Argo Blockchain Plc 6-K, filed Apr 28, 2023
Argo Blockchain Plc (ARBK)
6-K
2023-04-28
For: 2023-04-28
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Added on
April 05, 2026
About this 6-K
Argo Blockchain Plc filed this 6-K on April 28, 2023.
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 6-K
_____________________
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2023
Commission File Number: 001-40816
_____________________
Argo Blockchain plc
(Translation of registrant’s name into English)
_____________________
Eastcastle House
27/28 Eastcastle Street
London W1W 8DH
England
(Address of principal executive office)
_____________________
Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form
20-F ☒ Form 40-F
☐
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ☐
EXHIBIT INDEX
|
Exhibit
No.
1
|
Description
2022
Full Year Results dated 28 April 2023
|
Press Release
28 April 2023
Argo Blockchain plc
("Argo" or "the Group"
or "the Company")
2022 Full Year Results
Argo Blockchain plc, a global leader in cryptocurrency mining (LSE:
ARB; NASDAQ: ARBK), is pleased to announce its audited results for
the year ended 31 December 2022.
Operating highlights
●
Increased
hashrate capacity by 55% from 1.6 EH/s at the end of 2021 to 2.5
EH/s at the end of 2022
●
Energized
the Helios facility in Dickens County, Texas and
commenced mining operations on 5 May 2022
●
Executed
an agreement with ePIC Blockchain Technologies ("ePIC"), as
amended, to purchase BlockMiner machines for use with Intel's
Blockscale ASIC chip (2,870 machines expected to be deployed in Q3
2023)
●
Completed
a swap agreement with Core Scientific ("Core") for S19J Pro
machines representing approximately 970 PH/s, which ended the
Group's hosting agreement with Core in place of self-mining
operations at Helios
●
Released
the Group's 2021 Sustainability Report and maintained climate
positive status by producing no Scope 1 emissions and offsetting
all Scope 2 and Scope 3 emissions through renewable energy credits
and verifiable emissions reductions
Financial highlights
●
Total
number of Bitcoin or Bitcoin Equivalent ("BTC") mined during 2022
was 2,156, a 5% increase compared to the BTC mined in
2021, despite an increase in global hashrate and network
difficulty
●
Revenues
of £47.4 million ($58.6 million), a
decrease of 36% from 2021, driven primarily by a
significant decrease in Bitcoin price and an increase in the
global hashrate and associated network difficulty
level
●
Adjusted
EBITDA of £1.0 million ($1.2 million), down from
Adjusted EBITDA of £55.0 million ($74.2 million) in
2021
●
Mining
margin of 54%, down from 84% in 2021. Similar to revenue, this
decrease was largely attributable to the decrease in Bitcoin price
and an increase in network difficulty, as well as significantly
higher than expected power costs in Texas
●
Net
loss of £194.2 million ($240.2 million), driven
primarily by the change in fair value of digital assets, impairment
of assets, and losses associated with our divestitures
●
Total
number of BTC held at 31 December 2022 was 141, of which
116 were Bitcoin Equivalents
Sale of Helios & Hosting Agreement with Galaxy
●
On
29 December 2022, the Group completed a series of
agreements with Galaxy Digital Holdings Ltd. (TSX: GLXY)
("Galaxy")
●
As
part of the agreements, Argo sold its Helios facility to
Galaxy for £53 million ($65 million), Argo
refinanced existing equipment financing loans with a new
asset-backed loan from Galaxy for an amount
of £28 million ($35 million), and Galaxy agreed
to host Argo's mining machines at Helios ("the
Transactions")
●
The Transactions improved
the Group's balance sheet and liquidity by reducing total
indebtedness by £33 million ($41 million) and
improving its cash position. As of 31 December 2022, after
accounting for the Transactions, the Group's total debt
was approximately £63 million ($76 million), and
debt, net of cash, was £46 million ($56
million)
●
Argo
maintained ownership of its entire fleet of mining machines, and
Galaxy is now hosting the fleet
of approximately 23,619 Bitmain S19J Pro machines at
Helios under a two-year hosting agreement
●
Under
the hosting agreement, Argo has access to the electricity price
that Galaxy obtains through its power purchase agreement, and Argo
pays an incremental hosting fee based on its actual electricity
usage
Board and Senior Management Changes
Subsequent to 31 December 2022:
●
on
30 January 2023, Chief Financial Officer and Executive Director
Alex Appleton resigned from his positions to pursue other
opportunities. After a formal recruitment process led by an
executive search firm, the Board appointed Jim MacCallum as Chief
Financial Officer effective 5 April 2023
●
on
8 February 2023, Sarah Gow resigned as non-executive director of
the Company for health reasons; and
●
on
9 February 2023, Chief Executive Officer and Interim Chairman Peter
Wall resigned from his positions to pursue other opportunities.
Matthew Shaw became Chairman of the Board, and the Board appointed
Chief Operating Officer Seif El-Bakly, CFA, to serve as Interim
CEO. The Group will provide an update on the CEO recruitment
process in due course
Q1 2023 Update (Preliminary and Unaudited)
●
Total
number of Bitcoin or Bitcoin Equivalent ("BTC") mined during Q1
2023 was 491, or 5.5 BTC per day. This is a 5% increase in daily
BTC compared to the same period in 2021, and it is a 8% decrease in
BTC production compared to the prior quarter. The decrease compared
to Q4 2022 is primarily due to an increase in the network
difficulty
●
Generated
revenues of approximately £9 million ($11
million) with a mining margin in the range of 45% to 50%;
mining margin increased from approximately 35% in Q4 2022 due to
higher Bitcoin price and lower electricity prices in
Texas
●
Average
direct cost per Bitcoin mined was approximately
£10,000 ($12,000)
●
Average
all-in costs (power costs and hosting fees) at Helios was
approximately $0.05 to $0.055 per kilowatt-hour
Outlook for 2023
Renewed Focus on Quebec
●
Going
forward, in the near term, Argo will be focusing on improving
operational efficiency at its Quebec facilities
by optimizing its mining fleet and utilizing excess
capacity at these sites
●
Both
data centers have access to 99% renewable electricity generated
from hydropower at competitive prices
Deployment of ePIC BlockMiners
●
The
Group is expecting the delivery of 2,870 units of ePIC "BlockMiner"
machines beginning in early Q3 2023
●
These
new BlockMiner machines, representing an incremental 300 PH/s
of hashrate capacity, will be deployed at the Group's Quebec
facilities
Commenting on the results, Seif El-Bakly, Argo Blockchain Interim
CEO, said, "Having navigated
challenging market conditions in both the crypto sector and the
global economy in the second half of 2022, Argo has emerged
stronger and in a much more solid financial
position.
Following the build of Helios and the strategic transaction with
Galaxy, we have streamlined our operations to maximize efficiency
and increase our hashrate while maintaining our mining capacity
thanks to our Hosting Agreement. On the basis of these foundations,
we continue to work diligently on the next stage of Argo's growth
and development, with the goal of delivering long-term value to our
shareholders."
*The
tables below reconcile Bitcoin and Bitcoin Equivalent Mining Margin
to gross margin, the most directly comparable IFRS measure, and
Adjusted EBITDA to net income/(loss), the most directly comparable
IFRS measure:
|
|
Year ended
|
Year ended
|
|
|
31 December
|
31 December
|
|
|
2022
|
2021
|
|
|
£'000
|
£'000
|
|
|
|
|
|
Gross profit/(loss)
|
(34,460)
|
53,646
|
|
|
|
|
|
Depreciation
of mining equipment
|
16,549
|
11,129
|
|
Change
in fair value of digital currencies
|
113
|
(1,191)
|
|
Realised
loss / (gain) on sale of digital currencies
|
43,526
|
(437)
|
|
Cryptocurrency
management fees
|
(96)
|
(3,789)
|
|
Mining profit
|
25,633
|
59,268
|
|
Bitcoin and Bitcoin Equivalent Mining Margin
|
54%
|
84%
|
|
|
Year ended
|
Year ended
|
|
|
31 December
|
31 December
|
|
|
2022
|
2021
|
|
|
£'000
|
£'000
|
|
|
|
|
|
Net income/(loss)
|
(194,231)
|
30,765
|
|
|
|
|
|
Interest
expense
|
18,321
|
2,142
|
|
Depreciation
/ amortisation
|
23,449
|
11,521
|
|
Income
tax (credit) / expense
|
(361)
|
8,506
|
|
EBITDA
|
(152,822)
|
52,934
|
|
Change
in fair value of digital currencies
|
113
|
(1,191)
|
|
Realised
loss / (gain) on sale of digital currencies
|
43,526
|
(437)
|
|
Impairment
of assets
|
45,143
|
-
|
|
Impairment
of intangible assets
|
4,168
|
535
|
|
Loss on
sale of subsidiary and investments
|
44,804
|
629
|
|
Loss on
sale of fixed assets
|
18,779
|
-
|
|
Foreign
exchange
|
(17,250)
|
589
|
|
Legal
and restructuring fees related to restructuring
|
9,590
|
-
|
|
Share
based payment charge
|
4,928
|
1,938
|
|
Adjusted EBITDA
|
979
|
54,997
|
Inside Information and Forward-Looking Statements
This announcement contains inside information and includes
forward-looking statements which reflect the Company's current
views, interpretations, beliefs or expectations with respect to the
Company's financial performance, business strategy and plans and
objectives of management for future operations. These statements
include forward-looking statements both with respect to the Company
and the sector and industry in which the Company operates.
Statements which include the words "remains confident", "expects",
"intends", "plans", "believes", "projects", "anticipates", "will",
"targets", "aims", "may", "would", "could", "continue", "estimate",
"future", "opportunity", "potential" or, in each case, their
negatives, and similar statements of a future or forward-looking
nature identify forward-looking statements. All forward-looking
statements address matters that involve risks and uncertainties
because they relate to events that may or may not occur in the
future, including the risk that the Company may receive the
benefits contemplated by its transactions with Galaxy, the Company
may be unable to secure sufficient additional financing to meet its
operating needs, and the Company may not generate sufficient
working capital to fund its operations for the next twelve months
as contemplated. Forward-looking statements are not guarantees of
future performance. Accordingly, there are or will be important
factors that could cause the Company's actual results, prospects
and performance to differ materially from those indicated in these
statements. In addition, even if the Company's actual results,
prospects and performance are consistent with the forward-looking
statements contained in this document, those results may not be
indicative of results in subsequent periods. These forward-looking
statements speak only as of the date of this announcement. Subject
to any obligations under the Prospectus Regulation Rules, the
Market Abuse Regulation, the Listing Rules and the Disclosure and
Transparency Rules and except as required by the FCA, the London
Stock Exchange, the City Code or applicable law and regulations,
the Company undertakes no obligation publicly to update or review
any forward-looking statement, whether as a result of new
information, future developments or otherwise. For a more complete
discussion of factors that could cause our actual results to differ
from those described in this announcement, please refer to the
filings that Company makes from time to time with the United States
Securities and Exchange Commission and the United Kingdom Financial
Conduct Authority, including the section entitled "Risk Factors" in
the Company's Registration Statement on Form F-1.
For further information please contact:
|
Argo Blockchain
|
|
|
Investor Relations
|
ir@argoblockchain.com
|
|
finnCap Ltd
|
|
|
Corporate
Finance
Jonny Franklin-Adams
Seamus Fricker
Joint
Corporate Broker
Sunila de Silva
|
+44 207 220 0500
|
|
Tennyson Securities
|
|
|
Joint
Corporate Broker
Peter Krens
|
+44 207 186 9030
|
|
Tancredi Intelligent Communication
UK
& Europe Media Relations
|
|
|
Salamander Davoudi
Emma Valgimigli
Fabio Galloni-Roversi Monaco
Nasser Al-Sayed
|
argoblock@tancredigroup.com
|
About Argo:
Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK)
blockchain technology company focused on large-scale cryptocurrency
mining. With mining facilities in Quebec, mining operations in
Texas, and offices in the US, Canada, and the UK, Argo's global,
sustainable operations are predominantly powered by renewable
energy. In 2021, Argo became the first climate positive
cryptocurrency mining company, and a signatory to the Crypto
Climate Accord. For more information, visit www.argoblockchain.com.
Chairman's Statement
2022 was a year of transformation for Argo Blockchain. In the first
half of the year, we completed the development and construction of
the Helios facility in Dickens County, Texas. We energized Helios
in May 2022 and began mining operations, and we increased our total
hashrate capacity by more than 50%. However, we faced numerous
headwinds as our business model was challenged by sharp declines in
Bitcoin price, increases in the global network hashrate, increases
in energy prices, and macroeconomic and geopolitical factors. At
the end of 2022, we made the strategic decision to sell the Helios
facility and use the proceeds to reduce debt on our balance sheet.
Following the transaction, we have strengthened Argo's management
team, renewed our emphasis on financial discipline and operational
excellence, and crafted a strategy to resume our growth. With these
steps, we are in a much better position to improve our mining
operations, grow the business, and weather the crypto
winter.
2022 in Review
Our main focus in 2022 was to complete the build out and
energization of the Helios facility. In Q1 2022, we raised
additional financing in the form of secured debt from NYDIG to
complete construction at Helios. On 5 May 2022, we successfully
energized Helios and commenced mining operations. With 180 MW of
capacity and utilizing 100% immersion-cooling technology, the
Helios facility is one of the largest and most
technologically-advanced Bitcoin mining facilities in the United
States.
In the same month, we began taking delivery of the new Bitmain
Antminer S19J Pro machines that we ordered in September 2021. We
installed the new machines in monthly batches and grew our total
hashrate capacity by more than 50% from 1.6 EH/s in April 2022 to
2.5 EH/s in September 2022.
As we brought operations online at Helios, we began to transition
away from our hosted operations at facilities owned by Core
Scientific ("Core"). Between May and July 2022, we completed a
machine swap with Core, whereby new-in-box Bitmain S19J Pro
machines were delivered to Helios in exchange for Core taking over
our existing fleet of Bitmain S19 machines hosted in its
facilities. This machine swap mitigated the logistical challenges
and downtime associated with unplugging and shipping the mining
machines from Core's facilities to Helios. After completion of the
machine swap in July 2022, 100% of Argo's mining machines were
operating in our own facilities.
