Argo Blockchain Plc 6-K, filed Apr 27, 2022
Argo Blockchain Plc (ARBK)
6-K
2022-04-27
For: 2022-04-27
View Original
Added on
April 05, 2026
About this 6-K
Argo Blockchain Plc filed this 6-K on April 27, 2022.
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, 2022
Commission File Number: 001-40816
_____________________
Argo Blockchain plc
(Translation
of registrant’s name into English)
_____________________
9th Floor
16
Great Queen Street
London
WC2B 5DG
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
2021
Full Year Results dated 27 04 2022
|
Press Release
27 April 2022
Argo Blockchain plc
(“Argo” or “the Group”)
2021 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 2021.
Financial highlights
●
Revenue
increased by 291% to £74.2 million [$100.1 million] (2020:
£19.0 million [$25.6 million]), driven by a significant
increase in Argo’s hashrate, the temporary drop in difficulty
on the Bitcoin network, and higher Bitcoin prices in
2021
●
Mining
margin* was 84% (2020: 41%); this was driven largely by an increase
in the price of Bitcoin throughout 2021 and the drop in global
hashrate following the Chinese ban on Bitcoin mining in May
2021
●
Achieved
EBITDA* of £52.9 million [$71.4 million] in 2021 compared with
EBITDA* of £7.6 million [$10.3 million] in 2020, a 594%
increase
●
Delivered
net income of £30.8m [$41.5 million], a 2,033% increase over
the prior year (2020: £1.4 million [$1.9
million])
●
Cash
and digital assets held as at 31 December 2021 amounted to
£92.6 million [$124.9 million] based on the Bitcoin price at
that time
●
Total number of Bitcoin mined was 2,045 in 2021,
17% lower than in 2020; this decrease is largely attributable to the halving
event that occurred in May 2020 which reduced the block award from
12.5 to 6.25 Bitcoin per block
●
As
at 31 March 2022, the Group held 2,700 Bitcoin and Bitcoin
Equivalents valued at £93.6 million [$122.9 million] based on
the Bitcoin price at that time
*See Non-IFRS reconciliation.
Operating highlights
●
Acquired
the Helios project in Dickens County, Texas, which has an
interconnection agreement for up to 800MW of power capacity; Phase
1 (initial 200MW), expected to be operational in May
2022
●
Acquired
two data centres in Quebec (Mirabel and Baie Comeau) from GPUone
with a combined total of 20MW of power capacity
●
Purchased
20,000 Bitmain S19J Pro mining machines with delivery and
installation expected to occur in batches from May to October
2022
●
Expanded
Bitcoin mining capacity from 0.6 Exahash per second
(“EH/s”) to 1.6 EH/s
Financing highlights
●
In
Q1, raised £49.2 million [$66.4 million] in new equity via
private placement for investment in mining rigs, Texas development,
blockchain/fintech ventures including a significant equity
investment in Pluto Digital Assets plc, and working
capital
●
In
Q3, raised £94.8 million [$127.9 million] in new equity via a
public offering on the Nasdaq Global Select Market, which
significantly expanded our investor reach by expanding access to
the US capital markets
●
In
Q4, raised £29.6 million [$40.0 million] in unsecured debt
through the issuance of senior notes traded on the Nasdaq Global
Select Market
Post balance sheet events
●
Signed
a supply agreement with Intel Corporation (“Intel”) to
purchase ASIC Blockscale chips
●
Launched
Argo Labs, our in-house innovation arm focused on strategic
diversification and network participation in the broader web3
ecosystem
●
Raised
£19.8 million [$26.7 million] in debt from New York Digital
Investment Group which is secured by electrical infrastructure
equipment at Helios
●
Executed
an agreement to swap approximately 10,000 S19 machines being hosted
at Core Scientific facilities for the equivalent hashrate of brand
new S19J Pro machines to be delivered to the Helios facility in
Texas. Upon completion of this swap, Argo will no longer have any
machines hosted at third party facilities
Outlook for 2022 and Beyond
●
Mining
operations scheduled to begin at Helios in May 2022
●
Expect
to achieve 5.5 EH/s of hashrate capacity by the end of 2022. This
increase is driven by the installation of the Bitmain S19J Pro
machines and the deployment of custom-designed mining machines
utilizing Intel’s state-of-the-art ASIC Blockscale
chips
●
Additional
capital spending to complete Helios Phase 1 is expected to be in
the range of £93 million to £100 million ($125 million to
$135 million), which will be financed primarily through debt and
proceeds from selling a portion of our Bitcoin mined each month
(non-dilutive to existing Argo shareholders)
●
Beyond
2022, hashrate is expected to grow significantly to more than 20
EH/s over the next few years as the additional 600 MW of capacity
at Helios is fully developed
Commenting on the results, Peter Wall, Argo CEO, said: “2021
was truly a year of transformation for Argo as we accomplished key
milestones to strengthen the foundation of the Group and position
us for long-term success through the acquisition of the Helios
project and our dual listing on Nasdaq.
“The acquisition of Helios provided us with the opportunity
to build a best-in-class, vertically-integrated facility with
access to low-cost and sustainable electricity, which is unmatched
by our peers. With our mining operations at Helios expected to
commence in May, along with the development of custom mining
machines using Intel’s next-generation Blockscale ASIC chips,
Argo is well-positioned to continue its growth with a focus on
delivering for our shareholders. Onwards and
upwards.”
*The tables below reconcile Bitcoin and Bitcoin Equivalent Mining
Margin to gross margin, the most directly comparable IFRS measure,
and EBITDA to net income/(loss), the most directly comparable IFRS
measure:
|
|
Year ended
|
Year ended
|
|
|
|
31 December
|
31 December
|
|
|
|
2021
|
2020
|
|
|
|
£’000
|
£’000
|
|
|
|
|
|
|
|
Gross profit
|
53,619
|
3,921
|
|
|
|
|
|
|
|
Depreciation
of mining equipment
|
11,129
|
5,896
|
|
|
Change
in fair value of digital currencies
|
(1,191)
|
(2,084)
|
|
|
Realized
gain (loss) on sale of digital currencies
|
(437)
|
14
|
|
|
Cryptocurrency
management fees
|
(3,789)
|
(10)
|
|
|
Mining profit
|
59,268
|
7,737
|
|
|
Bitcoin and Bitcoin Equivalent Mining Margin
|
84%
|
41%
|
|
|
|
Year ended
|
Year ended
|
|
|
31 December
|
31 December
|
|
|
2021
|
2020
|
|
|
£’000
|
£’000
|
|
|
|
|
|
Net income/(loss)
|
30,765
|
1,442
|
|
|
|
|
|
Interest
expense
|
2,142
|
157
|
|
Depreciation
/ amortisation
|
11,511
|
6,027
|
|
Income
tax expense
|
8,506
|
-
|
|
EBITDA
|
52,924
|
7,626
|
For further information please contact:
|
Argo Blockchain
|
|
|
Peter Wall
Chief
Executive
|
via Tancredi +44 203 434 2334
|
|
finnCap Ltd
|
|
|
Corporate
Finance
Jonny Franklin-Adams
Tim Harper
Joint
Corporate Broker
Sunila de Silva
|
+44 207 220 0500
|
|
Tennyson Securities
|
|
|
Joint
Corporate Broker
Peter Krens
|
+44 207 186 9030
|
|
OTC Markets
|
|
|
Jonathan Dickson
jonathan@otcmarkets.com
|
+44 204 526 4581
+44 7731 815 896
|
|
Tancredi Intelligent Communication
UK
& Europe Media Relations
|
|
|
Emma Valgimigli
Emma Hodges
Fabio Galloni-Roversi Monaco
Nasser Al-Sayed
argoblock@tancredigroup.com
|
+44 7727 180 873
+44 7861 995 628
+44 7888 672 701
+44 7915 033 739
|
About Argo:
Argo Blockchain plc is a global leader in cryptocurrency mining
with one of the largest and most efficient operations powered by
clean energy. The company is headquartered in London, UK and its
shares are listed on the Main Market of the London Stock Exchange
under the ticker: ARB and on the Nasdaq Global Select Market in the
United States under the ticker: ARBK.
www.argoblockchain.com
Chairman’s Statement
I am
pleased to report that 2021 was a year of significant and
profitable growth as Argo executed its strategic pivot away from
third party hosting to a vertically-integrated, owned-and-operated
business model. We completed our acquisition of two mining
facilities in Quebec, and we made a transformative acquisition of a
project in the Texas Panhandle, where we are developing
Argo’s flagship mining facility, Helios.
2021 in Review
Our
main focus in 2021 was to scale as a vertically-integrated
cryptocurrency mining company through a focus on smart growth and
profitability. We felt confident that by increasing our level of
control through owning the infrastructure and operating our mining
rigs, we could improve both profitability and performance. This was
successfully demonstrated at our Quebec facilities, Mirabel and
Baie Comeau, where we quickly began to realize efficiencies as we
assumed operations after acquiring them in May 2021.
Additionally,
much of 2021 was spent on constructing the Helios facility in
Dickens County, Texas. We broke ground on the facility in July 2021
and made tremendous progress through the remainder of 2021 and so
far in 2022. Helios has been designed to house one of the largest
immersion-cooled mining operations in the world. Immersion cools
the mining machines more efficiently than air cooling, extends the
life of mining machines by keeping out particulate matter, and
allows for increased operational performance. As I write this
letter in April 2022, we are very close to energizing Phase 1 (the
initial 200 MW) and commencing mining operations at the Helios
facility.
In
September 2021, we purchased 20,000 Bitmain S19J Pro machines, with
delivery and installation expected to take place in batches at
Helios from May to October 2022. This will increase our Bitcoin
mining hashrate by an additional 2 Exahash per second
(“EH/s”), not including the potential uplift from
immersion.
Financial results
Revenue
in 2021 increased by 291% to £74.2 million ($100.1 million).
Similarly, EBITDA grew by 594% to £52.9 million ($71.4
million) in 2021. Earnings attributable to shareholders totaled
£37.3 million ($50.4 million). In 2021, total capital
expenditures were £160.3 million ($216.3 million), with nearly
all going towards Helios infrastructure construction and the
purchase of mining machines.
