 31 December |
| As at 31 December | |
2023 | 2022 | |||
Non-current liabilities | $’000 | $’000 | ||
Issued debt - bond (a) | | | ||
Galaxy loan (b) | | | ||
Mortgage – Quebec facility (c) | | | ||
Lease liability | — | | ||
Total |
| |
| |
Current liabilities |
|
|
|
|
Galaxy loan (b) |
| |
| |
Mortgage- Quebec facility (c) | | | ||
Other Loans | | | ||
Lease liability | — | | ||
Total |
| |
| |
(a)Unsecured Bonds:
In November 2021, the Group issued an unsecured bond with an interest rate of
(b)Galaxy and related loans
On 23 December 2021 the Group entered into a loan agreement with Galaxy Digital LP for a loan of USD$
In March 2022, the Group entered into loan agreements with NYDIG ABL LLC for loans in the amounts of USD$
In May 2022, the Group entered into a loan agreement with Liberty Commercial Finance for a loan of USD$
F-40
ARGO BLOCKCHAIN PLC
In December 2022, the Group sold Galaxy Power LLC (see note 15) and entered into a loan agreement with Galaxy Digital LLC for USD$
(c)Mortgage – Quebec Facility
The mortgage is secured against the property at Baie-Comeau and is repayable over
27.FINANCIAL INSTRUMENTS
| Group |
| Group | |
2023 | 2022 | |||
$’000 | $’000 | |||
Carrying amount of financial assets |
| |||
Measured at amortised cost |
| |||
- Mining equipment prepayments | | | ||
- Trade and other receivables |
| |
| — |
- Cash and cash equivalents |
| |
| |
Measured at fair value through profit or loss | | | ||
Total carrying amount of financial assets |
| |
| |
Carrying amount of financial liabilities |
|
|
| |
Measured at amortised cost |
|
|
|
|
- Trade and other payables |
| |
| |
- Short term loans |
| |
| |
- Long term loans |
| |
| |
- Issued debt - bonds | | | ||
- Lease liabilities |
| |
| |
Total carrying amount of financial liabilities |
| |
| |
Fair Value Estimation
Fair value measurements are disclosed according to the following fair value measurement hierarchy:
| ● | Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) |
| ● | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices), or indirectly (that is, derived from prices) (Level 2) |
| ● | Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). This is the case for unlisted equity securities. |
F-41
ARGO BLOCKCHAIN PLC
The following table presents the Group’s assets that are measured at fair value at 31 December 2023 and 31 December 2022.
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |
Assets | $’000 | $’000 | $’000 | $’000 | ||||
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
- Equity holdings |
| |
| |
| |
| |
- Digital assets |
| |
| |
| — |
| |
Total at 31 December 2023 |
| |
| |
| |
| |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |
Assets | $’000 | $’000 | $’000 | $’000 | ||||
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
- Equity holdings | | | | | ||||
- Digital assets |
| |
| |
| — |
| |
Total at 31 December 2022 |
| |
| |
| |
| |
All financial assets are in listed and unlisted securities and digital assets.
There
The Group recognises the fair value of financial assets at fair value through profit or loss relating to unlisted investments at the cost of investment unless:
| ● | There has been a specific change in the circumstances which, in the Group’s opinion, has permanently impaired the value of the financial asset. The asset will be written down to the impaired value; |
| ● | There has been a significant change in the performance of the investee compared with budgets, plans or milestones; |
| ● | There has been a change in expectation that the investee’s technical product milestones will be achieved or a change in the economic environment in which the investee operates; |
| ● | There has been an equity transaction, subsequent to the Group’s investment, which crystallises a valuation for the financial asset which is different to the valuation at which the Group invested. The asset’s value will be adjusted to reflect this revised valuation; or |
| ● | An independently prepared valuation report exists for the investee within close proximity to the reporting date. |
| ● | The deferred consideration has been fair valued to the year-end date as the amount is to be paid in Argo shares. |
28.COMMITMENTS AND CONTINGENCIES
The Group’s material contractual commitments relate to the hosting services agreement with Galaxy Digital Qualified Opportunity Zone Business LLC, which provides hosting, power and support services at the Helios facility. Whilst management do not envisage terminating agreements in the immediate future, it is impracticable to determine monthly commitments due to large fluctuations in power usage and variations on foreign exchange rates, and as such a commitment over the contract life has not been determined. The agreement is for services with no identifiable assets, therefore, there is no right of use asset associated with the agreement.
As the company disclosed on February 8, 2023, it is currently subject to a class action lawsuit. The case, Murphy vs Argo Blockchain plc et al, was filed in the Eastern District of New York on 26 January 2023. The company refutes all of the allegations and believes that this class action lawsuit is without merit. The company is vigorously defending itself against the action. We are not currently subject to any other material pending legal proceedings or claims.
The Company is also subject to other litigation matters in the ordinary course of business. Subsequent to period end, the Company settled a breach of contract claim for $
F-42
ARGO BLOCKCHAIN PLC
29.RELATED PARTY TRANSACTIONS
The compensation paid to related parties in respect of services rendered in 2023 were:
| ● | $ |
| ● | $ |
| ● | $ |
| ● | $ |
| ● | $ |
30.CONTROLLING PARTY
There is no controlling party of the Group.
31.POST BALANCE SHEET EVENTS
In January 2024, the Company issued
In March 2024, the Group sold its Mirabel Facility for proceeds of $
F-43