One of the attributes that made the Helios project an attractive
investment for Argo was its location in the Texas Panhandle, where
more than 85% of the installed power generation capacity comes from
wind and solar. Not only is this strategy consistent with our
stated goal of using renewable sources of energy to power our
mining operations, but Texas has long been known for having
low-cost electricity due to the high percentage of renewable power
on its grid.
Several external factors, however, resulted in elevated electricity
prices during Q2 and Q3 of 2022 when we were commencing operations
at Helios. Russia's invasion of Ukraine and the subsequent
sanctions on Russian petroleum exports disrupted the energy
markets. This, along with unusually low stocks of natural gas in US
storage facilities, resulted in a historic spike in the price of
natural gas. While Texas has a large amount of renewable energy
generation, it also has a significant amount of natural gas-fired
generation. The increased natural gas price also caused an increase
in electricity prices, making it cost prohibitive to sign a fixed
price power purchase agreement ("PPA"). This had a negative impact
on our mining performance and profitability.
Additionally, the global network hashrate continued to increase
throughout 2022 despite the material decline in Bitcoin price. The
depressed price of Bitcoin and the elevated global hashrate caused
hashprice, the primary measure of mining profitability, to reach
all-time lows in Q4 2022. The low hashprice and elevated power
prices significantly reduced Argo's profitability and ability to
generate free cash flow. During Q4 2022, we evaluated several
strategic alternatives to restructure our balance sheet and improve
our cash flow.
On 28 December 2022, we announced a series of transactions with
Galaxy Digital Holdings, Ltd. ("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 £54 million ($65 million) and refinanced existing
asset-backed loans via a new £29 million ($35 million),
three-year asset-backed loan with Galaxy. The transactions reduced
total indebtedness by £34 million ($41 million) and allowed us
to simplify our operating structure.
Importantly, we maintained ownership of our entire fleet of more
than 27,000 mining machines. Pursuant to a new two-year hosting
services agreement with Galaxy, our 23,650 Bitmain S19J Pro mining
machines at Helios will remain in operation at that facility. Under
the hosting agreement, we have access to the base power rate that
Galaxy obtains through its PPA, and we pay them an incremental
hosting fee based on our actual electricity usage.
The hosting agreement with Galaxy allowed us to keep our mining
machines operating at Helios and mitigated any mining machine
downtime from the sale of the Helios facility. Furthermore, we
believe that the immersion-cooling system we developed and
implemented at Helios provides for a superior operating environment
for our mining machines.
After the year end, we completed the transition of operations at
Helios over to the Galaxy team, and we have been working closely
with them to optimize our mining operations and
performance.
We continue to operate both data centers that we own in Quebec,
Canada. Our Baie Comeau site is over 40,000 square feet and has 15
MW of 99% renewable power capacity sourced from the nearby Baie
Comeau hydroelectric dam. Our Mirabel facility, located adjacent to
the Mirabel airport near Montreal, has approximately 30,000 square
feet of mining space with 5 MW of 99% renewable power capacity
sourced from Hydro-Quebec. We also operate a cleaning and repair
center at Mirabel, along with servers and computing equipment for
proof-of-stake activities and other blockchain infrastructure
needs.
Going forward, in the near term we will be focusing on optimization
by improving the operational efficiency of our Quebec facilities
and utilizing excess capacity at these sites. Both data centers
have access to 99% renewable electricity from hydropower at
competitive power prices. Additionally, we are expecting the
delivery of 2,870 units of the ePIC Blockchain machine (known as
the "BlockMiner" machine), in early Q3 2023. These new BlockMiner
machines, representing an incremental 300 PH/s of hashrate
capacity, will be deployed at our Quebec facilities.
Financial results
Revenue in 2022 was £47.4 million ($58.6 million) compared to
£74.2 million ($100.2 million) in 2021. Adjusted EBITDA was
£1.0 million ($1.2 million) compared to £55.0 million
($74.2 million) in 2021. Loss attributable to shareholders totalled
£199.5 million ($246.7 million). In 2022, total capital
expenditures, net of disposals, were £5.4 million ($6.7
million), with nearly all going towards Helios infrastructure
construction and the purchase of mining machines.
Operating results
In line with Argo's expansion of mining operations in 2022, the
Group's total hashrate capacity increased by more than 50% from 1.6
EH/s in April 2022 to 2.5 EH/s by September 2022. The Group also
has 280 Megasols of Z-cash mining capacity on Equihash. Argo's
mining margin averaged 54% for the full year 2022, which is lower
than the 84% mining margin achieved in 2021. The decrease in mining
margin from 2021 was driven by the decrease in the Bitcoin price,
the increase in energy costs, and the increase in global hashrate
(and associated increase in network difficulty).
Bitcoin macro environment
The decrease in the price of Bitcoin throughout 2022 was
accompanied by a change in monetary policy by central banks and a
significant drawdown across all digital assets. In March 2022, the
US Federal Reserve raised interest rates for the first time since
2018 as it began to address rising inflation. Assets that were
considered higher risk, including high-growth technology stocks and
highly-correlated digital assets, including Bitcoin, saw outflows
as investors factored in higher forecasted interest rates and
reduced market liquidity.
In May 2022, the collapse of the Luna/UST stablecoin caused turmoil
in the crypto market into turmoil as forced liquidations continued
to put downward pressure on digital assets. Several high-profile
collapses subsequently followed, including hedge fund Three Arrows
Capital, Celsius, and most significantly FTX and Alameda Ventures.
In the midst of this crypto downturn, the price of Bitcoin reached
a low of less than $16,000 in November 2022.
Despite the 77% drop in the price of Bitcoin from its all-time
highs in November 2021, the network hashrate continued to increase
for the twelfth consecutive year. Additionally, even though Bitcoin
miners like Argo faced increased network difficulty and lower
profitability, they continued to validate transactions and secure
the network; in total, ~53,000 blocks were mined in 2022,
generating over ~$10 billion in aggregate revenue for Bitcoin
miners.
Commitment to Sustainability
Since inception, Argo has always maintained a strong focus on
environmental sustainability. This is why we located our mining
operations in Quebec, where they are powered by hydroelectricity,
and the Texas Panhandle, where more than 85% of the installed
generation capacity comes from renewable sources. Since 2021, Argo
has been committed to achieving net-zero carbon emissions. The
Company has also released a full climate strategy and became the
first Bitcoin mining company to announce climate positive status.
We achieved this through our use of renewable energy to power
mining operations, and by offsetting more scope 2 and 3 greenhouse
gas emissions than we emitted in both 2020 and 2021. We are in the
process of accounting for our greenhouse gas emissions for
2022.
To our knowledge, we are the first publicly traded cryptocurrency
mining company to publish a report in accordance with the Task
Force on Climate-related Financial Disclosures ("TCFD")
Recommendations and Recommended Disclosures.
Leadership changes
In February 2022, Argo expanded its board by appointing Raghav
Chopra as an independent non-executive director. In March 2022, the
Company hired Seif El-Bakly, CFA as Chief Operating
Officer.
Following the end of the period, on 30 January 2023, Chief
Financial Officer and Executive Director Alex Appleton resigned
from his positions to pursue other opportunities. After a formal
recruitment process led by an executive search firm, the Board
appointed Jim MacCallum as Chief Financial Officer effective 5
April 2023.
On 9 February 2023, Chief Executive Officer and Interim Chairman
Peter Wall resigned from his positions to pursue other
opportunities. Matthew Shaw became Chairman of the Board, and the
Board appointed Chief Operating Officer Seif El-Bakly to serve as
Interim CEO.
Strategic focus in 2023
With the completion of the Helios sale to Galaxy at the end of 2022
and the leadership changes in Q1 2023, Argo is entering a new
chapter in its story. As 2023 progresses, we are focused on growing
our business with a strong emphasis on operational excellence and
financial discipline. Specifically, we intend to:
●
Optimize
our mining operations across our Quebec facilities and the Helios
facility
●
Control
operating expenses and maximize cash flow
●
Strengthen
the balance sheet
●
Explore
organic and inorganic growth opportunities
On behalf of the Board, I would like to thank all of our
shareholders and stakeholders. I am excited for Argo to continue in
its mission of powering the world's most innovative and sustainable
blockchain infrastructure.
Matthew Shaw
Chairman of the Board
Independent Auditor's Report
We have audited the financial statements of Argo Blockchain plc
(the 'parent company') and its subsidiaries (the "group") for the
year ended 31 December 2022 which comprise the Group Statement of
Comprehensive Income, the Group and Parent Company Statements of
Financial Position, the Group and Parent Company Statements of
Changes in Equity, the Group and Parent Company Statements of Cash
Flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK-adopted
international accounting standards and as regards the parent
company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
●
the
financial statements give a true and fair view of the state of the
Group's and of the parent company's affairs as at 31 December 2022
and of the Group's loss for the year then ended;
●
the
Group financial statements have been properly prepared in
accordance with UK-adopted international accounting
standards;
●
the
parent company financial statements have been properly prepared in
accordance with UK-adopted international accounting standards and
as applied in accordance with the provisions of the Companies Act
2006; and
●
the
financial statements have been prepared in accordance with the
requirements of the Companies Act 2006
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations. Company law requires the directors to prepare
financial statements for each financial year. Under that law the
directors have prepared the Group and parent company financial
statements in accordance UK-adopted international accounting
standards. Under company law the directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Company
and of the profit and loss of the Group and Company for that
period.
In preparing these financial statements, the directors are required
to:
●
Select
suitable accounting policies and then apply them
consistently;
●
Make
judgements and accounting estimates that are reasonable and
prudent;
●
State
whether applicable UK-adopted international accounting standards
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
●
Prepare
the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue
in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are also responsible to make a statement that they
consider the Annual Report and financial statements taken as a
whole, is fair, balanced and understandable and provides the
information necessary for the shareholders to assess the Group's
and Company's position and performance, business model and
strategy.
Website publication
The directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Group and Company's website is the responsibility of the
directors. The directors' responsibility also extends to the
on-going integrity of the financial statements contained
therein.
Directors' responsibilities pursuant to DTR4 (Disclosure and
Transparency Rules)
The directors confirm to the best of their knowledge:
●
The
Group and Company financial statements have been prepared in
accordance with UK-adopted international financial reporting
standards and give a true and fair view of the assets, liabilities,
financial position and profit or and give a true and fair view of
the assets, liabilities, financial position and profit and loss of
the Group and Company; and
●
The
Annual Report includes a fair review of the development and
performance of the business and financial position of the Group and
Company together with a description of the principal risks and
uncertainties that it faces.
GROUP STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended December 2022
|
Year ended December 2021
|
|
Continuing operations
|
Note
|
£'000
|
£'000
|
|
|
|
|
|
|
Revenues
|
7
|
47,363
|
74,204
|
|
Direct
costs
|
8
|
(38,183)
|
(22,186)
|
|
Change
in fair value of digital currencies
|
21
|
(43,640)
|
1,628
|
|
|
|
|
|
|
Gross (loss)/profit
|
|
(34,460)
|
53,646
|
|
|
|
|
|
|
Operating
costs and expenses
|
8
|
(27,534)
|
(8,887)
|
|
Share
based payment charge
|
22
|
(4,928)
|
(1,938)
|
|
Gain on
hedging
|
7
|
1,695
|
-
|
|
Operating (loss)/profit
|
|
65,227
|
42,821
|
|
|
|
|
|
|
Fair
value revaluation of variable consideration
|
25
|
4,038
|
236
|
|
Fair
value (loss)/gain of investments
|
15
|
(328)
|
183
|
|
Loss on
sale of subsidiary and investment
|
14
|
(44,804)
|
(629)
|
|
Loss on
disposal of fixed assets
|
19
|
(18,779)
|
-
|
|
Finance
costs
|
8
|
(18,321)
|
(2,142)
|
|
Other
income
|
7
|
3,012
|
-
|
|
Impairment
of tangible fixed assets
|
19
|
(45,143)
|
-
|
|
Impairment
of intangible assets
|
18
|
(4,168)
|
-
|
|
Equity
accounted loss from associate
|
16
|
(4,872)
|
(1,198)
|
|
(Loss)/profit before taxation
|
|
(194,592)
|
39,271
|
|
|
|
|
|
|
Tax
credit/(expense)
|
13
|
361
|
(8,506)
|
|
|
|
|
|
|
(Loss)/profit after taxation
|
|
(194,231)
|
30,765
|
|
Other comprehensive income
|
|
|
|
|
Items
which may be subsequently reclassified to profit or
loss:
|
|
|
|
|
- Currency
translation reserve
|
|
1,735
|
(410)
|
|
- Equity
accounted OCI from associate
|
16
|
(6,571)
|
6,571
|
|
- Fair
value gains on intangible digital assets
|
18
|
(414)
|
414
|
|
Total other comprehensive (loss)/income, net of tax
|
|
(5,250)
|
6,575
|
|
|
|
|
|
|
Total comprehensive (loss)/income attributable to the equity
holders of the Company
|
|
(199,481)
|
37,340
|
|
|
|
|
|
|
Earnings per share attributable to equity owners
(pence)
|
|
|
|
|
Basic
(loss)/earnings per share
|
|
(40.98p)
|
7.7p
|
|
Diluted
(loss)/ earnings per share
|
|
(40.98p)
|
7.4p
|
The income statement has been prepared on the basis that all
operations are continuing operations.