Operating results
In line
with Argo’s focus to significantly expand its mining
operations in 2021, the Group’s hashrate increased almost
three-fold, from 645 petahash to 1,605 petahash by the end of the
year. The Group continues to have 280 Megasols of Z-cash mining
capacity on Equihash. Argo’s mining margin of 84% for 2021
was among the highest reported by publicly traded miners. The
increase in mining margin from 41% in 2020 was driven primarily by
the increase in Bitcoin price, as well as the temporary reduction
in the global hashrate (and associated decrease in difficulty)
following the Chinese ban on Bitcoin mining.
Nasdaq listing
Scaling
as a vertically-integrated cryptocurrency miner comes with
significant capital requirements for infrastructure development and
machine purchases. After careful consideration, in early 2021 we
pursued access to the US capital markets. In January 2021, our
shares began trading on the OTCQB Venture Market, which afforded US
investors the opportunity to become Argo shareholders. Soon after,
the listing was upgraded to the OTCQX Best Market. Later in the
year, we completed a public offering on the Nasdaq Global Select
Market, the most selective exchange in the United States and the
market of choice for high growth companies. Having a Nasdaq listing
has broadened our access to the capital necessary for our ambitious
growth plans. We are seeing increased interest in the Bitcoin
mining sector from long-term institutional investors, which we
believe will ultimately reduce our cost of capital.
Bitcoin macro environment
2021
marked a banner year for Bitcoin as it continued to see widespread
adoption and record-high price levels. MicroStrategy and Tesla were
two early examples of corporations holding Bitcoin on their balance
sheet. The price of Bitcoin hit all time highs in April 2021
($59,911) and again in November 2021 ($67,617); it remained
dynamic, finishing off the year at $46,320.
Perhaps
the most significant event of 2021 for the cryptocurrency sector
was the total ban on Bitcoin mining in China beginning in May 2021.
Prior to the ban, China accounted for the largest percentage of
total global Bitcoin mining; an estimated 50% of global hashrate
operated within its borders, powered by low cost electricity from
coal and hydro. While the Chinese mining ban had the potential to
disrupt the entire Bitcoin network, the network demonstrated its
resilience as miners moved to other locations. North
America’s access to low cost power and stable regulatory
environment proved to be an attractive location for the displaced
miners. It took only seven months for the global hashrate to
recover to 180 EH/s, the level it was before the Chinese ban, with
much of that hashrate shifting to North America.
Texas,
in particular, has become a popular destination for Bitcoin mining
due to its low electricity prices (in part due to its high amount
of renewable energy generation), its competitive electrical grid
that offers demand response programs, and a regulatory environment
that has embraced the benefits that Bitcoin mining can bring in the
form of grid stability, job creation, and tax revenue.
Commitment to Environmental, Social, and Governance (ESG)
Principles
Argo
continues to place a significant emphasis on ESG principles. Since
inception, we have always maintained a strong focus on
environmental sustainability. This is why we located our mining
facilities in Quebec, where they are powered by hydroelectricity,
and the Texas Panhandle, where 85% of the generation capacity comes
from wind power. In 2021, we signed the Crypto Climate Accord,
which commits us to achieve net-zero carbon emissions by 2030. In
2021, Argo reached this goal, releasing a full climate strategy and
becoming the first Bitcoin mining company to announce climate
positive status through its 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. Additionally, we
were founding members of the Bitcoin Mining Council, which educates
the public on the increasing amount of renewable energy used for
Bitcoin mining. It also seeks to improve reporting and increase the
amount of data available on the use of renewable energy within the
sector.
Argo’s
operations in Quebec and Texas also promote sustainability by
helping to stabilize the electrical grid. In Quebec, we participate
in curtailment programs to lower our electricity usage during
periods of extreme weather. In Texas, the Helios facility will
participate in demand response programs, whereby it can reduce its
electricity usage and increase availability of power to the grid in
times of peak demand. This flexibility in our load has profound
benefits for grid stability and helps to ensure equilibrium between
supply and demand.
From a
social benefit perspective, the Helios project is bringing real
economic benefits to Dickens County, Texas and the surrounding
communities. During the construction phase, more than 130 temporary
jobs have been created, and we have hired approximately 40 full
time employees, primarily from the local community, to work at the
facility. Additionally, Argo is contributing directly to the town
of Spur, Texas by refurbishing the community pool, which has been
closed since 2009. We recognize the importance of having a strong
relationship with the local community, and we are proud to be the
largest private sector employer in the county.
Argo
has taken steps to strengthen its Board of Directors as it
continues to grow. In July 2021, Sarah Gow, Maria Perrella, and
Colleen Sullivan were appointed as independent non-executive
directors, while I assumed the role of Interim Executive Chairman.
Ian MacLeod, Marco D’Attanasio, and James Savage departed
from their roles as Executive Chairman and non-executive directors,
respectively. In September 2021, we established Remuneration,
Nomination and Audit committees, and have continued to develop our
internal processes and procedures. In November 2021, Colleen
Sullivan resigned from the Board after starting a new professional
role which precluded her from serving on the Board of a public
company. Following the end of the period, in February 2022, Raghav
Chopra was appointed as an independent non-executive
director.
Strategic focus in 2022
Our
strategic focus in 2022 is to execute on our plans at Helios and to
scale our operations. As we near the completion of Helios Phase 1,
Argo is poised to significantly increase its hashrate and continue
building out infrastructure. While Phase 1 of Helios will utilize
200 MW of electricity, our interconnection agreement provides us
with access to up to an additional 600 MW of capacity. This runway
for growth is unmatched by Argo’s peers, and we have built a
robust foundation upon which we can scale efficiently and
profitably.
On
behalf of the Board, thank you to all of our shareholders and staff
who share in our mission of powering the world’s most
innovative and sustainable blockchain infrastructure with a focus
on sustainability.
Onwards
and upwards!
Peter
Wall
CEO and Interim Executive Chairman
Operating and financial review
Argo saw significant increases in financial performance as its
expanding fleet of mining machines took advantage of high Bitcoin
prices and a slump in the global hashrate after the Chinese ban on
Bitcoin mining. Argo’s hashrate nearly tripled, growing from
645 petahash to 1,605 petahash, with mining machines deployed at
Argo’s two owned and operated facilities in Quebec (Mirabel
and Baie Comeau), as well as at hosted facilities in the United
States owned by Core Scientific.
The mining margin for 2021 was 84%, which is significantly higher
than the 41% mining margin achieved in 2020. Argo continues to have
one of the highest mining margins of its peers, which is a
testament to its focus on operational efficiency.
As Argo’s operations have expanded, the employee headcount
has grown as well. At the end of 2021, total employee headcount was
39, compared to 7 at the end of 2020. As of 31 March 2022, the
employee headcount was 89. Aside from adding the critical
operations teams at the three data centers, Argo strengthened its
executive team by adding the following:
●
Davis
Zapffe, General Counsel
●
Seif
El-Bakly, Chief Operating Officer
●
Justin
Nolan, Vice President of Business Development
●
Jean
Esquier, Vice President of Technology &
Development
●
Theo
Papadakis, Vice President of Data Center Operations
●
Tom
Divine, Vice President of Investor Relations
Financial review
In 2021, Argo tapped into the capital markets, raising £144.0
million [$194.3 million] across three separate equity offerings, as
well as issuing £29.1 million [$40.0 million] of unsecured
notes. The proceeds of these equity and debt capital raises were
used for the build out of the Helios facility and for mining
machine purchases.
As of 31 December 2021, the Group’s total debt amounted to
£53.7 million [$72.4 million].
As of 31 March 2022, the Group held 2,700 Bitcoin and Bitcoin
Equivalents valued at £93.6 million [$122.9 million] based on
the Bitcoin price at that time.
In Q1 2022, the Group announced an equipment financing agreement
with New York Digital Investment Group in the amount of £19.8
million [$26.7 million], secured by electrical infrastructure
equipment at Helios.
In order to complete Helios Phase 1, Argo anticipates additional
capital expenditures in the range of £93 million to £100
million ($125 million to $135 million). This amount includes the
remaining infrastructure and associated mining machines, but
excludes shipping costs. Argo anticipates that the funding for the
remaining capital spend will be non-dilutive, consisting primarily
of debt and proceeds from selling a portion of monthly Bitcoin
production.
Outlook
Q1 2022 saw a pullback in the equity market across most sectors,
driven primarily by concerns over inflation, interest rates, supply
chain disruptions, and the war in Ukraine. Despite this, Bitcoin
prices remained relatively flat over the quarter, bolstering the
argument that Bitcoin is a safe haven asset and a reliable store of
value. Argo is well-positioned for success as Helios
Phase 1 approaches completion. Argo’s significant runway for
growth at Helios, with up to another 600 MW of capacity to be
developed, combined with the Blockscale ASIC chip supply agreement
with Intel, gives the Board great reason for optimism as it looks
toward the future.
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 2021 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 2021 and of the group’s profit 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 group and 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
|
Year ended
|
|
|
|
31 December
|
31 December
|
|
|
|
2021
|
2020
|
|
Continuing operations
|
Note
|
£’000
|
£’000
|
|
|
|
|
|
|
Revenues
|
7
|
74,204
|
18,957
|
|
Direct
costs
|
8
|
(22,186)
|
(17,106)
|
|
Change
in fair value of digital currencies
|
22
|
1,628
|
2,070
|
|
|
|
|
|
|
Gross profit
|
|
53,646
|
3,921
|
|
|
|
|
|
|
Operating
costs and expenses
|
8
|
(8,298)
|
(2,167)
|
|
Reversal
of credit loss provision
|
|
-
|
447
|
|
Share
based payment charge
|
23
|
(1,938)
|
(331)
|
|
Foreign
exchange
|
|
(589)
|
(271)
|
|
Operating profit
|
|
42,821
|
1,599
|
|
|
|
|
|
|
Fair
value revaluation of variable consideration
|
26
|
236
|
-
|
|
Fair
value gain/(loss) of investments
|
15
|
183
|
-
|
|
Loss on
sale of investment
|
15
|
(629)
|
-
|
|
Finance
costs
|
8
|
(2,142)
|
(157)
|
|
Equity
accounted loss from associate
|
16
|
(1,198)
|
-
|
|
Profit before taxation
|
|
39,271
|
1,442
|
|
|
|
|
|
|
Tax
expense
|
13
|
(8,506)
|
-
|
|
|
|
|
|
|
Profit after taxation
|
|
30,765
|
1,442
|
|
Other comprehensive income
|
|
|
|
|
Items
which may be subsequently reclassified to profit or
loss:
|
|
|
|
|
- Currency
translation reserve
|
|
(410)
|
265
|
|
- Equity accounted
OCI from associate
|
16
|
6,571
|
-
|
|
- Fair value gains on
intangible digital assets
|
18
|
414
|
-
|
|
Total other comprehensive income, net of tax
|
|
6,575
|
265
|
|
|
|
|
|
|
Total comprehensive income attributable to the equity holders of
the Company
|
|
37,340
|
1,707
|
|
|
|
|
|
|
Earnings per share attributable to equity owners
(pence)
|
|
|
|
|
Basic
earnings per share
|
12
|
7.7p
|
0.5p
|
|
Diluted
earnings per share
|
12
|
7.4p
|
0.4p
|
The
income statement has been prepared on the basis that all operations
are continuing operations.