GROUP STATEMENT OF FINANCIAL POSITION
|
|
|
As at 31 December 2022
|
As at 31 December 2021
|
|
|
Note
|
£'000
|
£'000
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Non-current assets
|
|
|
|
|
Investments
at fair value through profit or loss
|
15
|
344
|
403
|
|
Investments
accounted for using the equity method
|
16
|
2,374
|
13,817
|
|
Intangible
fixed assets
|
18
|
1,744
|
5,604
|
|
Property,
plant and equipment
|
19
|
63,850
|
111,604
|
|
Right
of use assets
|
19
|
435
|
350
|
|
Total non-current assets
|
|
68,747
|
131,778
|
|
Current assets
|
|
|
|
|
Trade
and other receivables
|
20
|
5,641
|
63,359
|
|
Digital
assets
|
21
|
368
|
80,759
|
|
Cash
and cash equivalents
|
|
16,662
|
11,803
|
|
Total current assets
|
|
22,671
|
155,921
|
|
|
|
|
|
|
Total assets
|
|
91,418
|
287,699
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
Equity
|
|
|
|
|
Share
Capital
|
23
|
478
|
468
|
|
Share
Premium
|
23
|
143,748
|
139,581
|
|
Share
based payment reserve
|
24
|
6,801
|
1,905
|
|
Fair
value reserve
|
24
|
-
|
414
|
|
Currency
translation reserve
|
24
|
1,768
|
33
|
|
Other
comprehensive income of equity accounted associates
|
24
|
-
|
6,571
|
|
Accumulated
surplus/(loss)
|
24
|
(141,393)
|
52,838
|
|
Total equity
|
|
11,402
|
201,810
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade
and other payables
|
25
|
8,310
|
15,245
|
|
Contingent
consideration
|
25
|
-
|
8,071
|
|
Loans
and borrowings
|
25
|
9,624
|
23,391
|
|
Income
tax
|
13
|
-
|
7,679
|
|
Deferred
tax
|
13
|
2,196
|
286
|
|
Lease
liability
|
|
4
|
7
|
|
Total current liabilities
|
|
20,134
|
54,679
|
|
Non-current liabilities
|
|
|
|
|
Deferred
tax
|
13
|
6,586
|
541
|
|
Issued
debt - bond
|
25
|
31,356
|
26,908
|
|
Loans
|
26
|
21,492
|
3,391
|
|
Lease
liability
|
25
|
448
|
370
|
|
Total liabilities
|
|
59,882
|
85,889
|
|
|
|
|
|
|
Total equity and liabilities
|
|
91,418
|
287,699
|
COMPANY STATEMENT OF FINANCIAL POSITION
|
|
|
As at December 2022
|
As at December 2021
|
|
|
Note
|
£'000
|
£'000
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Non-current assets
|
|
|
|
|
Investment
in subsidiaries
|
14
|
53,495
|
12,181
|
|
Investments
at fair value through profit or loss
|
15
|
73
|
73
|
|
Investments
accounted for using the equity method
|
16
|
2,374
|
13,817
|
|
Tangible
fixed assets
|
18
|
1,821
|
-
|
|
Total non-current assets
|
|
57,763
|
26,071
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Trade
and other receivables
|
20
|
456
|
8,598
|
|
Intercompany
receivable, net
|
20
|
8,572
|
175,859
|
|
Cash
and cash equivalents
|
|
115
|
126
|
|
Total current assets
|
|
9,143
|
184,583
|
|
|
|
|
|
|
Total assets
|
|
66,906
|
210,654
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
Equity
|
|
|
|
|
Share
Capital
|
23
|
478
|
468
|
|
Share
Premium
|
23
|
143,748
|
139,581
|
|
Share
based payment reserve
|
24
|
6,801
|
1,905
|
|
Other
comprehensive income of equity accounted associates
|
24
|
-
|
6,571
|
|
Accumulated
(loss)/surplus
|
24
|
(120,113)
|
18,986
|
|
Total equity
|
|
30,914
|
167,511
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade
and other payables
|
25
|
4,636
|
8,164
|
|
Contingent
consideration
|
25
|
-
|
8,071
|
|
Total current liabilities
|
|
4,636
|
16,235
|
|
Non-current liabilities
|
|
|
|
|
Loans
and borrowings
|
26
|
31,356
|
26,908
|
|
Total liabilities
|
|
31,356
|
43,143
|
|
|
|
|
|
|
Total equity and liabilities
|
|
66,906
|
210,654
|
As permitted by s408 Companies Act 2006, the Company has not
presented its own profit and loss account and related notes.
The Company's total comprehensive loss for the year was
£139.1m (2021 - loss of £3.6m).
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
Share Capital
|
Share Premium
|
Currency translation reserve
|
Share based payment reserve
|
Fair Revaluation Reserve
|
Other comprehensive income of associates
|
Accumulated surplus/
(deficit)
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Balance at 1 January 2022
|
468
|
139,581
|
33
|
1,905
|
414
|
6,571
-
|
52,838
|
201,810
|
|
Total comprehensive income for the period:
|
|
|
|
|
|
|
|
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
(194,231)
|
(194,231)
|
|
Other
comprehensive income
|
-
|
-
|
1,735
|
-
|
(414)
|
(6,571)
|
-
|
(5,250)
|
|
Total
comprehensive income for the period
|
-
|
-
|
1,735
|
-
|
(414)
|
(6,571)
|
(194,231)
|
(199,481)
|
|
Transactions with equity owners:
|
|
|
|
|
|
|
|
|
|
Share
capital issued
|
10
|
4,167
|
-
|
-
|
-
|
-
|
-
|
4,177
|
|
Share
based payment charge
|
-
|
-
|
-
|
4,928
|
-
|
-
|
-
|
4,928
|
|
Share
options/warrants exercised
|
-
|
-
|
-
|
(32)
|
-
|
-
|
-
|
(32)
|
|
Total
transactions with equity owners
|
10
|
4,167
|
-
|
4,896
|
-
|
-
|
-
|
9,073
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2022
|
478
|
143,748
|
1,768
|
6,801
|
-
|
-
|
(141,393)
|
11,402
|
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
Share Capital
|
Share Premium
|
Currency translation reserve
|
Share based payment reserve
|
Fair Revaluation Reserve
|
Other comprehensive income of associates
|
Accumulated surplus/
(deficit)
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Balance at 1 January 2021
|
304
|
1,540
|
443
|
75
|
-
|
-
|
21,965
|
24,327
|
|
Total comprehensive income for the period:
|
|
|
|
|
|
|
|
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
|
-
|
30,765
|
30,765
|
|
Other
comprehensive income
|
-
|
-
|
(410)
|
-
|
414
|
6,571
|
-
|
6,575
|
|
Total
comprehensive income for the period
|
-
|
-
|
(410)
|
-
|
414
|
6,571
|
30,765
|
37,340
|
|
Transactions with equity owners:
|
|
|
|
|
|
|
|
|
|
Share
capital issued
|
164
|
150,977
|
-
|
-
|
-
|
-
|
-
|
151,141
|
|
Issue
costs of share capital
|
-
|
(12,936)
|
-
|
-
|
-
|
-
|
-
|
(12,936)
|
|
Share
based payment charge
|
-
|
-
|
-
|
1,938
|
-
|
-
|
-
|
1,938
|
|
Share
options/warrants exercised
|
-
|
-
|
-
|
(108)
|
-
|
-
|
108
|
-
|
|
Total
transactions with equity owners
|
164
|
138,041
|
-
|
1,830
|
-
|
-
|
108
|
140,143
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2021
|
468
|
139,581
|
33
|
1,905
|
414
|
6,571
|
52,838
|
201,810
|
COMPANY STATEMENT OF CHANGES IN EQUITY
|
|
Share Capital
|
Share Premium
|
Share based payment reserve
|
Other comprehensive income of associates
|
Accumulated surplus/
(deficit)
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Balance at 1 January 2022
|
468
|
139,581
|
1,905
|
6,571
|
18,986
|
167,511
|
|
Total comprehensive income for the period:
|
|
|
|
|
|
|
|
Loss
for the period
|
-
|
-
|
-
|
-
|
(139,098)
|
(139,098)
|
|
Other
comprehensive income
|
-
|
-
|
-
|
(6,571)
|
-
|
(6,571)
|
|
Total
comprehensive income for the period
|
-
|
-
|
-
|
(6,571)
|
(139,098)
|
(146,830)
|
|
Transactions with equity owners:
|
|
|
|
|
|
|
|
Share
capital issued
|
10
|
4,167
|
-
|
-
|
-
|
4,177
|
|
Share
based payments charge
|
-
|
-
|
4,928
|
-
|
-
|
4,928
|
|
Share
options/warrants exercised
|
-
|
-
|
|
-
|
|
-
|
|
Total
transactions with equity owners
|
10
|
4,167
|
4,896
|
-
|
-
|
9,073
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2022
|
478
|
143,748
|
6,801
|
-
|
(120,112)
|
30,915
|
|
|
Share Capital
|
Share Premium
|
Share based payment reserve
|
Other comprehensive income of associates
|
Accumulated surplus/
(deficit)
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Balance at 1 January 2021
|
304
|
1,540
|
75
|
-
|
22,429
|
24,348
|
|
Total comprehensive income for the period:
|
|
|
|
|
|
|
|
Loss
for the period
|
-
|
-
|
-
|
-
|
(3,551)
|
(3,551)
|
|
Other
comprehensive income
|
-
|
-
|
-
|
6,571
|
-
|
6,571
|
|
Total
comprehensive income for the period
|
-
|
-
|
-
|
6,571
|
(3,551)
|
3,020
|
|
Transactions with equity owners:
|
|
|
|
|
|
|
|
Share
capital issued
|
164
|
150,977
|
-
|
-
|
-
|
151,141
|
|
Issue
costs of share capital
|
-
|
(12,936)
|
|
|
|
(12,936)
|
|
Share
based payments charge
|
-
|
-
|
1,938
|
-
|
-
|
1,938
|
|
Share
options/warrants exercised
|
-
|
-
|
(108)
|
-
|
108
|
-
|
|
Total
transactions with equity owners
|
164
|
138,041
|
1,830
|
-
|
108
|
140,143
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2021
|
468
|
139,581
|
1,905
|
6,571
|
18,986
|
167,511
|
GROUP STATEMENT OF CASH FLOWS
|
|
|
Year ended
December
2022
|
Year ended
December
2021
|
|
|
Note
|
£'000
|
£'000
|
|
Cash flows from operating activities
|
|
|
|
|
Loss/(profit)
before tax
|
|
(194,592)
|
39,271
|
|
Adjustments for:
|
|
|
|
|
Depreciation/Amortisation
|
8
|
23,449
|
11,511
|
|
Foreign
exchange movements
|
|
(17,250)
|
589
|
|
Loss on
disposal of tangible assets
|
|
18,779
|
-
|
|
Finance
cost
|
|
18,321
|
2,142
|
|
Loss on
sale of subsidiary and investment
|
|
44,804
|
629
|
|
Fair
value change in digital assets through profit or loss
|
21
|
43,640
|
(1,628)
|
|
Impairment
of intangible digital assets
|
18
|
4,168
|
535
|
|
Impairment
of property, plant and equipment
|
|
45,143
|
-
|
|
Investment
fair value movement
|
15
|
328
|
(183)
|
|
Share
of loss from associate
|
|
4,872
|
1,198
|
|
Non-cash
settlement of management fees
|
8
|
-
|
(1,561)
|
|
Revaluation
of contingent consideration
|
26
|
(4,038)
|
(236)
|
|
Derecognition
of contingent consideration
|
|
-
|
(352)
|
|
Hedging
gain
|
|
(1,695)
|
-
|
|
Share
based payment expense
|
23
|
4,928
|
1,938
|
|
Working capital changes:
|
|
|
|
|
(Increase)/decrease
in trade and other receivables
|
20
|
(15,250)
|
(13,628)
|
|
Increase/(decrease)
in trade and other payables
|
26
|
(83,021)
|
12,289
|
|
(Increase)
in digital assets
|
21
|
36,751
|
(80,331)
|
|
Net cash used in operating activities
|
|
(70,663)
|
(27,817)
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Investment
at fair value through profit or loss
|
15
|
-
|
(220)
|
|
Acquisition
of subsidiaries, net of cash acquired
|
17
|
-
|
(664)
|
|
Cash
disposed of on disposal of subsidiary
|
19
|
(1,357)
|
-
|
|
Investment
in associate
|
16
|
-
|
(7,353)
|
|
Proceeds
from sale of investment
|
15
|
-
|
772
|
|
Purchase
of tangible fixed assets
|
19
|
(87,353)
|
(78,972)
|
|
Proceeds
from disposal of tangible fixed assets
|
|
10,028
|
-
|
|
Purchase
of digital assets
|
22
|
-
|
(15,009)
|
|
Proceeds
from sale of digital assets
|
22
|
84,225
|
11,308
|
|
Mining
equipment prepayment
|
|
-
|
(47,426)
|
|
Net cash used in investing activities
|
|
5,543
|
(137,564)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Proceeds
from new loan issuance
|
27
|
78,418
|
22,239
|
|
Proceeds
from issue of loan in conjunction with the disposal of
subsidiary
|
19
|
8,033
|
-
|
|
Lease
payments
|
26
|
75
|
(7,379)
|
|
Loan
repayments
|
26
|
-
|
(1,196)
|
|
Interest
paid
|
|
(18,321)
|
(122)
|
|
Proceeds
from debt issue - net of issue costs
|
26
|
-
|
26,908
|
|
Proceeds
from shares issued - net of issue costs
|
23
|
-
|
134,684
|
|
Net cash generated from financing activities
|
|
68,055
|
175,133
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
2,935
|
9,752
|
|
Effect
of foreign exchange on cash and cash equivalents
|
|
1,924
|
|
|
Cash
and cash equivalents at beginning of period
|
|
11,803
|
2,051
|
|
Cash
and cash equivalents at end of period
|
|
16,662
|
11,803
|
|
|
|
|
|
|
|
|
|
|
Material non-cash movements:
●
The Group sold its Helios facility during the year, in exchange for
paying down existing debt amounting to £70,764,000 and the
issuance of £25,356,000 of the new loan. See Note 19 for
additional details.
●
In March 2022, the Group entered into an agreement to exchange
mining machines and terminate a hosting agreement. See Note
19 for additional details.
|
Group - net debt reconciliation
|
|
Year ended
31 December
2022
|
Year ended
31 December
2021
|
|
|
|
£'000
|
£'000
|
|
Current loans and borrowings
|
26
|
(9,624)
|
(23,391)
|
|
Current lease liability
|
|
(4)
|
(7)
|
|
Non-current issued debt - bonds
|
26
|
(31,356)
|
(26,908)
|
|
Non-current loans and borrowings
|
26
|
(21,492)
|
(3,391)
|
|
Non-current liability - lease
|
|
(448)
|
(370)
|
|
Cash and cash equivalents
|
|
16,662
|
11,803
|
|
Total net debt
|
|
(46,262)
|
(42,264)
|
|
|
|
|
|
The directors also consider their digital assets of £2.1m
(2021 - £80.7m) as a liquid holding and as such net
funds/(debt) would be £(44.2m) (2021 -
£65.4m).
COMPANY STATEMENT OF CASH FLOWS
|
|
|
Year ended
December 2022
|
Year ended
December 2021
|
|
|
Note
|
£'000
|
£'000
|
|
Cash flows from operating activities
|
|
|
|
|
Loss
before tax
|
|
(138,633)
|
(3,551)
|
|
Adjustments for:
|
|
|
|
|
Share
of loss from associate
|
|
4,872
|
1,198
|
|
Fair
value adjustment on contingent consideration
|
|
(4,038)
|
-
|
|
Foreign
exchange movements
|
|
(6,158)
|
(409)
|
|
Share
based payment expense
|
|
4,928
|
1,938
|
|
Loss on
disposal of investment in subsidiary
|
|
104,252
|
|
|
Impairment
of assets
|
|
15,120
|
|
|
Working capital changes:
|
|
|
|
|
(Increase)/decrease
in trade and other receivables
|
20
|
8,142
|
(8,411)
|
|
Increase/(decrease)
in trade and other payables
|
25
|
(3,328)
|
7,741
|
|
Net cash used in operating activities
|
|
(14,843)
|
(1,494)
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Purchase
of investments
|
|
-
|
(7,353)
|
|
(Increase)/decrease
in loan to subsidiary
|
|
14,832
|
(154,075)
|
|
Net cash (used in(/generated from investing activities
|
|
14,832
|
(161,428)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Proceeds
from debt issue - net of issue costs
|
|
-
|
26,908
|
|
Proceeds
from shares issued - net of issue costs
|
|
-
|
134,684
|
|
Net cash generated from financing activities
|
|
-
|
161,592
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
(11)
|
(1,330)
|
|
Cash
and cash equivalents at beginning of period
|
|
126
|
1,456
|
|
Cash
and cash equivalents at end of period
|
|
115
|
126
|
|
|
|
|
|
|
Company - net debt reconciliation
|
|
Year ended
31 December 2022
|
Year ended
31 December 2021
|
|
|
|
£'000
|
£'000
|
|
Non-current loans and borrowings
|
26
|
(31,356)
|
(26,908)
|
|
Cash and cash equivalents
|
|
115
|
126
|
|
Total net (debt) / asset
|
|
(31,241)
|
(26,782)
|
|
|
|
|
|
NOTES TO THE FINANCIAL STATEMENTS
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 100% subsidiary, Argo Innovation Labs
Inc. (together "the Group"), incorporated in Canada, on 12 January
2018.
On 4 March 2021 the Group acquired 100% of the share capital of DPN
LLC and was merged into new US entity Argo Innovation Facilities
(US) Inc (also 100% owned by Argo Blockchain plc).
On 11 May 2021 the Group acquired 100% of the share capital of
9377-2556 Quebec Inc and 9366-5230 Quebec Inc. These are held by
Argo Innovation Labs Inc. (Canada).
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 ordinary shares of the Company are listed under the trading
symbol ARB on the London Stock Exchange. The American Depositary
Receipts of the Company are listed under the trading symbol ARBK on
Nasdaq. The Company bond is listed on the Nasdaq Global Select
Market under the trading symbol ARBKL.
The financial statements cover the year ended 31 December
2022.
2. BASIS OF
PREPARATION
The financial statements have been prepared in accordance with
UK-adopted international accounting standards and with the
requirements of the Companies Act 2006. 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.
The financial statements are prepared in sterling, which is the
functional currency of the Company. Monetary amounts in these
financial statements are rounded to the nearest thousand 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 Sterling. Where the
subsidiaries 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.
3. ACCOUNTING
POLICIES
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out
below.
Going Concern
The preparation of consolidated financial statements requires
an assessment on the validity of the going concern assumption. 2022
was a challenging year for Bitcoin miners: the depressed price of
Bitcoin and the elevated global hashrate caused hashprice, the
primary measure of mining profitability, to reach all-time lows in
Q4 2022. In addition, global events resulted in disruption to
fossil fuel energy markets which resulted in a significant increase
in electricity prices. The low hashprice and elevated power prices
significantly reduced Argo's profitability and its ability to
generate free cash flow. During Q4 2022, the Group evaluated
several strategic alternatives to restructure our balance sheet and
improve our cash flow.
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 £54 million and refinanced existing asset-backed
loans via a new £29 million, three-year asset-backed loan with
Galaxy. The transactions reduced total indebtedness by £34
million and allowed Argo to simplify its operating
structure.
While the Galaxy transactions strengthened the Group's balance
sheet, material uncertainties exist that may cast significant doubt
regarding the Group's ability to continue as a going concern and
meet its liabilities as they come due. The significant
uncertainties are:
1)
The Group's debt service obligations of approximately £22
million to 30 June 2024. Please see the net debt tables under the
Group and Company cash flow statements for further information of
the Group's exposure to liabilities and net position at the year
end.
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 Directors' assessment of going
concern includes a forecast drawn up to 30 June 2024 using the
Group's estimate of the forecasted hashprice. Power costs are now
also partially fixed per kilowatt hour as Galaxy has hedged the
majority of the power obligations at Helios and, as per the hosting
agreement in place, the Group has access to this power. Anticipated
power costs based on this arrangement are reflected in the forecast
prepared.
Offsetting these potential risks to the Group's cash flow are the
Group's current cash balance, the Group's ability to generate
additional funds by issuing equity for cash proceeds and selling
certain non-core Group assets.
Based on information from Management, as well as independent
advisors, the directors have considered the period to 30 June 2024,
as a reasonable time period given the variable outlook of
cryptocurrencies and the Bitcoin halving due 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
Mined income: The Group recognised revenue during the period in
relation to mined crypto. The Group enters into contracts with the
mining pool. The performance obligation is identified to be the
delivery of crypto into the Group's wallet once an algorithm has
been solved. The transaction price is the fair value of crypto
mined, being the fair value per the prevailing market rate for that
crypto currency on the transaction date, and this is allocated to
the number of crypto mined. These criteria for performance
obligation are assessed to have occurred once the crypto has been
received in the Group's wallet. Mining earnings are made up of the
baseline block reward and transaction fees of between 5% to 10%,
however, these are bundled together in the daily deposits from
mining and therefore are not capable of being analysed
separately.
Management fees: 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
sells 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 its
potential inability of its counterparties to meet the terms of
their contracts. The Group participates in both Future and Forward
contracts as well as option contracts. Some of these derivatives
are listed on exchange whereas some of these are traded over the
counter.
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 re-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, Argo
Holdings US Inc., 9366-5230 and 9377-2556.
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. On the basis that Argo Innovation Labs Limited was dormant
during the year and is immaterial to the Group, it was not included
in these consolidated financial statements.
All financial statements are made up to 31 December 2022. Where
necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with
those used by other members of the Group.
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 acquire 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.
If the business combination is achieved in stages, the acquisition
date carrying value of the acquirer's previously held equity
interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.
Contingent consideration is classified either as equity or as a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value, with changes in fair
value recognised in profit or loss.
Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost, and
the carrying amount is increased or decreased to recognise the
investor's share of the profit or loss of the investee after the
date of acquisition. The Group's investment in associates includes
goodwill identified on acquisition.
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.
Gains and losses resulting from upstream and downstream
transactions between the Group and its associate are recognised in
the Group's financial statements only to the extent of unrelated
investor's interests in the associates. Unrealised losses are
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency
with the policies adopted by the Group.
Dilution gains and losses arising in investments in associates are
recognised in the income statement.
Segmental 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 performance of the operating
segments, has been identified as the CEO or equivalent. The
directors consider that the Group has only one significant
reporting segment being crypto mining which is fully earned by a
Canadian and USA subsidiary for the financial year ended 31
December 2022.
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 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 are subsequently measured at cost less
accumulated amortisation and accumulated impairment losses.
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.
Costs relating to the development of website are capitalised once
all the development phase recognition criteria of IAS 38
"Intangible Assets" are met. Amortisation is charged on a
straight-line basis over the estimated useful life of 5 years. The
useful life represents management's view of the expected period
over which the Group will receive benefits from the Website, as
well as anticipation of future events which may impact their useful
life, such as changes in technology.
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 acquires 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.
If the business combination is achieved in stages, the acquisition
date carrying value of the acquirer's previously held equity
interest in the acquiree is remeasured to fair value at the
acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
Tangible fixed assets
Tangible fixed assets comprise 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 adjust 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 3 years on a straight-line basis.
Tangible fixed assets are initially measured at cost and
subsequently measured at cost or valuation, net of amortisation and
any impairment losses. Cost includes the original purchase price of
the asset and any costs attributable to bringing the asset to its
working condition for its intended use. An item of property, plant
and equipment is recognised as an asset if it is probable that
future economic benefits associated with the asset will flow to the
entity, and the cost of the asset can be measured
reliably.
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 25 years on a
straight-line basis from when they are brought into use.
Depreciation is recorded in the Income Statement within general
administrative expenses once the asset is brought into use. Any
land component is not depreciated.
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 3 to 4 years in the case of mining and computer
equipment and 5 years in the case of the leasehold improvements, on
a straight-line basis. Depreciation is recorded in the Statement of
Comprehensive Income within direct costs.
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 3 years.
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.
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.
Digital assets
Digital assets consist of mined bitcoin, and do not qualify for
recognition as cash and cash equivalents or financial assets and
have an active market which provides pricing information on an
ongoing basis.
The Group has assessed that it acts in a capacity as a commodity
broker-trader as defined in IAS 2, Inventories, in characterising
its holding of Digital assets as inventory. If assets held by
commodity broker-traders are principally acquired for the purpose
of selling in the near future and generating a profit from
fluctuations in price or broker-traders' margin, such assets are
accounted for as inventory, and changes in fair value (less costs
to sell) are recognised in profit or loss. Digital assets are
initially measured at fair value. Subsequently, digital assets are
measured at fair value with gains and losses recognised directly in
profit or loss.
Digital assets are included in current assets as management intends
to dispose of them within 12 months of the end of the reporting
period. Digital assets are cryptocurrencies mined by the Group.
Cryptocurrencies not mined by the Group are recorded as Intangible
Assets (see note 18).
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
demand deposits with banks and other financial institutions, that
are readily convertible into known amounts of cash, and which are
subject to an insignificant risk of changes in value. 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.
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 recognises an allowance for 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. For
credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are
provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those
credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required
for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime
ECL).
For the years ended 31 December 2022 and 2021 the Group has not
recognised any ECLs.
For other receivables due in less than 12 months, the Group applies
the simplified approach in calculating ECLs, as permitted by IFRS
9. Therefore, the Group does not track changes in credit risk, but
instead, recognises a loss allowance based on the financial asset's
lifetime ECL at each reporting date.
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
100% Canadian subsidiary for which there is no formal agreement
including payment date and therefore it cannot be considered to be
in breach of an agreement and accordingly the loan is not subject
to adjustments and is maintained at its book value in the financial
statements.
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.
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.
Dividends payable on equity instruments are recognised as
liabilities once they are no longer at the discretion of the Group.
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 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.
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, unless those costs are required to be
recognised as part of non-current assets.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
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.
When the terms and condition of equity settled share-based payments
at the time they were granted are subsequently modified, the fair
value of the share-based payment under the original terms and
conditions and under the modified terms and conditions are both
determined at the date of the modification. Any excess of the
modified fair value over the original fair value is recognised over
the remaining vesting period in addition to the grant date fair
value of the original share-based payment. The share-based payment
expense is not adjusted if the modified fair value is less than the
original fair value.
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.
As a result of the increase in share price and the impact of the
estimation of share-based payments the Group has now recognised an
expense for the outstanding share options and
warrants.
Foreign exchange
Transactions in currencies other than pounds sterling 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.
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 2021 at a significant 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 USD 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.
|
|
Change
in USD rate
|
Effect
on profit before tax
|
Effect
on pre-tax equity
|
|
|
|
£'000
|
£'000
|
|
2022
|
+/-10%
|
+/-
4,302
|
-
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
+/-10%
|
+/-250
|
+/-87
|
|
|
|
|
|
|
|
Change
in CAD rate
|
Effect
on profit before tax
|
Effect
on pre-tax equity
|
|
|
|
£'000
|
£'000
|
|
2022
|
+/-10%
|
+/-
1,471
|
-
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
+/-10%
|
+/-1,611
|
+/-3,208
|
|
|
|
|
|
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.
|
|
Increase/decrease
in basis points
|
Effect
on profit before tax
|
|
|
|
|
£'000
|
|
|
2022
|
+/-180
|
+/-522
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
0%
|
+/-0
|
|
|
|
|
|
|
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. However,
the banking sector is not currently favourable toward crypto based
businesses in all of the jurisdictions that the Group operates and
as such the Group has opened accounts with a number of Tier 2 banks
in order to mitigate the risk of an account being deactivated or
closed by the bank. Management continues to assess various
opportunities to partner with FDIC-insured banks and or financial
institutions.