GROUP STATEMENT OF FINANCIAL POSITION
|
|
|
As at
|
As at
|
|
|
|
31 December
|
31 December
|
|
|
|
2021
|
2020
|
|
|
Note
|
£’000
|
£’000
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Non-current assets
|
|
|
|
|
Investments
at fair value through profit or loss
|
15
|
403
|
1,393
|
|
Investments
accounted for using the equity method
|
16
|
13,817
|
-
|
|
Intangible
fixed assets
|
18
|
5,604
|
368
|
|
Property,
plant and equipment
|
19
|
111,604
|
10,524
|
|
Right
of use assets
|
19
|
350
|
7,379
|
|
Other
receivables
|
20
|
-
|
4,115
|
|
Total non-current assets
|
|
131,778
|
23,779
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Trade
and other receivables
|
21
|
63,359
|
2,175
|
|
Digital
assets
|
22
|
80,759
|
4,638
|
|
Cash
and cash equivalents
|
|
11,803
|
2,051
|
|
Total current assets
|
|
155,921
|
8,864
|
|
|
|
|
|
|
Total assets
|
|
287,699
|
32,643
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
Equity
|
|
|
|
|
Share
Capital
|
24
|
468
|
303
|
|
Share
Premium
|
24
|
139,581
|
1,541
|
|
Share
based payment reserve
|
25
|
1,905
|
75
|
|
Fair
value reserve
|
25
|
414
|
-
|
|
Currency
translation reserve
|
25
|
33
|
443
|
|
Other
comprehensive income of equity accounted associates
|
25
|
6,571
|
-
|
|
Accumulated
surplus
|
25
|
52,838
|
21,965
|
|
Total equity
|
|
201,810
|
24,327
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade
and other payables
|
26
|
15,245
|
936
|
|
Contingent
consideration
|
26
|
8,071
|
-
|
|
Loans
and borrowings
|
27
|
23,391
|
-
|
|
Income
tax
|
13
|
7,679
|
-
|
|
Deferred
tax
|
13
|
286
|
|
|
Lease
liability
|
28
|
7
|
3,470
|
|
Total current liabilities
|
|
54,679
|
4,406
|
|
Non-current liabilities
|
|
|
|
|
Deferred
tax
|
13
|
541
|
-
|
|
Issued
debt - bond
|
27
|
26,908
|
-
|
|
Loans
|
27
|
3,391
|
-
|
|
Lease
liability
|
28
|
370
|
3,910
|
|
Total liabilities
|
|
85,889
|
8,316
|
|
|
|
|
|
|
Total equity and liabilities
|
|
287,699
|
32,643
|
COMPANY STATEMENT OF FINANCIAL POSITION
|
|
|
As at
|
As at
|
|
|
|
31 December
|
31 December
|
|
|
|
2021
|
2020
|
|
|
Note
|
£’000
|
£’000
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Non-current assets
|
|
|
|
|
Investment
in subsidiaries
|
14
|
12,181
|
-
|
|
Investments
at fair value through profit or loss
|
15
|
73
|
-
|
|
Investments
accounted for using the equity method
|
16
|
13,817
|
-
|
|
Total non-current assets
|
|
26,071
|
-
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Trade
and other receivables
|
21
|
8,598
|
186
|
|
Intercompany
receivable
|
21
|
175,859
|
22,876
|
|
Cash
and cash equivalents
|
|
126
|
1,456
|
|
Total current assets
|
|
184,583
|
24,518
|
|
|
|
|
|
|
Total assets
|
|
210,654
|
24,518
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
Equity
|
|
|
|
|
Share
Capital
|
24
|
468
|
303
|
|
Share
Premium
|
24
|
139,581
|
1,541
|
|
Share
based payment reserve
|
25
|
1,905
|
75
|
|
Other
comprehensive income of equity accounted associates
|
25
|
6,571
|
-
|
|
Accumulated
surplus
|
25
|
18,986
|
22,429
|
|
Total equity
|
|
167,511
|
24,348
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade
and other payables
|
26
|
8,164
|
170
|
|
Contingent
consideration
|
26
|
8,071
|
-
|
|
Total current liabilities
|
|
16,235
|
170
|
|
Non-current liabilities
|
|
|
|
|
Loans
and borrowing
|
27
|
26,908
|
-
|
|
Total liabilities
|
|
43,143
|
170
|
|
|
|
|
|
|
Total equity and liabilities
|
|
210,654
|
24,518
|
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 income /(loss) for the year was
£3,551,000 (2020 – loss of £610,000).
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
Share Capital
|
Share Premium
|
Currency translation reserve
|
Share based payment reserve
|
Fair Revaluation Reserve
|
Other comprehe-nsive income of associations
|
Accum-ulated 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 profit 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:
|
|
|
|
|
|
|
|
|
|
Shares
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
|
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
Share Capital
|
Share Premium
|
Currency translation reserve
|
Share based payment reserve
|
Accumulated surplus/
(deficit)
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Balance at 1 January 2020
|
294
|
25,252
|
178
|
-
|
(4,986)
|
20,738
|
|
Total comprehensive profit for the period:
|
|
|
|
|
|
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
1,442
|
1,442
|
|
Other
comprehensive income
|
-
|
-
|
265
|
-
|
-
|
265
|
|
Total
comprehensive income for the period
|
-
|
-
|
265
|
|
1,442
|
1,707
|
|
Transactions with equity owners:
|
|
|
|
|
|
|
|
Shares
to be issued
|
10
|
1,540
|
-
|
-
|
-
|
1,550
|
|
Cancellation
of share premium
|
-
|
(25,252)
|
-
|
-
|
25,252
|
-
|
|
Share
options/warrants charges
|
-
|
-
|
-
|
332
|
-
|
332
|
|
Share
based payments lapsed/expired
|
-
|
-
|
-
|
(257)
|
257
|
-
|
|
Total
transactions with equity owners
|
10
|
(23,712)
|
-
|
75
|
25,509
|
1,882
|
|
Balance at 30 December 2020
|
304
|
1,540
|
443
|
75
|
21,965
|
24,327
|
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 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:
|
|
|
|
|
|
|
|
Gross
share capital
|
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
|
|
|
Share Capital
|
Share premium
|
Share based payment reserve
|
Accumulated surplus/
(deficit)
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Balance at 1 January 2020
|
294
|
25,252
|
-
|
(2,469)
|
23,077
|
|
Total comprehensive profit for the period:
|
-
|
-
|
-
|
-
|
-
|
|
Loss
for the period
|
-
|
-
|
-
|
(610)
|
(610)
|
|
Other
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
|
Total
comprehensive income for the period
|
-
|
-
|
-
|
(610)
|
(610)
|
|
Transactions with equity owners:
|
|
|
|
|
|
|
Shares
to be issued
|
9
|
1,540
|
-
|
-
|
1,550
|
|
Cancellation
of share premium
|
-
|
(25,252)
|
-
|
25,252
|
-
|
|
Share
options/warrants charges
|
-
|
-
|
332
|
-
|
332
|
|
Share
based payments lapsed/expired
|
-
|
-
|
(257)
|
257
|
-
|
|
Total
transactions with equity holders
|
9
|
(23,712)
|
75
|
25,509
|
1,882
|
|
Balance at 31 December 2020
|
303
|
1,540
|
75
|
22,429
|
24,348
|
GROUP STATEMENT OF CASH FLOWS
|
|
|
Year ended
|
Year ended
|
|
|
|
31 December
|
31 December
|
|
|
|
2021
|
2020
|
|
|
Note
|
£’000
|
£’000
|
|
Cash flows from operating activities
|
|
|
|
|
Profit
before tax
|
|
39,271
|
1,442
|
|
Adjustments for:
|
|
|
|
|
Depreciation/Amortisation
|
18, 19
|
11,511
|
6,027
|
|
Foreign
exchange movements
|
|
589
|
271
|
|
Loss on
disposal of tangible assets
|
|
-
|
66
|
|
Finance
cost
|
|
2,142
|
157
|
|
Loss on
sale of investment
|
|
629
|
-
|
|
Fair
value change in digital assets through profit or loss
|
22
|
(1,628)
|
(2,342)
|
|
Fair
value movement on digital assets held as intangibles
|
|
(414)
|
-
|
|
Impairment
of intangible digital assets
|
18
|
535
|
-
|
|
Investment
fair value movement
|
15
|
(183)
|
-
|
|
Share
of loss from associate
|
|
1,198
|
-
|
|
Non-cash
settlement of management fees
|
8
|
(1,561)
|
-
|
|
Revaluation
of contingent consideration
|
26
|
(236)
|
-
|
|
Derecognition
of contingent consideration
|
|
(352)
|
|
|
Share
based payment expense
|
23
|
1,938
|
332
|
|
Working capital changes:
|
|
|
|
|
(Increase)/decrease
in trade and other receivables
|
21
|
(13,628)
|
(90)
|
|
Increase/(decrease)
in trade and other payables
|
14,430
|
(2,107)
|
|
|
(Increase)
in digital assets
|
14
|
(80,331)
|
(1,236)
|
|
Net cash (used in)/generated from operating activities
|
|
(27,817)
|
2, 520
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Investment
at fair value through profit or loss
|
15
|
(220)
|
-
|
|
Acquisition
of subsidiaries, net of cash acquired
|
17
|
(664)
|
-
|
|
Investment
in associate
|
16
|
(7,353)
|
-
|
|
Foreign
exchange on investing activities
|
|
-
|
48
|
|
Interest
received
|
|
-
|
1
|
|
Proceeds
from sale of investment
|
15
|
772
|
-
|
|
Purchase
of tangible fixed assets
|
19
|
(78,972)
|
(1,808)
|
|
Proceeds
from disposal of tangible fixed assets
|
|
-
|
704
|
|
Purchase
of digital assets
|
22
|
(15,009)
|
-
|
|
Proceeds
from sale of digital assets
|
22
|
11,308
|
-
|
|
Mining
equipment prepayment
|
|
(47,426)
|
-
|
|
Net cash used in investing activities
|
|
(137,564)
|
(1,055)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Increase/(decrease)
in loans
|
18
|
22,239
|
(968)
|
|
Lease
payments
|
28
|
(7,379)
|
-
|
|
Loan
repayments
|
27
|
(1,196)
|
-
|
|
Interest
paid
|
|
(122)
|
(157)
|
|
Proceeds
from debt issue – net of issue costs
|
27
|
26,908
|
-
|
|
Proceeds
from shares issued – net of issue costs
|
24
|
134,684
|
1,550
|
|
Net cash generated from/(used in) financing activities
|
|
175,133
|
425
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
9,752
|
1,890
|
|
Cash
and cash equivalents at beginning of period
|
|
2,051
|
161
|
|
Cash
and cash equivalents at end of period
|
|
11,803
|
2,051
|
|
|
|
|
|
|
|
|
|
|
Material non-cash movements:
●
During the year,
the Group assumed the mortgages on two properties from GPUone with
a value of £5,720,000. Consideration of the acquisition was
made from a forgiveness of prepayments made totalling
£4,656,000.
●
Additionally, the
Group used ordinary shares as payment to acquire DPN LLC, part of
which was issued during the period amounting to £3,521,000,
and a further £8,659,000 which is due to be paid in ordinary
shares and included within liabilities.
●
During the year,
the Group paid a total of 75,000 Polkadot, which had a value of
£1,092,000, in respect of the acquisition of shares in Pluto
Digital PLC.
●
During the year,
the Group reached a legal settlement regarding crypto mining
management fees in which it received digital assets (BTC) of
£1,561,000 for the forward value of those management fees and
agreed to terminate the agreement going forward.
●
Intangible assets
(note 18) were acquired with other digital assets and as such
£12,792,000 of purchases and sales were made in digital assets
during the year.
|
Group - net debt table
|
|
Year ended
31 December 2021
|
Year ended
31 December 2020
|
|
|
|
£’000
|
£’000
|
|
Current
loans and borrowings
|
27
|
(23,391)
|
-
|
|
Current
lease liability
|
28
|
(7)
|
(3,470)
|
|
Non-current
issued debt – bonds
|
27
|
(26,908)
|
-
|
|
Non-current
loans and borrowings
|
27
|
(3,391)
|
-
|
|
Non-current
liability
|
28
|
(370)
|
(3,910)
|
|
Cash
and cash equivalents
|
|
11,803
|
2,051
|
|
Total net debt
|
|
(42,264)
|
(5,329)
|
|
|
|
|
|
The
directors also consider their digital assets of £80,759,000
(2020 - £4,638,000) as a liquid holding and as such net
funds/(debt) would be £65,403,000 (2020 –
(£691,000)).
COMPANY STATEMENT OF CASH FLOWS
|
|
|
Year ended
|
Year ended
|
|
|
|
31 December
|
31 December
|
|
|
|
2021
|
2020
|
|
|
Note
|
£’000
|
£’000
|
|
Cash flows from operating activities
|
|
|
|
|
Profit
before tax
|
|
(3,551)
|
(610)
|
|
Adjustments for:
|
|
|
|
|
Share
of loss from associate
|
|
1,198
|
-
|
|
Foreign
exchange movements
|
|
(409)
|
|
|
Share
based payment expense
|
|
1,938
|
332
|
|
Working capital changes:
|
|
|
|
|
(Increase)/decrease
in trade and other receivables
|
(8,411)
|
(133)
|
|
|
Increase/(decrease)
in trade and other payables
|
26
|
7,741
|
(21)
|
|
Net cash used in operating activities
|
|
(1,494)
|
(432)
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Purchase
of investments
|
8
|
(7,353)
|
-
|
|
(Increase)/decrease
in loan to subsidiary
|
13
|
(154,075)
|
298
|
|
Net cash (used in)/generated from investing activities
|
|
(161,428)
|
298
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Proceeds
from debt issue – net of issue costs
|
18
|
26,908
|
|
|
Proceeds
from shares issued – net of issue costs
|
|
134,645
|
1,550
|
|
Net cash generated from/(used in) financing activities
|
|
161,592
|
1,550
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
(1,330)
|
1,416
|
|
Cash
and cash equivalents at beginning of period
|
|
1,456
|
40
|
|
Cash
and cash equivalents at end of period
|
|
126
|
1,456
|
|
|
|
|
|
|
Company - net (debt) / asset table
|
|
Year ended
31 December 2021
|
Year ended
31 December 2020
|
|
|
|
£’000
|
£’000
|
|
Non-current
loans and borrowings
|
27
|
(26,908)
|
-
|
|
Cash
and cash equivalents
|
|
126
|
1,456
|
|
Total net (debt) / asset
|
|
(26,782)
|
1,456
|
|
|
|
|
|
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 9th Floor, 16th Great Queen Street, London,
England, WC2B 5DG. 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).
The
principal activity of the group is that of crypto asset
mining.
The
common shares of the Group are listed under the trading symbol ARB
on the London Stock Exchange. The American Depositary Receipt of
the Group are listed under the trading symbol ARBK on Nasdaq. The
Group bond is listed on the Nasdaq Global Select Market under the
trading symbol ARBKL
The
financial statements cover the year ended 31 December
2021.
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
Innovation Facilities (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).
The
preparation of financial statements requires the use of certain
critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the group
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in note
3.
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. The
Directors have reviewed cash flow projections for a period to 31
December 2023. The Group currently has an increasing level of
revenues and margin as crypto prices have increased significantly
at the end of the year and post the year end. In making their
assessment of going concern, the Directors acknowledge that the
Group has increasing cash reserves from the exercise of share
options and warrants, two private placements and the IPO on NASDAQ
during the year. Therefore, the directors confirm that they hold
sufficient funds to ensure the Group continues to meet its
obligations as they fall due for a period of at least one year from
date of approval of these Financial Statements. In addition to cash
reserves, the Group also holds £80m of Bitcoin at the year
end.
As a
cryptocurrency miner, and principally that of mining Bitcoin, the
directors have considered the risk around the price of Bitcoin. The
cost to mine each Bitcoin in 2021 was less than £6k and as
such there can be a significant fall in Bitcoin price before the
Group has a significant issue. Given our relatively low cost of
power, we are better positioned than many of our competitors to
survive a significant drop in Bitcoin price. In this scenario, our
relative share of the global hashrate would increase and we would
mine more Bitcoin. As such the directors have considered the
sensitivity around BTC market price and have anticipated and
modelled a significant fall in Bitcoin price still allowing the
Group to mine at a profitable level.
As a
result of our diversification into non mining activities, via Argo
Labs we consider that we are diversifying and thereby reducing our
risk profile as a Group. Since Argo Labs invests in other
cryptocurrencies besides Bitcoin this diversification is at an
operating level and a commodity level.
The
directors have considered the period to 31 December 2023 as a
reasonable time period given the variable outlook of
cryptocurrencies. Please see the net debt tables under the
cashflows for further information of the Groups exposure to
liabilities and net position at the year end.
The
Directors have considered the impacts of Covid-19 and conclude that
there are no material factors that are likely to affect the ability
of the Group to continue as a going concern. Accordingly, the Board
believes it is appropriate to adopt the going concern basis in the
preparation of the Financial Statements.
Revenue 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.
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 Innovation Facilities
(US) Inc, Argo Innovation Labs Inc., 9366-5230 and 9377-2556 and
Argo Innovation Labs Limited, the latter remaining dormant. Argo
Innovation Labs Limited has been dormant since
incorporation.
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 2021. 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 acquire 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 board of directors that makes strategic
decisions. The directors consider that the Group has only one
significant reporting segment being crypto mining which is fully
earned by a Canadian subsidiary for the financial year ended 31
December 2021.
Loans and borrowings and issued debt
Loans
and borrowings and issued debt are recognised initially at fair
value, net of transaction costs incurred. Loans and borrowings 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
borrowings 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, and it
typically holds mined crypto assets on its balance sheet. 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. Currently
Argo allocates approximately 10% if its holdings to Argo
Labs.
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, office equipment, mining and
computer equipment, data centres, leasehold improvements and assets
under construction.
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 and assets under construction: Depreciation on the data
centres and assets under construction 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 of 3 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.
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 2021 and 2020 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 borrowings 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 and
general sentiment of crypto assets as a whole. During the year the
Group managed the company’s cryptocurrency through a
carefully structured active management strategy for all Group held
crypto assets. It is designed to protect the company in the event
that crypto prices decrease, but would also have the potential to
provide an upside in a rising crypto asset market. Internally, the
Argo team exchanged cryptocurrency to fiat currency via a third
party digital currency exchange, Satstreet Inc (based in Toronto
Canada). As a result of raising money through both debt and equity
the Group has not sold a significant proportion of its Bitcoin
holding during the year.
As a
cryptocurrency miner, and principally that of mining Bitcoin, the
directors have considered the risk around the price of Bitcoin. The
cost to mine each Bitcoin in 2021 was less than £6k and as
such there can be a significant fall in Bitcoin price before the
Group has a significant issue. Given our relatively low cost of
power, we are better positioned than many of our competitors to
survive a significant drop in Bitcoin price. In this scenario, our
relative share of the global hashrate would increase and we would
mine more Bitcoin. As such the directors have considered the
sensitivity around BTC market price and have anticipated and
modelled a significant fall in Bitcoin price still allowing the
Group to mine at a profitable level.