The Company considers the intercompany loan to its subsidiary (Argo
Innovation Labs Inc.) to be fully recoverable based on review of
projected cash flows and acceptance of regular payments directly to
the Company's creditors.
The carrying amount of financial assets recorded in the financial
statements represent 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.
The Group complied with all covenants during the year and through
the reporting date.
|
|
Less than 1 year
|
Between 1 and 2 years
|
Between 2 and 5 years
|
Over 5 years
|
|
At 31 December 2022
|
|
|
|
|
|
Loans
|
9,624
|
11,314
|
10,178
|
-
|
|
Lease
liabilities
|
4
|
8
|
12
|
424
|
|
Issued
debt - bonds
|
-
|
-
|
31,356
|
-
|
|
|
|
|
|
|
|
At December 2021
|
|
|
|
|
|
Loans
|
23,901
|
2,188
|
693
|
-
|
|
Lease
liabilities
|
21
|
42
|
63
|
251
|
|
Issued
debt - bonds
|
-
|
-
|
26,908
|
-
|
Capital risk management
The Group's objectives when managing capital is 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. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders or
issue new shares.
The Group carefully monitors its EBITDA vs. debt, net assets vs.
debt and market capitalisation vs. debt ratios. Please see the net
debt tables below the cashflows and note 27 showing the fair value
hierarchy of liabilities.
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 2022. 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 accounting period beginning on or
after
|
|
IAS
1
|
Amendments
- Presentation and Classification of Liabilities
|
TBC
|
|
IFRS
16
|
Amendments
- Lease liability in a sale and leaseback
|
TBC
|
|
IAS
1
|
Amendments
- Disclosure of Accounting Policies
|
1
January 2023
|
|
IAS
8
|
Amendments
- Definition of Accounting Estimates
|
1
January 2023
|
|
IAS
12
|
Amendments
- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
|
1
January 2023
|
|
IAS
17
|
Amendments
- Insurance Contracts
|
1
January 2023
|
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.
Valuation of tangible and intangible fixed assets - Notes 18 and
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
were required based on current forecasts. Key assumptions include
Bitcoin production, hashprice and the discount rate.
The assets held within Argo Labs are classified as intangible
assets. Any impairment of these assets is reflected in the income
statement and any increases in fair value are reflected in the fair
value reserve. 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.
Valuation of investments in subsidiaries and amounts due from group
companies - Note 20
The Board considered amounts due from group companies and whether
any further impairments were required on their carrying value. When
considering these amounts they made use of forecasts of the
profitability of the subsidiary and of their revenues and
expenditure and concluded that impairment of those assets was
unnecessary based on current forecasts and performance during the
first part of 2023.
The forecasts to support this were built using our existing
internal models showing positive cash contribution and
profitability of the subsidiaries and their future value to the
Group as a whole. Both pre and post year end these models continue
to show that the contribution to the Group is at least the carrying
value of these investments and as such no impairment has been
recognised.
Share-based payments - Note 22
During the year (and in previous years) share based payments were
made based on the fees due to certain individuals for services to
be performed by them in the future. In calculating these payments,
where possible the Directors consulted with professional advisers
to establish the market rate for these services. In addition to
this, the Company has also issued warrants and options to
Directors, consultants and employees which have been valued in
accordance with the Black Scholes model. Significant estimation and
judgement is required by the directors when using the Black Scholes
method. Further details of these estimates are available in note
22.
Investments accounted for using the equity method - Note
16
The Group holds significant influence over certain entities that
are accounted for under the equity method of accounting. The
shareholdings and nature of relationship details are in Note 16.
The equity accounted loss has been calculated based on the latest
management accounts made available by the investee company, which
were unaudited.
Contingent liabilities - Notes 13 and 28
The Group is subject to tax liabilities 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 and transfer pricing, 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 28 and no accrual
has been made as there is no basis to estimate any
liability.
7.
REVENUES
|
|
|
Year ended
31 December 2022
|
Year ended
31 December 2021
|
|
|
|
£'000
|
£'000
|
|
Crypto currency mining - worldwide
|
|
47,267
|
70,325
|
|
Crypto currency management fees - United States
|
|
96
|
3,879
|
|
Total revenue
|
|
47,363
|
74,204
|
|
|
|
|
|
Due to the nature of Cryptocurrency mining, it is not possible to
provide a geographical split of the revenue stream.
Cryptocurrency mining revenues are recognised at a point in
time.
Cryptocurrency management fees are services recognised over
time.
Other Income
Argo held 2,441 Bitcoin (fair valued at £80m as at 31 December
2021) on its balance Sheet at the beginning of 2022. The Group used
up to 1,504 Bitcoins as collateral with Galaxy Digital LP for a
short-term payable on demand loan of USD$30 million (£22.2m)
taken out on December 23, 2021. To protect its Bitcoin holdings
used as collateral for the loan and reduce overall exposure, Argo
took positions in the markets which resulted in a net hedge gain of
£1.7m for 2022.
|
|
|
2022
|
2021
|
|
Gain on Hedging
|
|
£'000
|
£'000
|
|
Gain on Hedging
|
|
1,695
|
-
|
|
Total gain on hedging
|
|
1,695
|
-
|
8. EXPENSES BY
NATURE
|
|
|
2022
|
2021
|
|
|||
|
Direct Costs
|
|
£'000
|
£'000
|
|
|||
|
Depreciation of mining hardware
|
|
16,549
|
11,129
|
|
|||
|
Hosting and other costs
|
|
21,634
|
11,057
|
|
|||
|
Total direct costs
|
|
38,183
|
22,186
|
|
|||
|
|
|
|
|
|
|||
|
|
|
2022
|
2021
|
||||
|
Administrative expenses
|
|
£'000
|
£'000
|
||||
|
Legal, professional, and regulatory fees
|
|
12,763
|
1,533
|
||||
|
Salary and other employee related costs
|
|
9,610
|
2,662
|
||||
|
Depreciation and amortisation
|
|
6,900
|
382
|
||||
|
Insurance
|
|
6,027
|
1,408
|
||||
|
Indirect taxes
|
|
3,684
|
-
|
||||
|
Freight, postage & delivery
|
|
1,314
|
-
|
||||
|
Consulting fees
|
|
828
|
684
|
||||
|
Repairs and maintenance
|
|
863
|
692
|
||||
|
Office general expenses
|
|
840
|
424
|
||||
|
Travel
|
|
678
|
128
|
||||
|
Public relations and associated activities
|
|
519
|
699
|
||||
|
Impairment of intangible assets
|
|
-
|
535
|
||||
|
Hedging costs
|
|
-
|
326
|
||||
|
Carbon credits
|
|
-
|
252
|
||||
|
Audit fees
|
|
310
|
239
|
||||
|
Bank charges
|
|
240
|
247
|
||||
|
Capital loss
|
|
116
|
-
|
||||
|
Research costs
|
|
91
|
-
|
||||
|
Write off of variable contingent consideration
|
|
-
|
(352)
|
||||
|
Settlement re Crypto mining management fees
|
|
-
|
(1,561)
|
||||
|
Foreign exchange gain (loss)
|
|
(17,250)
|
589
|
||||
|
Total operating costs and administrative expenses
|
|
27,534
|
8,887
|
||||
|
|
|
|
|
||||
|
|
|
2022
|
2021
|
||||
|
Finance Costs
|
|
£'000
|
£'000
|
||||
|
Interest on loans, including associated prepayment
penalties
|
|
18,321
|
2,142
|
||||
|
Total finance costs
|
|
18,321
|
2,142
|
||||
|
|
|
|
|
|
|
|
|
9. AUDITOR'S
REMUNERATION
|
|
|
2022
|
2021
|
|
|
|
£'000
|
£'000
|
|
In relation to statutory audit services
|
|
251
|
170
|
|
Other audit assurance services
|
|
59
|
52
|
|
Total auditor's remuneration
|
|
310
|
222
|
|
|
|
|
|
10.
EMPLOYEES
The average monthly number of persons (including directors)
employed by the Group during the period was:
|
|
|
2022
|
2021
|
|
|
|
Number
|
Number
|
|
Directors and employees
|
|
82
|
26
|
|
|
|
|
|
Their aggregate remuneration comprised:
|
|
|
2022
|
2021
|
|
|
|
£'000
|
£'000
|
|
Wages and salaries
|
|
8,934
|
2,286
|
|
Social security costs
|
|
646
|
199
|
|
Pension costs
|
|
30
|
25
|
|
Share based payments
|
|
4,928
|
1,392
|
|
|
|
14,538
|
3,902
|
The average monthly number of persons (including directors)
employed by the Company during the period was:
|
|
|
2022
|
2021
|
|
|
|
Number
|
Number
|
|
Directors and employees
|
|
6
|
4
|
|
|
|
|
|
Their aggregate remuneration comprised:
|
|
|
2022
|
2021
|
|
|
|
£'000
|
£'000
|
|
Wages and salaries
|
|
1,072
|
406
|
|
Social security costs
|
|
44
|
8
|
|
Pension costs
|
|
12
|
1
|
|
Share based payments
|
|
4,928
|
330
|
|
|
|
6,056
|
745
|
11. DIRECTOR'S
REMUNERATION
|
|
|
2022
|
2021
|
|
|
|
£'000
|
£'000
|
|
Director's remuneration for qualifying services
|
|
1,285
|
856
|
|
Senior management loss of office
|
|
-
|
132
|
|
Share based payments
|
|
1,522
|
431
|
|
Total remuneration for directors and key management
|
|
2,807
|
1,419
|
|
|
|
|
|
The amounts above are remunerated through both salaries (of which,
some are included in 10) and through service companies (as
disclosed in note 29). Further details of Directors' remuneration
are available in the Remuneration report. The highest paid director
during the year earned £588k (2021 - £455k).
12. EARNINGS PER
SHARE
The basic earnings per share is calculated by dividing the
profit/(loss) attributable to equity shareholders by the weighted
average number of shares in issue.
The Group and Company has in issue 18,698,304 warrants and options
at 31 December 2022 (2021: - 17,688,897).
|
|
2022
|
2021
|
|
Net
profit/(loss) for the period attributable to ordinary equity
holders from continuing operations (£'000)
|
(194,321)
|
30,765
|
|
Weighted
average number of ordinary shares in issue ('000)
|
473,930
|
397,513
|
|
Basic earnings (loss) per share for continuing operations
(pence)
|
(40.98)
|
7.7
|
|
|
|
|
|
Net
profit/(loss) for the period attributable to ordinary equity
holders for continuing operations (£'000)
|
(194,321)
|
30,765
|
|
Diluted
number of ordinary shares in issue ('000)
|
473,930
|
415,201
|
|
Diluted
earnings (loss) per share for continuing operations
(pence)
|
(40.98)
|
7.4
|
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
year would be anti-dilutive, they are not included in the above
calculation of dilutive earnings per Ordinary Share for
2022.
13.
TAXATION
|
Current tax:
|
2022
£'000
|
2021
£'000
|
||
|
|
|
|
||
|
Current tax on (loss)/profit for the year
|
(8,316)
|
7,679
|
||
|
Adjustments in respect of prior periods
|
-
|
-
|
||
|
Total current tax
|
(8,316)
|
7,679
|
||
|
|
|
|
||
|
Deferred tax:
|
2022
£'000
|
2021
£'000
|
||
|
|
|
|
||
|
Origination and reversal of temporary differences
|
7,955
|
827
|
||
|
Total deferred tax liability
|
7,955
|
827
|
||
|
|
|
|
|
|
|
Total tax (credit)/charge
|
(361)
|
8,506
|
No
deferred tax has been recognised on the losses brought forward and
carried interest 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:
|
|
|
2022
|
2021
|
|
|
|
£'000
|
£'000
|
|
Profit
(loss) before taxation
|
|
(194,592)
|
39,271
|
|
Expected tax charge (recovery) based on a weighted average of 25%
(2021 - 25%) (UK, US and Canada)
|
|
(48,648)
|
9,746
|
|
|
|
|
|
|
Effect of expenses not deductible in determining taxable
profit
|
|
26,406
|
1,779
|
|
Capital allowances in excess of depreciation
|
|
6,848
|
(3,770)
|
|
Other tax adjustments
|
|
205
|
(137)
|
|
Other timing differences
|
|
-
|
(385)
|
|
Origination and reversal of temporary differences
|
|
(827)
|
827
|
|
Unutilised tax losses carried forward
|
|
15,655
|
445
|
|
Taxation charge in the financial statements
|
|
(361)
|
8,506
|
|
|
|
|
|
The Group has tax losses available to be carried forward and used
against trading profits arising in future periods of
approximately £34,000,000
(2021 - £10,476,000).
The weighted average applicable tax rate was 25% (2021:
25%).
The movement in deferred income tax assets and liabilities during
the year, without taking into consideration the offsetting of
balances within the same tax jurisdiction, is as
follows:
|
Deferred tax liabilities
|
2022
£'000
|
2021
£'000
|
||
|
|
|
|
||
|
Digital assets
|
(286)
|
286
|
||
|
Gain on fair value of property acquired (see note 17)
|
442
|
442
|
||
|
Share of other comprehensive income of associates
|
-
|
99
|
||
|
Property, plant and equipment
|
8,626
|
-
|
||
|
Total deferred tax
|
8,782
|
827
|
||
|
Current portion
|
2,196
|
286
|
||
|
Non-current
|
6,586
|
541
|
||
|
|
|
|
|
|
A tax authority may disagree with tax positions that we have taken,
which could result in increased tax liabilities. For example, Her
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.