As a
result of our diversification into non mining activities, via Argo
Labs we consider that we are diversifying and thereby reducing our
risk profile as a Group. Since Argo Labs invests in other
cryptocurrencies besides Bitcoin this diversification is at an
operating level and a commodity level.
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. is 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 monitors exchange rates on a constant basis and
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
|
|
2021
|
+/-10%
|
+/-250
|
+/-87
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
+/-10%
|
-
|
-
|
|
|
|
|
|
|
|
Change
in CAD rate
|
Effect
on profit before tax
|
Effect
on pre-tax equity
|
|
|
|
£’000
|
£’000
|
|
2021
|
+/-10%
|
+/-1,611
|
+/-3,208
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
+/-10%
|
+/-614
|
+/-122
|
|
|
|
|
|
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,
in the UK the banking sector is not currently favourable toward
crypto based businesses and as such the Group has opened accounts
with a number of Tier 2 banks in order to mitigate the risk of an
account been deactivated or closed by the bank.
The
company considers the intercompany loan to its subsidiary (Argo
Innovation Labs Inc.) to be fully recoverable through 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.
The
Board 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.
|
|
Less than 1 year
|
Between 1 and 2 years
|
Between 2 and 5 years
|
Over 5 years
|
|
At 31 December 2021
|
|
|
|
|
|
Loans
and borrowings
|
23,901
|
2,188
|
693
|
-
|
|
Lease
liabilities
|
21
|
42
|
63
|
251
|
|
Issued
debt
|
-
|
-
|
26,908
|
-
|
|
|
|
|
|
,
|
|
At December 2020
|
|
|
|
|
|
Lease
liabilities
|
3,470
|
3909
|
-
|
-
|
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 has a very prudent view of using debt to finance future
outflows and 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 29 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 2021. The adoption of these standards and
amendments did not have any material impact on the financial result
of position of the Group.
Standards
which are in issue but not yet effective:
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 as Current
or Non-current
|
1
January 2023
|
|
IAS
16
|
Amendments
- Property, Plant and Equipment
|
1
January 2022
|
|
IAS
37
|
Provisions,
Contingent Liabilities and Contingent Assets
|
1
January 2022
|
|
IAS
8
|
Amendments
- Definition of Accounting Estimates
|
1
January 2023
|
|
IAS
1
|
Amendments
– Disclosure of Accounting Policies
|
1
January 2023
|
|
IFRS
3
|
Amendments
– Business Combinations – Conceptual
Framework
|
1
January 2022
|
|
IFRS
|
Annual
Improvements to IFRS Standards 2018-2020
|
1
January 2022
|
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.
Fair value of assets and liabilities acquired from GPUone –
Note 17
Fair
value of assets acquired was assessed in line with independent
valuations provide by CBRE of the sites. Given the continued demand
for power sites and data centres in the North of 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.
The
land and buildings have been capitalised (and subsequently
depreciated based upon that cost) at the value the independent
valuers have given those properties. When modelling a cashflow on
these properties and the benefit of owning versus being hosted at
the properties the cashflow and profits support these
valuations.
Valuation of cryptocurrencies – Note 22
During
the year the directors assessed the treatment of both the Bitcoin
it mines and the other cryptocurrency held for investment purposes
(as part of the broader diversification into non-mining
activities), deciding that the only digital assets it would carry
and treat as inventories would be the cryptocurrency mined or held
in the mined currency (Bitcoin) . As such any other cryptocurrency
is treated as an intangible assets, see note 18.
The
Board regularly monitors the values of the cryptocurrencies and any
market forecasts. During the period, the Group entered into crypto
currency transactions, which were assessed for fair value in line
with the requirements of IAS 2, Inventories. 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. Revaluations were
made with such regularity that as at the end of the reporting
period the carrying amount of the asset does not differ materially
from its fair value. All revaluations were made with reference to
level 1 information, being crypto currencies actively traded on the
open market (www.coingecko.com).
Although this is the website we predominantly refer due to the
large population of cryptocurrencies it monitors, we regularly
review this against other price websites and
exchanges.
As at
31 December 2021 the Group held £80,759k crypto currency (see
note 22). Cryptocurrencies mined by the Group are classified as
digital assets (See Note 22). Cryptocurrencies not mined by the
Group are classified as intangible assets (see Note
18).
Tokens
are valued at cost until they start vesting and reviewed for
impairment. Crowd loans are valued at £nil given that no
tokens have yet been received and/or have started vesting. It
should be noted only immaterial amounts are invested in this form
of assets.
Share-based payments – Note 23
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
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 23.
Share-based payments – Note 26
An
element of consideration relating to the asset acquisition of the
Texas facility (Helios) is contingent on the fulfilment of future
contractual milestones. On acquisition, estimates are made
regarding the probability of fulfilment and expected timing. These
estimates are reassessed at each reporting date and adjustments
made to the liability where necessary. The carrying value of
contingent consideration at 31 December 2021 was £8,071,000
(2020: £nil).
Valuation of tangible and intangible fixed assets – Notes 18
and 19
The
directors considered at length whether any further impairments were
required on the value of the mining and computer equipment, and
website and underlying software. In doing so they made use of
forecasts of revenues and expenditure prepared by the Group and
came to the conclusion that further impairment of those assets were
unnecessary based on current forecasts.
Fair
value of assets acquired was assessed in line with independent
valuations provide by CBRE of the sites. Given the continued demand
for power sites and data centres in the North of 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.
During
the year as the Group expanded into non-mining activities (Argo
Labs) the assets held within Argo Labs are classified as intangible
assets. Any impairment of these assets is reflected in the income
statement and any increased in the 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. Currently Argo allocates approximately 10% if
its holdings to Argo Labs.
Valuation of investments in subsidiaries and amounts due from group
companies – Note 21
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 were
unnecessary based on current forecasts and performance during the
first part of 2022.
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.
Valuation of investments – Note 15
The
Board has reviewed the carrying value of investments at the year
end. They have taken into account the underlying investments and
have concluded those investments do not require
impairment.
WonderFi
is listed on the Canadian NEO Exchange market and as such has been
valued at its market price.
7.
REVENUES
|
|
|
Period ended
31 December 2021
|
Period ended
31 December 2020
|
|
|
|
£’000
|
£’000
|
|
Crypto
currency mining - worldwide
|
|
70,325
|
18,947
|
|
Subscriber
revenue - worldwide
|
|
-
|
10
|
|
Crypto
currency management fees – United States
|
|
3,879
|
-
|
|
Total revenue
|
|
74,204
|
18,957
|
|
|
|
|
|
Due to
the nature of Cryptocurrency mining, it is not possible to provide
a geographical split of the revenue stream.
Crypto
currency mining revenues are recognised at a point in
time.
Crypto
currency management fees are services recognised over
time.
8.
EXPENSES
BY NATURE
|
|
|
2021
|
2020
|
|
Direct Costs
|
|
£’000
|
£’000
|
|
Depreciation
of mining hardware
|
|
11,129
|
5,896
|
|
Hosting
and other costs
|
|
11,057
|
11,210
|
|
Total direct costs
|
|
22,186
|
17,106
|
|
|
|
|
|
|
|
|
2021
|
2020
|
|
Administrative expenses
|
|
£’000
|
£’000
|
|
Salary
and other employee related costs
|
|
2,662
|
461
|
|
Depreciation
and amortisation
|
|
382
|
131
|
|
Legal,
professional and regulatory fees
|
|
1,533
|
114
|
|
Consulting
fees
|
|
684
|
690
|
|
Insurance
|
|
1,408
|
117
|
|
Public
relations and associated activities
|
|
699
|
113
|
|
Travel
and subsistence
|
|
128
|
46
|
|
Audit
fees
|
|
239
|
135
|
|
Carbon
credits
|
|
252
|
-
|
|
Hedging
costs
|
|
326
|
-
|
|
Impairment
of intangible assets
|
|
535
|
-
|
|
Repairs
and maintenance
|
|
939
|
75
|
|
Settlement
re Crypto mining management fees
|
|
(1,561)
|
-
|
|
Write
off of variable contingent consideration
|
|
(352)
|
-
|
|
Research
costs
|
|
-
|
20
|
|
Other
expenses
|
|
424
|
265
|
|
Total administrative expenses
|
|
8,298
|
2,167
|
|
|
|
|
|
|
|
|
2021
|
2020
|
|
|
Finance Costs
|
|
£’000
|
£’000
|
|
|
Interest
on loans and borrowings
|
|
2,142
|
151
|
|
|
Total finance costs
|
|
2,142
|
151
|
|
|
|
|
|
|
|
9.
AUDITOR’S
REMUNERATION
|
|
|
2021
|
2020
|
|
|
|
£’000
|
£’000
|
|
In
relation to statutory audit services
|
|
170
|
100
|
|
Other
audit assurance services
|
|
52
|
35
|
|
Total auditor’s remuneration
|
|
222
|
135
|
|
|
|
|
|
10.
EMPLOYEES
The average monthly number of persons (including directors)
employed by the group during the period was:
|
|
|
2021
|
2020
|
|
|
|
Number
|
Number
|
|
Directors
and employees
|
|
26
|
6
|
|
|
|
|
|
Their
aggregate remuneration comprised:
|
|
|
2021
|
2020
|
|
|
|
£’000
|
£’000
|
|
Wages
and salaries
|
|
2,286
|
191
|
|
Social
security costs
|
|
199
|
13
|
|
Pension
costs
|
|
25
|
-
|
|
Share
based payments
|
|
1,392
|
24
|
|
|
|
3,902
|
228
|
The
average monthly number of persons (including directors) employed by
the company during the period was:
|
|
|
2021
|
2020
|
|
|
|
Number
|
Number
|
|
Directors
and employees
|
|
4
|
1
|
|
|
|
|
|
Their
aggregate remuneration comprised:
|
|
|
2021
|
2020
|
|
|
|
£’000
|
£’000
|
|
Wages
and salaries
|
|
406
|
135
|
|
Social
security costs
|
|
8
|
18
|
|
Pension
costs
|
|
1
|
-
|
|
Share
based payments
|
|
338
|
-
|
|
|
|
745
|
153
|
11.
DIRECTOR’S
REMUNERATION
|
|
|
2021
|
2020
|
|
|
|
£’000
|
£’000
|
|
Director’s
remuneration for qualifying services
|
|
856
|
532
|
|
Senior
management loss of office
|
|
132
|
-
|
|
Share
based payments
|
|
431
|
20
|
|
Total remuneration for directors and key management
|
|
1,419
|
552
|
|
|
|
|
|
The amounts above are remunerated through both salaries (of which,
some are included in 10) and through service companies (as
disclosed in note 31). Further details of Directors’
remuneration are available in the Remuneration report. The highest
paid director during the year was Peter Wall, earning £455k,
(2020 - £251k)
12.
EARNINGS
PER SHARE
The
basic earnings per share is calculated by dividing the profit
attributable to equity shareholders by the weighted average number
of shares in issue.
The
Group and Company has in issue 17,688,897 warrants and options at
31 December 2021 (2020 -41,202,382).
|
|
2021
|
2020
|
|
Net
profit for the period attributable to ordinary equity holders from
continuing operations (£’000)
|
37,765
|
1,442
|
|
Weighted
average number of ordinary shares in issue
(‘000)
|
397,513
|
303,436
|
|
Basic
earnings per share for continuing operations (pence)
|
7.1
|
0.5
|
|
|
|
|
|
Net
profit for the period attributable to ordinary equity holders for
continuing operations (£’000)
|
30,765
|
1,442
|
|
Diluted
number of ordinary shares in issue (‘000)
|
415,201
|
344,638
|
|
Diluted
earnings per share for continuing operations (pence)
|
7.4
|
0.4
|
|
13.TAXATIONCurrent
tax:2021£’0002020£’000Current tax on profits
for the year7,679-Adjustments in respect of prior periods--Total
current tax7,679-Deferred
tax:2021£’0002020£’000Origination and
reversal of temporary differences827-Total deferred tax827-Total
tax charge8,506-No deferred tax has
been recognised on the losses brought forward on the UK and US
losses given the uncertainty on the generation of future
profits.Income tax expenseThe
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:20212020£’000£’000Profit
before taxation39,2711,442Expected tax charge based on a weighted
average of 25% (2020 - 24%) (UK, US and Canada)9,746346Effect of
expenses not deductible in determining taxable profit1,7793Capital
allowances in excess of depreciation(3,770)(101)Other tax
adjustments(137)(703)Other timing differences(385)-Origination and
reversal of temporary differences827-Unutilised tax losses carried
forward445455Taxation charge in the financial
statements8,506-
|
||
The group has tax losses available to be carried forward and used
against trading profits arising in future periods of
approximately £10,476,000 (2020
- £10,031,000).
No
deferred tax asset has been recognised on the UK and US utilized
losses.
The
weighted average applicable tax rate was 25% (2020: 24%). The
increase is caused by a change in the profitability of the
Group’s subsidiaries in the respective
countries.
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
|
2021
£’000
|
2020
£’000
|
||
|
Fair value gains:
|
|
|
||
|
Digital
assets
|
286
|
-
|
||
|
Gain on
fair value of property acquired (see note 17)
|
442
|
-
|
||
|
Share
of other comprehensive income of associates
|
99
|
-
|
||
|
Total deferred tax
|
827
|
-
|
||
No
deferred tax liability was recognised in the year ended 31 December
2020 as there were losses to offset such a gain.
14.
INVESTMENT
IN SUBSIDIARIES
Company
Details of the company’s subsidiaries at 31 December 2021 and
31 December 2020 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%
|
**
|
||||
* The provision of cryptocurrency mining
services
** The
provision of cryptocurrency mining sites
|
Investment in subsidiaries
|
2021
£’000
|
2020
£’000
|
|
|
|
|
|
At 1
January
|
-
|
-
|
|
Additions
|
12,181
|
-
|
|
At 31 December
|
12,181
|
-
|
The
cost of the investment above is in respect of the DPN LLC
acquisition further detail can be found in note 19.
The
company’s interest in Argo innovation Labs Inc. was acquired
on incorporation of the company, previously named Argo Blockchain
Canada Holdings Inc., on 12 January 2019.
The
registered office of Argo Blockchain Canada Holdings Inc. is
700-401 West Georgia Street, Vancouver, BC V6B 5A1 Canada. On 8
January 202 Argo Blockchain Canada Holdings Inc.’s name was
changed to Argo Innovation Labs Inc..
On 1
September 2019 the company acquired 100% of Argo Mining Limited for
£1 (one). The registered office is 9th Floor 16 Great Queen
Street, London, England, WC2B 5DG. On 14 January 2020 Argo Mining
Limited changed its name to Argo Innovation Labs Limited. This
company was dormant in the years ended 31 December 2020 and
2021.
Argo
innovation Facilities (US) Inc was incorporated on 25 February 2021
with a registered address of 2028
East Ben White Blvd. Austin, TX
78740.
9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are the GPUone
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.
15.
INVESTMENTS
AT FAIR VALUE THROUGH INCOME OR LOSS
|
|
|
|
||
|
Non-current
Group
|
2021
£’000
|
2020
£’000
|
||
|
|
|
|
||
|
At 1
January
|
1,393
|
58
|
||
|
Additions
|
219
|
1,336
|
||
|
Foreign
exchange movement
|
-
|
(1)
|
||
|
Fair
value through profit or loss
|
183
|
-
|
||
|
Disposals
|
(1,392)
|
-
|
||
|
At 31 December
|
403
|
1,393
|
||
Non-current investments include:
GPUone Holding Inc.
As part
of the disposition of GPUone Holdings Inc on 20 August 2021 Argo
disposed of 100% of its holding for a total consideration of
£764,000, of which £128,000 was received post year end
once the final total assets were calculated. This resulted in a
loss on sale of investment of £629,000.
Luxor Technology Corporation
On 7
December 2020 the Group entered into an agreement to acquire
£73,427 (USD$100,000) of shares in Luxor Technology
Corporation. On 7 May 2021, following a second round of funding
which the Group did not participate in, this prepayment became an
investment representing less than 1% of the Series A-1 Preferred
Stock and voting rights.
WonderFi Technologies Inc.
On 3 June 2021 the Group invested £145,933 (CDN$250,000) of
WonderFi Technologies Inc. equating to 250,000 ordinary
shares (formerly DeFi
Ventures Inc.) an investment representing less than 1% of the
Ordinary shares and voting rights. As at 31 December 2021 the
investment was revalued to the year end share price of CAD 2.25 per
share, resulting in a £183,000 fair value
adjustment.
|
Non-current
Company
|
2021
£’000
|
2020
£’000
|
|
|
|
|
|
At 1
January
|
-
|
-
|
|
Additions
|
73
|
-
|
|
At 31 December
|
73
|
-
|
Non-current investments include:
Luxor Technology Corporation as described
above.
16.
INVESTMENTS
ACCOUNTED FOR USING THE EQUITY METHOD
|
|
|
|
As at 31 December 2021
|
As at 31 December 2020
|
|
|
|
|
|
|
|
|
|
|
£000’s
|
£000s
|
|
Opening
balance
|
|
|
-
|
-
|
|
Acquired
during the period
|
|
|
8,444
|
-
|
|
Share
of loss
|
|
|
(1,198)
|
|
|
Share
of fair value gains on intangible assets through other
comprehensive income
|
|
|
6,571
|
|
|
Closing balance
|
|
|
13,817
|
-
|
Set out
below are the associates of the Group as at 31 December 2021,
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
|
|
Pluto
Digital PLC
|
Hill
Dickinson LLP, 8th Floor The Broadgate Tower, 20 Primrose Street,
London, United Kingdom, EC2A 2EW
|
24.65%
|
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 £1,091,850. Further to this in a
second round of funding the Group invested an additional
£7,352,970 on 8 March 2021. In addition the Argo holds
121,666,666 warrants as 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 2021
including the exercise of the share warrants.
Argo
owns 24.65% of the total share capital and voting rights of the
business and is entitled to nominate one director to the Pluto
Board of Directors.
Pluto
is a crypto technology company that connects Web 3.0 decentralised
technologies to the global economy. Pluto identifies key emerging
areas and projects in the crypto sphere, then deploys its business,
networks and technical expertise to create value for crypto
partners, projects and Pluto shareholders.
Pluto
incubates and advises digital asset projects based on decentralised
technologies, decentralised finance and networks such as Ethereum
and Polkadot. Additionally, Pluto supports the operation of
proof-of-stake networks by staking and operating validator nodes.
Pluto represents a strategic partnership for the Group as it
diversifies its activities in the crypto space.
Pluto
Digital PLC 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 and the unaudited management accounts for the period from 1
October 2021 to 31 December 2021 have been made available by Pluto
to the Group and the figures in the above represent Argo’s
share of the loss and gain on the fair value of the intangible
assets (net of deferred tax).
Summarised financial information for associates
Set out
below is the summarised financial information for Pluto Digital plc
which is accounted for using the equity method.
Summarised Statement of Financial Position
|
|
|
|
Pluto Digital plc
|
|
|
|
|
|
As at 31 December
|
|
|
|
|
|
2021
£000’s
|
|
|
Current
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
1,759
|
|
|
Other
current assets (excluding cash)
|
|
|
335
|
|
|
Total
current assets
|
|
|
2,094
|
|
|
Trade
payables
|
|
|
88
|
|
|
Other
current liabilities (excluding trade payables)
|
|
|
1,494
|
|
|
Total
current liabilities
|
|
|
1,582
|
|
|
Non-current
|
|
|
|
|
|
Tangible
fixed assets
|
|
|
49
|
|
|
Investments
and other non-current assets
|
|
|
56,000
|
|
|
Total
non-current assets
|
|
|
56,049
|
|
|
Financial
liabilities
|
|
|
2,807
|
|
|
Total
non-current liabilities
|
|
|
2,807
|
|
|
Net assets
|
|
|
53,754
|
|
Pluto
was incorporated in 2021, therefore, no comparatives are
available.