14. INVESTMENT IN
SUBSIDIARIES AND LOSS ON SALE OF SUBSIDIARY
Company
Details of the Company's subsidiaries at 31 December 2022 and 31
December 2021 are as follows:
|
Name of Undertaking
|
Country of Incorporation
|
Ownership Interest (%)
|
Voting Power Held (%)
|
Nature of Business
|
||||
|
Argo Innovation Labs Inc.
|
Canada
|
100%
|
100%
|
***
|
||||
|
Argo Innovation Labs Limited
|
UK
|
100%
|
100%
|
Dormant
|
||||
|
Argo Innovation Facilities (US) Inc.
|
USA
|
100%
|
100%
|
*
|
||||
|
9377-2556 Quebec Inc.
|
Canada
|
100%
|
100%
|
**
|
||||
|
9366-5230 Quebec Inc.
|
Canada
|
100%
|
100%
|
**
|
||||
|
Argo Holdings US Inc.
|
USA
|
100%
|
100%
|
****
|
||||
|
Argo Operating US LLC
|
USA
|
100%
|
100%
|
*
|
||||
|
|
|
|
|
|
|
|
|
|
* The
provision of cryptocurrency mining services
** The provision of cryptocurrency mining sites
*** Converted from the provision of cryptocurrency mining services
to cost centre in 2022
**** Holding company
|
Investment in subsidiaries
|
2022
£'000
|
2021
£'000
|
|
|
|
|
|
At 1 January
|
12,181
|
-
|
|
Additions
|
53,494
|
12,181
|
|
Disposals
|
(12,181)
|
-
|
|
At 31 December
|
53,494
|
12,181
|
The cost of the investment above is in respect of the DPN LLC
acquisition further detail can be found in note 19.
9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are the GPU.One
subsidiaries acquired on 11 May 2021 with registered addresses
of 8 avenue William Dobell, Baie-Comeau, Quebec G4Z 1T7 and
10205 Irene Vachon, Mirabel, Quebec J7N 3E3 respectively. More
information on this acquisition can be found in note
17.
Argo Holdings US Inc. was incorporated on November 22, 2022, with a
registered office of 1209 Orange Street, Wilmington, Delaware, USA,
19801. The Company contributed shares in Argo Innovation Facilities
(US) valued at £53.5m.
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
2021 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 2022, Argo Innovation Facilities (US) Inc. was
converted to Galaxy Power LLC. Galaxy Power LLC was sold on 28
December 2022 pursuant
to an equity purchase agreement. The proceeds received for the sale were
£53.0 million against a book value £97.8 million
resulting in a loss on sale for the Group of £44.8
million.
The effects of the disposal of Galaxy Power LLC on the cash flows
of the Group were:
|
|
|
Group at 28 December 2022
|
|
Carrying amounts of assets and liabilities as at the date of
disposal:
|
|
£'000
|
|
Cash
and bank balances
|
|
1,357
|
|
Property,
plant and equipment
|
|
104,888
|
|
Trade
and other debtors
|
|
297
|
|
Total assets
|
|
106,542
|
|
|
|
|
|
Trade and other creditors
|
|
9,764
|
|
Total liabilities
|
|
9,764
|
|
|
|
|
|
Net assets disposed of
|
|
96,778
|
|
|
|
|
|
Cash
inflows arising from disposal:
|
|
|
|
|
|
|
|
Proceeds
used to paydown existing debt
|
|
70,654
|
|
Issuance
of new loan
|
|
(25,356)
|
|
Proceeds
received in cash for new loans
|
|
6,676
|
|
Total
Proceeds
|
|
51,974
|
|
Net
assets disposed of (as above)
|
|
96,778
|
|
Loss on disposal
|
|
(44,804)
|
|
|
|
|
15. INVESTMENTS AT FAIR
VALUE THROUGH PROFIT OR LOSS
|
|
|
|
||
|
Non-current
Group
|
2022
£'000
|
2021
£'000
|
||
|
|
|
|
||
|
At 1 January
|
403
|
1,393
|
||
|
Foreign exchange movement
|
20
|
-
|
||
|
Additions
|
249
|
219
|
||
|
Fair value through profit or loss
|
(328)
|
183
|
||
|
Disposals
|
-
|
(1,392)
|
||
|
At 31 December
|
344
|
403
|
||
|
|
|
|
|
|
16. INVESTMENTS ACCOUNTED
FOR USING THE EQUITY METHOD
|
|
|
|
2022
|
2021
|
|
|
|
|
|
|
|
|
|
|
£000's
|
£000s
|
|
Opening balance
|
|
|
13,817
|
-
|
|
Acquired during the period
|
|
|
-
|
8,444
|
|
Share of loss
|
|
|
(4,872)
|
(1,198)
|
|
Share of fair value (losses)/gains on intangible assets through
other comprehensive income
|
|
|
(6,571)
|
6,571
|
|
Closing balance
|
|
|
2,374
|
13,817
|
Set out below are the associates of the Group as at 31 December
2022, which, in the opinion of the Directors, significant influence
is held. The associate as listed below has share capital consisting
solely of ordinary shares, which are held directly by the Group.
The country of incorporation or registration is also their
principal place of business.
Nature of investment in associates:
|
Name of entity
|
Address of the registered office
|
% of ownership interest
|
Nature of relationship
|
Measurement method
|
|
Emergent
Entertainment PLC (Previously Pluto Digital plc)
|
Hill
Dickinson LLP, 8th Floor The Broadgate Tower, 20 Primrose Street,
London, United Kingdom, EC2A 2EW
|
19.94%
|
Refer
below
|
Equity
|
On 3 February 2021 Argo invested in Pluto Digital PLC ("Pluto"), a
crypto venture capital and technology company. The investment was
satisfied with 75,000 Polkadot with a fair value at that date of
£1.1m. Further to this in a second round of funding the Group
invested an additional £7.4m on 8 March 2021.
In addition, Argo holds 121,666,666 warrants at a price of
£0.12 each and 35,450,000 warrants at a price of £0.06
each. If Pluto was fully diluted Argo's ownership would be 33.26%
as at 31 December 2022 including the exercise of the share
warrants.
The warrants expired unexercised in February and March
2023.
In October 2022, Pluto merged with Maze Theory to become Emergent
Entertainment PLC ("Emergent").
Argo owns 19.94% (2021 - 24.65%) of the total share capital and
voting rights of the business. The Group retains the right to
appoint a board member from Argo on Emergent's board based on its
current ownership percentage.
Emergent Entertainment PLC is a next-generation entertainment
company that brings storytellers and their audiences closer
together by harnessing new technologies including virtual reality,
augmented reality, artificial intelligence and
blockchain.
Emergent Entertainment is a private company and there is no quoted
market price available for its shares.
There are no contingent liabilities relating to the Group's
interest in the associates.
The audited financial information for the period ended 30 September
2021, together with the unaudited management accounts for the
period from 1 October 2021 to 31 December 2022, have been made
available by Emergent to the Group and the figures in the above
represent Argo's share of the loss for the period and movements in
the fair value of the net assets (net of deferred
tax).
Summarised financial information for associates
Set out below is the preliminary, unaudited financial information
for Emergent Entertainment PLC which is accounted for using the
equity method.
Summarised Statement of Financial Position
|
|
|
|
|
|
|
|
|
|
|
Current
|
As at December 31, 2022
£000's
|
|
As at December 31, 2021
£000's
|
|
Cash and cash equivalents
|
2,964
|
|
1,759
|
|
Other current assets (excluding cash)
|
3,650
|
|
335
|
|
Total current assets
|
6,614
|
|
2,094
|
|
Trade payables
|
280
|
|
88
|
|
Other current liabilities
|
74
|
|
1,494
|
|
Total current liabilities
|
354
|
|
1,582
|
|
Non-current
|
|
|
|
|
Tangible fixed assets
|
106
|
|
49
|
|
Investments and other non-current assets
|
11,596
|
|
56,000
|
|
Total non-current assets
|
11,702
|
|
56,049
|
|
Financial liabilities
|
4,809
|
|
2,807
|
|
Total non-current liabilities
|
4,809
|
|
2,807
|
|
Net assets
|
13,153
|
|
53,754
|
Summarised Statement of Comprehensive Income, Emergent
Entertainment PLC
|
|
2022
|
|
January 12 to December 31, 2021
|
|
|
£000's
|
|
£000's
|
|
Revenue
|
352
|
|
-
|
|
Cost of sales
|
(224)
|
|
-
|
|
Gross profit
|
(128)
|
|
-
|
|
Operating costs
|
(12,088)
|
|
7,652
|
|
Revaluation loss - digital assets
|
(12,810)
|
|
(2,394)
|
|
Loss from operations
|
(24,770)
|
|
5,258
|
|
Non-operating costs
|
(209)
|
|
-
|
|
Income tax expense (recovery)
|
(2,579)
|
|
575
|
|
Post-tax loss
|
(23,400)
|
|
4,867
|
|
Other comprehensive income
|
(26,991)
|
|
26,991
|
|
Total comprehensive income (loss)
|
(49,391)
|
|
21,824
|
The information above reflects the amounts presented in the
financial statements of the associate (and not Argo Blockchain
Plc's share of those amounts) adjusted for differences in
accounting policies between the Group and the
associate.
Reconciliation of summarised financial information
|
|
|
2022
£000's
|
2021
£000's
|
|
Summarised
financial information (as adjusted)
|
|
|
|
|
Net
assets, opening
|
|
56,052
|
-
|
|
Acquired
during the period
|
|
-
|
34,228
|
|
Profit/(loss)
for the period
|
|
(22,400)
|
(4,867)
|
|
Other
comprehensive income
|
|
(26,991)
|
26,691
|
|
Closing
net assets
|
|
6,661
|
56,052
|
|
|
|
|
|
|
Interest
in associates (2022: 19.94%; 2021: 24.65%)*
|
|
2,374
|
13,818
|
|
Goodwill
|
|
-
|
-
|
|
Carrying
value
|
|
2,374
|
13,818
|
*The percentage share of the associate profit or loss for the year
was calculated and recorded on a month by month basis, based on the
movements in the percentage ownership, from the unaudited
management accounts.
17. BUSINESS
COMBINATION
GPU.One subsidiaries acquired from GPU.One Holding
Inc.
On 11 May 2021, the Group acquired 100% of the share capital of
GPU.One 9377-2556 Quebec Inc. and GPU.One 9366-5230 Quebec Inc.
from its shareholder GPU.One Holding Inc. for a total consideration
of £5.5m; consisting of £212k
being satisfied in cash and the balance satisfied by the
cancellation of certain prepayments and deposits previously paid by
Argo to the vendor. Each of these acquired entities owned and
operated a data centre within which Argo was the lead
tenant.
The acquisition was performed to enable the Group to obtain control
of its hosting facility and power costs across its facilities in
Canada. From acquisition on 11 May 2021 to 31 December 2021 the
GPU.One subsidiaries loss amounted to £3.4m which is fully
consolidated. No revenue has been generated from these
entities since acquisition, however both entities have provided
hosting services to Argo Innovation Labs Inc. Both GPU.One entities
were dormant up until the date of acquisition, when the relevant
assets and liabilities acquired were transferred by GPU.One Holding
Inc. to these entities immediately prior to acquisition. There is
no difference between the amount consolidated within profit and
loss and the amount which would have been consolidated if the
acquisition happened on 1 January
2021.
The consideration was negotiated on an arm's length basis and
primarily on the basis of the valuation of the land and buildings
being acquired. The directors attribute the consideration as fair
value of the land and buildings with no goodwill being recognised
as currently Argo does not anticipate hosting any third parties at
these sites in the medium term.
The fair values of the acquisition date assets and liabilities,
together with any separately identifiable intangible assets, have
been provisionally determined at 30 September 2021 because the
acquisition was completed late in the period. The Group is
currently obtaining the information necessary to finalise its
valuation.
On a £1 for £1 basis certain deposits and other
receivables totalling £668k were acquired. The directors
consider these amounts fully recoverable and as such these
receivables have not been impaired. Liabilities assumed are
incorporated at their cost.
The following table summarises the consideration paid for the
GPU.One subsidiaries and the fair value of assets acquired and
liabilities assumed at the acquisition date:
Consideration
|
|
£'000
|
|
Cash
|
213
|
|
Payment for deposits
|
668
|
|
Cancellation of prepayment and deposits
|
4,656
|
|
Total consideration
|
5,537
|
Recognised amounts of identifiable assets acquired, and liabilities
assumed
|
|
£'000
|
|
Cash
and cash equivalents
|
4
|
|
Property, plant and equipment (Note 11)
|
10,779
|
|
Trade and other receivables
|
387
|
|
Trade and other payables
|
(326)
|
|
Property mortgages
|
(5,010)
|
|
Lease liability
|
(377)
|
|
Goodwill
|
80
|
|
Total
|
5,537
|
Fair value of assets acquired was assessed in line with independent
valuations provided by CBRE of the sites. Given the continued
demand for power sites and data centres in North America the
Directors consider the valuations to be prudent, however they are
still in line with the fair value and consideration paid for the
entities, primarily (as discussed above) for Argo to gain access to
the low cost of power and direct control of management of the
miners at those sites. No acquisition costs have been recognised in
the above calculations.