Summarised Statement of Comprehensive Income, Pluto Digital
plc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 12 – December 31, 2021
£000’s
|
|
Operating
costs and expense
|
|
|
(7,652)
|
|
Realised
gains – digital assets
|
|
|
2,394
|
|
Loss
from continuing operations
|
|
|
(5,258)
|
|
Income
tax expense
|
|
|
575
|
|
Post-tax
loss from continuing operations
|
|
|
(4,867)
|
|
Other
comprehensive income
|
|
|
26,991
|
|
Total comprehensive Income
|
|
|
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
|
|
|
|
2021
£000’s
|
|
Summarised financial information
|
|
|
|
|
Net
assets at acquisition
|
|
|
34,228
|
|
Profit/(loss)
for the period
|
|
|
(4,867)
|
|
Other
comprehensive income
|
|
|
26,691
|
|
Foreign
exchange differences
|
|
|
-
|
|
Closing net assets
|
|
|
56,052
|
|
Interest
in associates (24.65%; 0%)
|
|
|
13,817
|
|
Goodwill
|
|
|
-
|
|
Carrying value
|
|
|
13,817
|
17.
BUSINESS
COMBINATION
GPUone subsidiaries acquired from GPUone Holding Inc.
On 11 May 2021, the Group acquired 100% of the share capital of
GPUone 9377-2556 and GPUone 9366-5230 from its shareholder GPUone
Holding Inc. for a total consideration of £5,537,012;
consisting of £212,936 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
GPUone subsidiaries loss amounted to £3,369,213 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 GPUone entities were
dormant up until the date of acquisition, when the relevant assets
and liabilities acquired were transferred by GPUone 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 £668,179 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
GPUone 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
|
2021
Total
|
2020
Website
|
||||
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
||||
|
Cost
|
|
|
|
|
|
|
||||
|
At 1
January 2020
|
|
-
|
-
|
671
|
671
|
671
|
||||
|
|
|
|
|
|
|
|
||||
|
Additions
|
|
80
|
18,216
|
-
|
18,296
|
-
|
||||
|
Disposals
|
|
-
|
(12,792)
|
-
|
(12,792)
|
-
|
||||
|
At 31
December 2021
|
|
80
|
5,424
|
671
|
6,175
|
671
|
||||
|
|
|
|
|
|
|
|
||||
|
Amortisation and impairment
|
|
|
|
|
|
|
||||
|
At 1
January 2020
|
|
-
|
-
|
303
|
303
|
190
|
||||
|
Foreign
exchange movement
|
-
|
-
|
9
|
9
|
-
|
|||||
|
Impairment
|
|
-
|
535
|
-
|
535
|
-
|
||||
|
Fair
value gain
|
|
-
|
(414)
|
-
|
(414)
|
-
|
||||
|
Amortisation
charged during the period
|
-
|
-
|
138
|
138
|
113
|
|||||
|
At 31
December 2021
|
|
-
|
121
|
450
|
571
|
303
|
||||
|
|
|
|
|
|
|
|
||||
|
Balance At 31 December 2021
|
80
|
5,303
|
221
|
5,604
|
368
|
|||||
|
|
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
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,
those assets (immaterial in total) held longer term are
inaccessible have been valued at either cost or £nil depending
upon the information available as at the year
end.
|
|||||||||
|
|
As at 31 December 2021
|
|
|
|
||||||
|
|
Crypto asset name
|
|
Coins/tokens
|
Fair value
£000
|
||||||
|
|
Polkadot – DOT
|
|
71,303
|
1,527
|
||||||
|
|
Ethereum - ETH
|
|
558
|
1,415
|
||||||
|
|
Cosmos Hub – ATOM
|
|
31,789
|
601
|
||||||
|
|
Solana - SOL
|
|
6,249
|
579
|
||||||
|
|
USDC (stable coin – fixed to USD)
|
|
274,110
|
203
|
||||||
|
|
Alternative coins
|
|
-
|
978
|
||||||
|
|
At 31 December 2021
|
|
|
5,303
|
||||||
19.
TANGIBLE
FIXED ASSETS
|
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 30
December 2021
|
8
|
-
|
18,507
|
-
|
65
|
229
|
18,810
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
|
|
|
At 1
January 2021
|
7,379
|
|
10,487
|
-
|
-
|
-
|
17,904
|
|
At 31 December 2021
|
350
|
49
|
39,992
|
61,306
|
20
|
10,237
|
111,954
|
|
|
|
|
|
|
|
|
|
No
depreciation has been charged on the Texas land and buildings
additions, which are included within assets under construction, as
they are yet to come into use. 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. The Group used ordinary shares as payment
to acquire DPN LLC, part of which was issued during the period
amounting to £3,520,844, and a further £8,658,851 which
is due to be paid in ordinary shares and included within
liabilities.
One of
the data centres acquired through the GPUone acquisition owns a
building on long term leasehold land (expiring in July 2072).
Details of the outstanding lease liability can be found in note
28.
As per
note 17 the directors have obtained independent valuations of both
the Texas land and data centres all of which supports the carrying
value of those assets. CBRE Limited performed the valuations for
the Mirabel building and Baie-Comeau property using the income
method.
|
Group
|
Right of use Assets
|
Mining and Computer Equipment
|
Data centres including improvement
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Cost
|
|
|
|
|
|
At 1
January 2020
|
-
|
17,833
|
85
|
17,918
|
|
|
|
|
|
|
|
Foreign
exchange movement
|
-
|
(136)
|
-
|
(136)
|
|
Additions
|
7,379
|
1,808
|
-
|
9,187
|
|
Disposals
|
-
|
(1,640)
|
-
|
(1,640)
|
|
At 31
December 2020
|
7,379
|
17,865
|
85
|
25,329
|
|
|
|
|
|
|
|
Depreciation and impairment
|
|
|
|
|
|
At 1
January 2020
|
-
|
2,488
|
31
|
2,519
|
|
Foreign
exchange movement
|
-
|
15
|
-
|
15
|
|
Depreciation
charged during the period
|
-
|
5,896
|
17
|
5,913
|
|
Depreciation
on Disposals
|
-
|
(1,021)
|
-
|
(1,021)
|
|
At 31
December 2020
|
|
7,377
|
48
|
7,425
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
At 1
January 2020
|
-
|
15,345
|
54
|
15,399
|
|
At 31 December 2020
|
7,379
|
10,487
|
37
|
17,904
|
|
|
|
|
||
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 did
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
|
20.
OTHER
RECEIVABLES (NON-CURRENT)
|
|
|
|
As at 31 December 2021
|
As at 31 December 2020
|
|
|
|
|
|
|
|
|
|
|
£’000
|
£’000
|
|
Deposits
|
|
|
|
|
|
Brought
forward
|
|
|
4,115
|
4,151
|
|
Exchange
movement
|
|
|
-
|
(36)
|
|
Cancelled
on acquisition of GPUone subsidiaries
|
|
|
(4,115)
|
-
|
|
Total carrying amount of other receivables
|
|
|
-
|
4,115
|
On this deposit was used as part of the acquisition of the GPUone
Holding Inc subsidiaries detailed in note 17.
|
|
|
Group
2021
|
Company
2021
|
Group
2020
|
Company
2020
|
|
|
|
|
|
|
|
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Prepayments
and other receivables
|
|
13,194
|
8,008
|
812
|
108
|
|
Mining
equipment prepayments
|
|
47,426
|
-
|
-
|
-
|
|
Other
taxation and social security
|
|
2,739
|
590
|
1,364
|
78
|
|
Total trade and other receivables
|
|
63,359
|
8,598
|
2,176
|
186
|
Mining
equipment prepayments consist of payments made and due on mining
equipment due to arrive by the end of 2021. Payments to ePIC ASIC
Asia Limited (“ePIC”) comprise £3,430k, True North
£2,366k and the balance of £41,630k was paid to Bitmain
in advance of machine purchases to be received after the period
end.
In February 2021, the Group entered into an agreement with ePIC (a
designer and manufacturer of mining machines), which gave the Group
priority access to next generation mining machines on a
non-exclusive basis. As part of the agreement, the Group will
assist in the development and testing of future products and will
provide space and capacity at our Mirabel facility for ePIC’s
research and innovation engineering teams to assist in the
development of future mining machines. In August 2021, based on
limitations of technology, Argo and ePIC agreed to amend their
agreement. Under the amended agreement, the initial purchase order
was cancelled and, at Argo’s option, the $5 million deposited
with ePIC, in whole or in part, can be applied to the purchase of
ePIC mining machines or ePIC common stock or repaid in
full.
Other
taxation and social security consist of purchase tax recoverable in
the UK and Canada. GST and QST debtors are greater than 90 days as
at 31 December 2021.
The directors consider that the carrying amount of trade and other
receivables is equal to their fair value.
COMPANY - INTERCOMPANY
|
|
|
Company
2021
|
Company
2020
|
|
|
|
£’000
|
£’000
|
|
Amounts
due from group companies
|
|
175,859
|
22,876
|
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.
22.
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. The Group had used 1,504 Bitcoin as
collateral for a loan see note 27, at that point the loan
collateral was in excess of the requirements under the loan
agreement.
During the year, as a result of the launch of its non-mining
activities 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 £80,759k. The breakdown of which can be seen
below:
|
Group
|
|
|
|
|
|
|
|
|
2021
£’000
|
2020
£’000
|
|
At 1 January
|
|
|
4,637
|
1,041
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
Crypto assets purchased and received
|
|
|
16,569
|
9,897
|
|
Crypto assets mined
|
|
|
70,325
|
18,948
|
|
Total additions
|
|
|
86,894
|
28,845
|
|
|
|
|
|
|
|
Disposals
|
|
|
|
|
|
Crypto assets sold
|
|
|
(12,400)
|
(27,318)
|
|
Total disposals
|
|
|
(12,400)
|
(27,318)
|
|
|
|
|
|
|
|
Fair value movements
|
|
|
|
|
|
Gain/(loss) on crypto asset sales
|
|
|
437
|
(14)
|
|
Movements on crypto assets held at the year end
|
|
|
1,191
|
2,083
|
|
Total fair value movements
|
|
|
1,628
|
2,069
|
|
|
|
|
|
|
|
At 31 December
|
|
|
80,759
|
4,637
|
|
|
|
|
|
|
|
Carrying value of digital assets pledged as collateral
|
|
|
49,759
|
-
|
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. The Group has used 1,504 Bitcoin as
collateral for a loan - see note 27.