18. INTANGIBLE FIXED
ASSETS
|
Group
|
|
Goodwill
|
Digital assets
|
Website
|
2022
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cost
|
|
|
|
|
|
|
At 1 January 2022
|
|
80
|
5,303
|
671
|
6,054
|
|
|
|
|
|
|
|
|
Additions
|
|
-
|
1,728
|
-
|
1,728
|
|
Disposals
|
|
-
|
(2,058)
|
-
|
(2,058)
|
|
At 31 December 2022
|
|
80
|
4,973
|
671
|
5,724
|
|
|
|
|
|
|
|
|
Amortisation and impairment
|
|
|
|
|
|
|
At 1 January 2022
|
|
-
|
121
|
450
|
571
|
|
Foreign
exchange movement
|
|
(1,321)
|
(18)
|
(1,339)
|
|
|
|
|
|
|
|
|
|
Fair value movement
|
|
|
4,601
|
-
|
4,601
|
|
Amortisation
charged during the period
|
-
|
-
|
147
|
147
|
|
|
At 31 December 2022
|
|
-
|
3,309
|
579
|
3,888
|
|
|
|
|
|
|
|
|
Balance at 31 December 2022
|
80
|
1,572
|
92
|
1,744
|
|
|
Group
|
|
Goodwill
|
Digital assets
|
Website
|
2021
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cost
|
|
|
|
|
|
|
At 1 January 2021
|
|
-
|
-
|
671
|
671
|
|
|
|
|
|
|
|
|
Additions
|
|
80
|
18,216
|
-
|
18,296
|
|
Disposals
|
|
-
|
(12,792)
|
-
|
(12,792)
|
|
At 31 December 2021
|
|
80
|
5,424
|
671
|
6,175
|
|
|
|
|
|
|
|
|
Amortisation and impairment
|
|
|
|
|
|
|
At 1 January 2021
|
|
-
|
-
|
303
|
303
|
|
Foreign
exchange movement
|
-
|
-
|
9
|
9
|
|
|
Impairment
|
|
-
|
535
|
-
|
535
|
|
Fair value gain
|
|
|
(414)
|
-
|
(414)
|
|
Amortisation
charged during the period
|
-
|
-
|
138
|
138
|
|
|
At 31 December 2021
|
|
0
|
121
|
450
|
571
|
|
|
|
|
|
|
|
|
Balance at 31 December 2021
|
80
|
5,303
|
221
|
5,604
|
|
|
|
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.
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.
|
|
As at 31 December 2022
Crypto asset name
|
Coins / tokens
|
Fair value
£'000
|
|
Token deals
|
-
|
771
|
|
Ethereum - ETH
|
518
|
519
|
|
Polkadot - DOT
|
32,964
|
118
|
|
Alternative coins
|
-
|
164
|
|
As at 31 December 2022
|
|
1,572
|
19. TANGIBLE FIXED
ASSETS
|
Group
|
Right of use Assets
|
Office Equipment
|
Mining and Computer Equipment
|
Machine Components
|
Assets Under Construction
|
Leasehold
Improvements
|
Data centres
|
Equipment
|
Total
|
|||||
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|||||
|
Cost
|
|
|
|
|
|
|
|
|
|
|||||
|
At 1
January 2022
|
358
|
49
|
58,499
|
-
|
61,306
|
85
|
10,466
|
-
|
130,763
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Foreign
exchange movement - cost
|
17
|
|
2,744
|
-
|
7,287
|
4
|
560
|
-
|
10,612
|
|||||
|
Additions
|
75
|
-
|
117,246
|
17,364
|
-
|
7
|
0
|
86
|
134,779
|
|||||
|
Transfers to another class - cost
|
-
|
-
|
--
|
-
|
(68,593)
|
-
|
68,593
|
-
|
-
|
|||||
|
Disposals
|
-
|
(2)
|
(60,809)
|
-
|
|
-
|
(68,593)
|
-
|
(129,404)
|
|||||
|
At 31 December 2022
|
450
|
47
|
117,680
|
17,364
|
-
|
96
|
11,026
|
86
|
146,749
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Depreciation and impairment
|
|
|
|
|
|
|
|
|
|
|||||
|
At 1
January 2022
|
8
|
-
|
18,507
|
-
|
-
|
65
|
229
|
-
|
18,809
|
|||||
|
Foreign
exchange movement
|
-
|
-
|
868
|
-
|
-
|
3
|
11
|
-
|
882
|
|||||
|
Depreciation
charged during the period
|
7
|
14
|
16,549
|
-
|
-
|
19
|
6,846
|
12
|
23,448
|
|||||
|
Impairment in asset
|
-
|
-
|
29,797
|
15,121
|
-
|
-
|
225
|
-
|
45,143
|
|||||
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,817)
|
-
|
(5,817)
|
|||||
|
At 31 December 2022
|
15
|
14
|
65,721
|
15,121
|
|
87
|
1,494
|
12
|
82,464
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Carrying amount
|
|
|
|
|
|
|
|
|
|
|||||
|
At 1 January 2022
|
350
|
49
|
39,992
|
-
|
61,306
|
20
|
10,237
|
-
|
111,954
|
|||||
|
At 31 December 2022
|
435
|
33
|
51,959
|
2,244
|
-
|
9
|
9,532
|
74
|
64,285
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Group
|
Right of use Assets
|
Office Equipment
|
Mining and Computer Equipment
|
Assets Under Construction
|
Leasehold
Improvements
|
Data centres
|
Total
|
|||||||
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|||||||
|
Cost
|
|
|
|
|
|
|
|
|||||||
|
At 1
January 2021
|
7,379
|
-
|
17,865
|
-
|
85
|
-
|
25,329
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
Foreign
exchange movement
|
-
|
-
|
(62)
|
-
|
-
|
-
|
(62)
|
|||||||
|
Acquisition
through business combination
|
358
|
-
|
-
|
12,180
|
-
|
10,466
|
23,004
|
|||||||
|
Additions
|
-
|
49
|
33,317
|
49,126
|
-
|
-
|
82,492
|
|||||||
|
Transfer
to another class
|
(7,379)
|
-
|
7,379
|
-
|
-
|
-
|
-
|
|||||||
|
At 31
December 2021
|
358
|
49
|
58,499
|
61,306
|
85
|
10,466
|
130,763
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
Depreciation and impairment
|
|
|
|
|
|
|
|
|||||||
|
At 1
January 2021
|
-
|
-
|
7,443
|
-
|
48
|
-
|
7,491
|
|||||||
|
Foreign
exchange movement
|
-
|
-
|
(65)
|
-
|
-
|
-
|
(65)
|
|||||||
|
Depreciation
charged during the period
|
3,281
|
-
|
7,856
|
-
|
17
|
229
|
11,383
|
|||||||
|
Transfer
to another class
|
(3,273)
|
-
|
3,273
|
-
|
-
|
-
|
-
|
|||||||
|
At 31
December 2021
|
8
|
-
|
18,507
|
-
|
65
|
229
|
18,810
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
Carrying amount
|
|
|
|
|
|
|
|
|||||||
|
At 1
January 2021
|
7,379
|
-
|
10,422
|
-
|
-
|
-
|
17,833
|
|||||||
|
At 31 December 2021
|
350
|
49
|
39,992
|
61,306
|
20
|
10,237
|
111,954
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
All property, plant and equipment is owned by the subsidiary, Argo
Innovation Labs Inc. During the year, the lease for the right of
use assets was settle by purchasing the mining equipment. Book
balances were transferred to mining and computer
equipment.
Acquisition of DPN LLC
On 8
March 2021 the Group completed the acquisition of DPN LLC to
acquire 160 acres (with option to purchase a further 157 acres) of
land in West Texas for the construction of a 200MW mining facility
for completion mid-2022.
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 3.6m, satisfied by the issue and
allotment to the shareholders of DPN LLC of 3,497,817 new ordinary
shares in Argo, with up to a further 8.6m of shares payable if
certain contractual milestones related to the facility are
fulfilled.
Initial issue and allotment of GBP 3.6m has been recognised based
on estimated fair value of assets received at acquisition in line
with IFRS 2 Share based payments. Contingent consideration balance
of this business combination has been subsequently measured at fair
value with changes recognised in profit and loss in line with IFRS
9. Fair value of assets acquired was assessed in line with
independent valuations of site by CBRE as well as external
financial due diligence and financial modelling. Financial models
used historical power purchase assumptions for the area and the
Company's internal hash rate and Bitcoin pricing assumptions to
help the Company evaluate the financial benefits of developing a
Bitcoin mining operation on the land. Work performed by DPN LLC
from August 2019, when it purchased the land, to March 2021, when
it sold the land to the Company, to prepare for a Bitcoin mining
operation added to the value of the land for that
purpose.
|
Consideration at 8 March 2021
|
|
|
£'000
|
|
Share based payment
|
3,521
|
|
Contingent consideration to be settled in shares
|
8,659
|
|
Total
|
12,180
|
Allocated as follows
|
|
£'000
|
|
Tangible fixed assets (Asset under construction)
|
12,180
|
|
Total
|
12,180
|
Property, Plant and Equipment Impairments and Loss on Sale of
Subsidiary
The Group has a single line of business, crypto mining. As such,
the Group has one cash generating unit (CGU). At each reporting
date, the Group assesses whether there is an indication that an
asset may be impaired. If an indication exists, the Group estimates
an asset's recoverable amount. An asset's recoverable amount is the
higher of an asset's or CGU's fair value less costs of disposal and
its value in use. When the carrying value of an asset or CGU exceed
its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
In assessing fair value of Mining and Computer Equipment, the Group
used readily available price per terahash less a 15% discount for
used equipment. In assessing value in use, the discounted estimated
future cash flows over the useful life of the mining machines using
a pre-tax discount rate of 23.28%. As a result of the analysis, an
impairment of £24 million was recorded. A 5% change in
the price per terahash has a £6.1 million impact on the impact
of the impairment. A 1% change in the discount rate has
a of £1.1 million impact on the
impairment.
In assessing the recoverable amount of the CGU, the Group
calculated the discounted cash flows of the CGU using a terminal
growth rate of 3%. The pre-tax discount rate used was 23%. As a
result of this analysis, an impairment of £5.8 million
was recorded which has been attributed to Mining and Computer
Equipment.
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
£15million was recorded.
Loss on Sale
During the year, the Group sold chips that were previously
purchased. The proceeds on these chip sales were £10,029 and
the Group recorded a loss on disposal of fixed assets of
£18,779.
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 be
recorded at the book value of the mining machines transferred to
the hosting service provider.
20. TRADE AND OTHER
RECEIVABLES / INTERCOMPANY
|
|
|
Group
2022
|
Company
2022
|
Group
2021
|
Company
2021
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade and other receivables
|
|
-
|
-
|
13,194
|
8,008
|
|
Mining equipment prepayments
|
|
4,958
|
456
|
47,426
|
-
|
|
Other taxation and social security
|
|
683
|
-
|
2,739
|
590
|
|
Total trade and other receivables
|
|
5,641
|
456
|
63,359
|
8,598
|
Mining equipment prepayments consist of payments made and due on
mining equipment due to arrive in 2023.
Other taxation and social security consist of purchase tax
recoverable in Canada. GST and QST debtors are greater than 90 days
as at 31 December 2022.
COMPANY - INTERCOMPANY
|
|
|
Company
2022
|
Company
2021
|
|
|
|
£'000
|
£'000
|
|
Amounts due from group companies, net
|
|
8,572
|
175,859
|
Funds advanced to group companies were used for operating expenses,
settle debt and purchase tangible and intangible assets. There are
no terms of repayment. The amounts due are non-interest bearing.
The decrease in 2022 is as a result of the debts from Argo
Innovation Facilities (US) which were converted to shares to be
issued prior to the sale.
21. DIGITAL
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.
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 £528k. The breakdown of which can be seen
below:
|
Group
|
|
|
|
|
|
|
|
|
2022
£'000
|
2021
£'000
|
|
At 1 January
|
|
|
80,759
|
4,637
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
Crypto assets purchased and received
|
|
|
207
|
16,569
|
|
Crypto assets mined
|
|
|
47,267
|
70,325
|
|
Total additions
|
|
|
47,474
|
86,894
|
|
|
|
|
|
|
|
Disposals
|
|
|
|
|
|
Transferred to/from intangible assets
|
|
|
330
|
(5,424)
|
|
Crypto assets sold
|
|
|
(84,555)
|
(6,976)
|
|
Total disposals
|
|
|
(84,225)
|
(12,400)
|
|
|
|
|
|
|
|
Fair value movements
|
|
|
|
|
|
Gain/(loss) on crypto asset sales
|
|
|
(43,526)
|
437
|
|
Movements on crypto assets held at the year end
|
|
|
(114)
|
1,191
|
|
Total fair value movements
|
|
|
(43,640)
|
1,628
|
|
|
|
|
|
|
|
At 31 December
|
|
|
368
|
80,759
|
|
|
|
|
|
|
|
Carrying value of digital assets pledged as collateral
|
|
|
-
|
49,759
|
As at 31 December 2022, digital assets comprised 141 Bitcoin
equivalents (2021: 2,441 Bitcoin).
22. SHARE OPTIONS AND
WARRANTS
The following options and warrants over Ordinary Shares have been
granted by the Company and are outstanding:
|
Options/ Warrants
|
Grant Date
|
Expiry date
|
Exercise Price
|
Number of options/warrants outstanding 2022 '000
|
Number of options/warrants exercisable 2022 '000
|
|
Warrants
|
15
January 2021
|
15
January 2031
|
£1.25
|
240
|
240
|
|
Warrants
|
19
January 2021
|
18
January 2026
|
£0.90
|
110
|
110
|
|
Warrants
|
19
April 2021
|
19
March 2024
|
£1.35
|
224
|
224
|
|
Warrants
|
17 June
2021
|
19
March 2024
|
£1.50
|
22
|
22
|
|
Options
|
25 July
2018
|
25 July
2024
|
£0.16
|
1,000
|
1,000
|
|
Options
|
17 July
2019
|
16 July
2025
|
£0.16
|
537
|
537
|
|
Options
|
5
February 2020
|
4
February 2030
|
£0.07
|
4,362
|
4,362
|
|
Options
|
3
February 2021
|
2
February 2031
|
£0.94
|
159
|
151
|
|
Options
|
24 June
2021
|
23 June
2031
|
£1.26
|
1,000
|
500
|
|
Options
|
27 June
2021
|
26 June
2031
|
£1.35
|
500
|
250
|
|
Options
|
1 July
2021
|
30 June
2031
|
£1.16
|
500
|
250
|
|
Options
|
13 July
2021
|
12 July
2031
|
£1.00
|
1,000
|
500
|
|
Options
|
22
September 2021
|
22
September 2031
|
£1.57
|
4,150
|
1,758
|
|
Options
|
23
November 2021
|
23
November 2031
|
£1.30
|
500
|
184
|
|
Options
|
17
December 2021
|
16
December 2031
|
£0.86
|
675
|
234
|
|
Options
|
19 May
2022
|
19 May
2032
|
£0.51
|
3,350
|
861
|
|
Options
|
27 June
2022
|
27 June
2032
|
£0.34
|
250
|
42
|
|
Warrants
|
31
March 2022
|
31
March 2027
|
£0.94
|
60
|
60
|
|
Warrants
|
31 July
2022
|
31 July
2027
|
£1.00
|
10
|
10
|
|
Warrants
|
31
August 2022
|
31
August 2027
|
£1.04
|
10
|
10
|
|
Warrants
|
31
September 2022
|
31
September 2027
|
£1.12
|
10
|
10
|
|
Warrants
|
31
October 2022
|
31
October 2027
|
£1.05
|
10
|
10
|
|
Warrants
|
31
November 2022
|
31
November 2027
|
£1.02
|
10
|
10
|
|
Warrants
|
31
December 2022
|
31
December 2027
|
£1.01
|
10
|
10
|
|
|
|
|
|
18,698
|
11,345
|
|
|
Number of options and warrants '000
|
Weighted average exercise price £
|
|
At 1
January 2022
|
17,689
|
0.81
|
|
Granted
|
5,220
|
0.50
|
|
Exercised
|
(1,593)
|
0.07
|
|
Lapsed
|
(2,618)
|
0.89
|
|
Outstanding
at 31 December 2022
|
18,698
|
0.68
|
|
Exercisable
at 31 December 2022
|
11,345
|
0.61
|
|
|
Number of options and warrants '000
|
Weighted average exercise price £
|
|
At 1
January 2021
|
42,202
|
0.13
|
|
Granted
|
10,698
|
1.63
|
|
Exercised
|
(34,351)
|
0.12
|
|
Lapsed
|
(860)
|
0.95
|
|
Outstanding
at 31 December 2021
|
17,689
|
0.81
|
|
Exercisable
at 31 December 2021
|
7,596
|
0.26
|
The weighted average remaining contractual life of options and
warrants as at 31 December 2022 is 93 months (2021 -102 months). If
the exercisable shares had been exercised on 31 December 2022 this
would have represented 61% (2021 - 2%) of the enlarged share
capital.
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.
|
Grant date
|
Grant date share price
|
Exercise price
|
Volatility
|
Life
|
Risk Free interest rate %
|
Marketability discount
|
|
25 July 2018
|
0.08
|
0.16
|
40%
|
6 years
|
0.01
|
75%
|
|
17 July 2019
|
0.09
|
0.16
|
40%
|
6 years
|
0.01
|
90%
|
|
5 February 2020
|
0.07
|
0.07
|
40%
|
6 years
|
0.01
|
0%
|
|
3 February 2021
|
0.94
|
0.94
|
112%
|
10 years
|
0.01
|
0%
|
|
24 June 2021
|
1.26
|
1.26
|
112%
|
10 years
|
0.01
|
0%
|
|
27 June 2021
|
1.35
|
1.35
|
112%
|
10 years
|
0.01
|
0%
|
|
1 July 2021
|
1.23
|
1.16
|
112%
|
10 years
|
0.01
|
0%
|
|
13 July 2021
|
1.00
|
1.00
|
112%
|
10 years
|
0.01
|
0%
|
|
22 September 2021
|
1.57
|
1.57
|
112%
|
10 years
|
0.01
|
0%
|
|
23 November 2021
|
1.30
|
1.30
|
112%
|
10 years
|
0.01
|
0%
|
|
17 December 2021
|
0.86
|
0.86
|
112%
|
10 years
|
0.01
|
0%
|
|
19 May 2022
|
0.51
|
0.51
|
112%
|
10 years
|
0.01
|
0%
|
|
27 June 2022
|
0.34
|
0.34
|
112%
|
10 years
|
0.01
|
0%
|
23. ORDINARY
SHARES
|
|
|
As at 31 December
2022
|
As at 31 December 2021
|
|
|
|
£'000
|
£'000
|
|
Ordinary share capital
|
|
|
|
|
Issued and fully paid
|
|
|
|
|
468,082,335 Ordinary Shares of £0.001 each
|
|
468
|
303
|
|
Issued in the period
|
|
|
|
|
9,742,831 Ordinary Shares of £0.001 each
|
|
10
|
165
|
|
Fully paid not yet issued
|
|
|
|
|
Ordinary Shares of £0.001 each
|
|
-
|
-
|
|
477,825,166 Ordinary Shares of £0.001 each
|
|
478
|
468
|
|
|
|
|
|
|
Share premium
|
|
|
|
|
At beginning of the period
|
|
139,581
|
1,540
|
|
Cancelled during the period
|
|
-
|
-
|
|
Issued in the period
|
|
4,167
|
150,977
|
|
Issue costs
|
|
-
|
(12,936)
|
|
Fully paid not yet issued
|
|
-
|
-
|
|
At the end of period
|
|
143,748
|
139,581
|
|
|
|||
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 US Dollars) and Group presentational currency
(Sterling).
|
|
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
2022
|
Company
2022
|
Group 2021
|
Company 2021
|
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade payables
|
|
|
2,754
|
1,791
|
10,259
|
8,023
|
|
Accruals and other payables
|
|
|
5,042
|
2,845
|
4,986
|
141
|
|
Other taxation and social security
|
|
|
515
|
-
|
-
|
-
|
|
Total trade and other creditors
|
|
|
8,311
|
4,636
|
15,245
|
8,164
|
Within trade payables is £nil (2021: £7,194,000) for
amounts due for mining equipment not yet
received. The
directors consider that the carrying value of trade and other
payables is equal to their fair value.
Contingent consideration
As part of the acquisition of DPN LLC up to a further £8.6m of
shares were payable if certain contractual milestones related to
the facility were fulfilled (see note 19).
The amount payable as contingent consideration was payable in
shares and as such is revalued as at the balance sheet date and any
gain or loss is recognised in profit or loss, which for the year
ended 31 December 2021 amounted to £236k.
In June 2022, the Company issued 8,147,831 Ordinary Shares to
settle £4m in contingent consideration. The remaining
contingent consideration of £4m was not earned and as a result
was reversed into profit or loss.
26. LOANS AND
BORROWINGS
|
|
|
|
||
|
Non-current liabilities
|
As at 31 December 2022
£'000
|
As at 31 December 2021
£'000
|
||
|
Issued debt - bond (a)
|
31,356
|
6,908
|
||
|
Galaxy loan (b)
|
19,183
|
-
|
||
|
Mortgages - Quebec facilities (c)
|
2,309
|
3,391
|
||
|
Lease liability
|
448
|
370
|
||
|
Total
|
53,296
|
30,669
|
||
|
Current liabilities
|
|
|
||
|
Galaxy loan (b)
|
8,819
|
22,239
|
||
|
Mortgages- Quebec facilities (c)
|
805
|
1,152
|
||
|
Lease liability
|
4
|
7
|
||
|
Total
|
9,628
|
23,398
|
||
|
|
|
|
|
|
(a) Unsecured Bonds:
In November 2021, the Group issued an unsecured 5-year bond with an
interest rate of 8.75%. The bonds mature on 30 November 2026. The
bonds may be redeemed for cash in whole or in part at any time at
the Group's option (i) on or after 30 November 2023 and prior to 30
November 2024, at a price equal to 102% of their principal amount,
plus accrued and unpaid interest to, but excluding, the date of
redemption, (ii) on or after 30 November 30 and prior to 30
November 2025, at a price equal to 101% of their principal amount,
plus accrued and unpaid interest to, but excluding, the date of
redemption, and (iii) on or after November 30, 2025 and prior to
maturity, at a price equal to 100% of their principal amount, plus
accrued and unpaid interest to, but excluding, the date of
redemption. The Group may redeem the bonds, in whole, but not in
part, at any time at its option, at a redemption price equal to
100.5% of the principal amount plus accrued and unpaid interest to,
but not including, the date of redemption, upon the occurrence of
certain change of control events. The bonds are listed on the
Nasdaq Global Select Market under the symbol ARBKL.
(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$30 million (£22.2m). The
proceeds of the loan were used, in conjunction with funds raised
previously, to continue the build-out the Texas data centre,
Helios. The short-term loan was a Bitcoin collateralised loan with
an interest rate of 8% per annum. This loan was repaid during the
2022 as part of the Galaxy transaction.
In March 2022, the Group entered into loan agreements with NYDIG
ABL LLC for loans in the amounts of USD$26.7 million for the
purchase of mining machines and Helios infrastructure,
respectively. The loan was repaid during the year as part of the
Galaxy transaction.
In May 2022, the Group entered into a loan agreement with Liberty
Commercial Finance for a loan of USD$1.2 million (£1.0m) to
purchase equipment. The loan is repayable over a period of 36
months with an interest rate of 11.9%. In June 2022, the loan was
assigned to North Mill Equipment Finance LLC ("New Mill"). The loan
was repaid during the year as part of the Galaxy
transaction.
In December 2022, the Group sold Galaxy Power LLC (see note 14) and
entered into a loan agreement with Galaxy Digital LLC for USD$35
million (£29m). Proceeds were used to pay off the Galaxy
Digital LP, New Mill and NYDIG loans and working capital. The
Galaxy Digital LLC loan is payable based on an amortization
schedule over 32 months with an interest rate of the secured
overnight financing rate by the Federal Reserve Bank of New York
plus 11%. The loan is secured by the Group's property, plant and
equipment.
(c) Mortgages - Quebec Facilities
The mortgages are secured against the two buildings at Mirabal and
Baie-Comeau and are repayable over periods from 3 months to 48
months at interest rates between 6.95% and 9.45%
respectively.
27. FINANCIAL
INSTRUMENTS
|
|
Group
2022
|
Company
2022
|
Group
2021
|
Company
2021
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Carrying amount of financial assets
|
|
|
|
|
|
Measured
at amortised cost
|
|
|
|
|
|
- Mining
equipment prepayments
|
4,958
|
456
|
47,426
|
-
|
|
- Trade
and other receivables
|
-
|
-
|
13,194
|
183,867
|
|
- Cash
and cash equivalents
|
16,662
|
115
|
11,803
|
126
|
|
Measured at fair value through profit or loss
|
344
|
73
|
403
|
73
|
|
Total carrying amount of financial assets
|
21,964
|
644
|
72,826
|
184,066
|
|
|
|
|
|
|
|
Carrying amount of financial liabilities
|
|
|
|
|
|
Measured at amortised cost
|
|
|
|
|
|
- Trade
and other payables
|
8,311
|
3,675
|
10,259
|
8,163
|
|
- Short
term loans
|
9,624
|
-
|
23,391
|
-
|
|
- Long
term loans
|
21,492
|
-
|
3,391
|
-
|
|
- Issued
debt - bonds
|
31,356
|
31,356
|
26,908
|
26,908
|
|
- Lease
liabilities
|
452
|
-
|
377
|
-
|
|
Measured at fair value
|
|
|
|
|
|
- Fair
value of contingent consideration
|
-
|
-
|
8,071
|
8,071
|
|
Total carrying amount of financial liabilities
|
71,235
|
35,031
|
72,397
|
43,142
|
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.
The following table presents the Group's assets and liabilities
that are measured at fair value at 31 December 2022 and 31 December
2021.
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Assets
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
- Equity
holdings
|
|
21
|
-
|
73
|
94
|
|
- Digital
assets
|
|
-
|
368
|
-
|
368
|
|
Total at 31 December 2022
|
|
21
|
368
|
73
|
462
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
|
|
- Deferred
contingent consideration
|
|
-
|
-
|
-
|
-
|
|
Total at 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
|
|
329
|
-
|
73
|
402
|
|
- Digital
assets
|
|
-
|
80,759
|
-
|
80,759
|
|
Total at 31 December 2021
|
|
329
|
80,759
|
73
|
81,161
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Financial
liabilities at fair value through profit or loss
|
|
|
|
|
|
|
- Deferred
contingent consideration
|
|
-
|
-
|
8,071
|
8,071
|
|
Total at 31 December 2021
|
|
-
|
-
|
8,071
|
8,071
|
All financial assets are in listed and unlisted securities and
digital assets.
There were no transfers between levels during the
period.
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 yearend 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.
The Group has entered into an agreement for the purchase of mining
machines to be delivered in 2023. A deposit of USD$3.3M
(£2.7m) is on account. Payments of USD$438k (£363k) and
USD$424k (£352k) will be made prior to delivery of the
machines.
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.
29. RELATED PARTY
TRANSACTIONS
Key management compensation
Key management includes Directors (executive and non-executive) and
senior management. The compensation paid to related parties in
respect of key management for employee services during the period
was made from Argo Innovation Labs Inc., amounting to:
£118,030 (2021 - £36,769) paid to POMA Enterprises
Limited in respect of fees of Matthew Shaw (Non-executive
director); £182,759 (2021 - £566,591) due to Vernon
Blockchain Inc in respect of fees of Peter Wall (CEO). Maria
Perrella and Raghav Chopra (Non-executive directors) were paid
£121,391 and £105,492 as at year end
respectively.
From Argo Blockchain PLC, Alex Appleton (CFO) through Appleton
Business Advisors Limited was paid £378,161 (2021 -
£308,359). Sarah Gow was paid £70,399 as at year
end.
30. CONTROLLING
PARTY
There is no controlling party of the Group.
31. POST BALANCE SHEET
EVENTS
In January 2023, Alex Appleton resigned from his position as Chief
Financial Officer, Executive Director and Secretary of the
Group.
In February 2023, Peter Wall resigned from his position as Chief
Executive Officer and Interim Chairman, Sarah Gow resigned from her
position as non-executive director on the Board.
In April 2023, Jim MacCallum was appointed Chief Financial Officer
of the Group.
SIGNATURES
|
Date:
28 April, 2023
|
ARGO BLOCKCHAIN PLC
By:
Name:
Peter Wall
Title:
Chief Executive Officer
Name:
David Zapffe
Title:
General Counsel
|