As at 31 December 2021 the above digital assets solely comprised
2,441 Bitcoin.
|
As at 31 December 2020 (audited)
|
|
|
|
|
Crypto asset name
|
|
Coins/tokens
|
Fair value
£000
|
|
Bitcoin - BTC
|
|
183
|
3,930
|
|
Polkadot – DOT
|
|
75,000
|
515
|
|
Ethereum - ETH
|
|
254
|
138
|
|
Binance Coin - BNB
|
|
1,243
|
34
|
|
USDT,USDC & Tether (stable coin – fixed to
USD)
|
|
26,509
|
19
|
|
Alternative coins
|
|
-
|
1
|
|
At 31 December 2020
|
|
|
4,637
|
23.
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 2021 ‘000
|
Number of options/warrants exercisable 2021 ‘000
|
|
Warrants
|
15
January 2021
|
15
January 2031
|
£1.25
|
240
|
240
|
|
Warrants
|
19
April 2021
|
19
March 2024
|
£1.35
|
224
|
149
|
|
Warrants
|
19
January 2021
|
18
January 2026
|
£0.87
|
110
|
110
|
|
Warrants
|
17 June
2021
|
1 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
2024
|
£0.16
|
537
|
357
|
|
Options
|
5
February 2020
|
4
February 2030
|
£0.07
|
2,254
|
1,937
|
|
Options
|
5
February 2020
|
4
February 2030
|
£0.07
|
3,700
|
3,463
|
|
Options
|
3
February 2021
|
2
February 2031
|
£0.94
|
232
|
106
|
|
Options
|
27 June
2021
|
26 June
2031
|
£1.35
|
500
|
83
|
|
Options
|
24 June
2021
|
23 June
2031
|
£1.26
|
1,000
|
167
|
|
Options
|
1 July
2021
|
30 June
2031
|
£1.16
|
500
|
83
|
|
Options
|
13 July
2021
|
12 July
2031
|
£1.00
|
1,000
|
167
|
|
Options
|
22
September 2021
|
22
September 2031
|
£1.57
|
5,000
|
479
|
|
Options
|
17
December 2021
|
16
December 2031
|
£0.86
|
870
|
12
|
|
Options
|
23
November 2021
|
23
November 2031
|
£1.30
|
500
|
14
|
|
|
|
|
|
17,689
|
8,389
|
|
|
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
|
|
|
Number of options and warrants ‘000
|
Weighted average exercise price £
|
|
At 1
January 2020
|
45,037
|
0.14
|
|
Granted
|
11,400
|
0.07
|
|
Exercised
|
(9,686)
|
0.16
|
|
Lapsed
|
(5,549)
|
0.16
|
|
Outstanding
at 31 December 2020
|
41,202
|
0.13
|
|
Exercisable
at 31 December 2020
|
34,439
|
0.13
|
The
weighted average remaining contractual life of options and warrants
as at 31 December 2021 is 102 months (2020 -29 months). If the
exercisable shares had been exercised on 31 December 2021 this
would have represented 2% (2020 – 11%) 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%
|
|
15 January 2021
|
1.07
|
1.25
|
112%
|
10 years
|
0.01
|
0%
|
|
19 January 2021
|
0.94
|
0.87
|
112%
|
5 years
|
0.01
|
0%
|
|
3 February 2021
|
0.94
|
0.94
|
112%
|
10 years
|
0.01
|
0%
|
|
19 April 2021
|
1.35
|
1.35
|
112%
|
3 years
|
0.01
|
0%
|
|
17 June 2021
|
1.35
|
1.50
|
112%
|
3 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%
|
24.
ORDINARY
SHARES
|
|
|
As at 31 December
2021
|
As at 31 December 2020
|
|
|
|
£’000
|
£’000
|
|
Ordinary share capital
|
|
|
|
|
Issued and fully paid
|
|
|
|
|
303,435,997
Ordinary Shares of £0.001 each
|
|
303
|
294
|
|
Issued in the period
|
|
|
|
|
164,646,338
Ordinary Shares of £0.001 each
|
|
165
|
-
|
|
Fully paid not yet issued
|
|
|
|
|
Ordinary
Shares of £0.001 each
|
|
-
|
9
|
|
468,082,335
Ordinary Shares of £0.001 each
|
|
468
|
303
|
|
|
|
|
|
|
Share premium
|
|
|
|
|
At
beginning of the period
|
|
1,540
|
25,252
|
|
Cancelled
during the period
|
|
-
|
(25,252)
|
|
Issued
in the period
|
|
150,977
|
-
|
|
Issue
costs
|
|
(12,936)
|
-
|
|
Fully
paid not yet issued
|
|
-
|
1,540
|
|
At the
end of period
|
|
139,581
|
1,540
|
|
|
|
|
|
|
|
|||
25.
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.
|
|
|
|
|
|
|
|
|
|
|
Group 2021
|
Company 2021
|
Group 2020
|
Company 2020
|
|
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Trade
payables
|
|
|
10,259
|
8,023
|
548
|
10
|
|
Accruals
and other payables
|
|
|
4,986
|
141
|
271
|
159
|
|
Short
term loans
|
|
|
-
|
-
|
116
|
-
|
|
Other
taxation and social security
|
|
|
-
|
-
|
1
|
1
|
|
Total trade and other creditors
|
|
|
15,245
|
8,164
|
936
|
170
|
Within
trade payables is £7,193,611 (2020: £nil) 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.
Variable consideration
As part
of the acquisition of DPN LLC up to a further 8.6m of shares being
payable if certain contractual milestones related to the facility
are fulfilled.
The
amount payable as contingent consideration is payable in shares and
as such is revalued as at the balance sheet date and any gain or
loss is recognised in the profit and loss statement (£236k see
note 26).
If any
of the milestones are not achieved then the difference between
those movements in the contingent consideration are also recognised
in the profit and loss account (£352k see note
8).
27.
LOANS
AND BORROWINGS
|
|
|
|
||
|
Non-current liabilities
|
As at 31 December 2021
£’000
|
As at 31 December 2020
£’000
|
||
|
Issued
debt - bond
|
26,908
|
-
|
||
|
Assumed
mortgage on acquisition
|
3,391
|
-
|
||
|
Total
|
30,299
|
-
|
||
|
Current liabilities
|
|
|
||
|
Short
term loan
|
22,239
|
-
|
||
|
Assumed
mortgage on acquisition
|
1,152
|
-
|
||
|
Total
|
23,391
|
-
|
||
The
mortgages are secured against the two buildings at Mirabel and Baie
Comeau are repayable over periods from 15 months to 60 months at
interest rates of between 3% and 5% respectively.
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 will be used, in conjunction with funds raised
previously, to continue the build-out the Texas data centre,
Helios. The short-term loan is a Bitcoin collateralised loan with
an interest rate of 8% per annum. The loan is payable on
demand.
In
November 2021, the Group issued an unsecured 5 year bond with an
interest rate of 8.75%. The directors do not consider that there is
any variance between the fair value of the borrowings and the
carrying amount. The bonds will 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 bond is
listed on the Nasdaq Global Select Market under the symbol
ARBKL.
28.
LEASE
LIABILITIES
|
|
|
|
As at 31 December 2021
|
As at 31 December 2020
|
|
|
|
|
|
£’000
|
£’000
|
|
|
Lease
liability – current
|
|
|
7
|
3,470
|
|
|
Lease
liability – non current
|
|
|
370
|
3,910
|
|
During
the year as part of the acquisition of the GPUone subsidiaries (see
note 17) the company acquired a lease on the land of one of the
data centres. This is a long term lease expiring in 2072 at an
interest rate of 5.5% with limited conditions, which in the opinion
of the directors will be met. The material condition of this lease
is that CAD 1.5m will be spent on the buildings to maintain upkeep
during the lease period.
In late
2020, the company entered into a lease agreement with Celsius
Network for mining hardware at an interest rate of 12% per annum.
In December 2021, the company settled the outstanding amount of the
lease.
During the year £114k of interest was paid in respect of the
assumed mortgages and £8k was paid in respect of the land
lease liability.
29.
FINANCIAL
INSTRUMENTS
|
|
Group
2021
|
Company
2021
|
Group
2020
|
Company
2020
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Carrying amount of financial assets
|
|
|
|
|
|
Measured
at amortised cost
|
|
|
|
|
|
-
Mining equipment
prepayments
|
47,426
|
-
|
-
|
-
|
|
-
Trade and other
receivables
|
13,194
|
183,867
|
145
|
22,949
|
|
-
Cash and cash
equivalents
|
11,803
|
126
|
2,051
|
1,456
|
|
Measured
at fair value through profit or loss
|
403
|
73
|
1,393
|
-
|
|
Total carrying amount of financial assets
|
72,826
|
184,066
|
3,589
|
24,405
|
|
|
|
|
|
|
|
Carrying amount of financial liabilities
|
|
|
|
|
|
Measured
at amortised cost
|
|
|
|
|
|
- Trade and other
payables
|
10,259
|
8,163
|
548
|
10
|
|
- Short term
loans
|
23,391
|
-
|
116
|
-
|
|
- Long term
loans
|
3,391
|
-
|
-
|
-
|
|
- Issued debt -
bonds
|
26,908
|
26,908
|
|
|
|
- Lease
liabilities
|
377
|
-
|
7,409
|
-
|
|
Measured at fair value
|
|
|
|
|
|
- Fair value of
contingent consideration
|
8,071
|
8,071
|
|
|
|
Total carrying amount of financial liabilities
|
72,397
|
43,142
|
8,073
|
10
|
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 2021 and 31 December
2020.
|
|
|
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
|
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Assets
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Financial
assets at fair value through profit or loss
|
|
|
|
|
|
|
Equity
holdings
|
|
-
|
-
|
1,393
|
1,393
|
|
Digital
assets
|
|
-
|
4,637
|
-
|
4,637
|
|
Total at 30 December 2020
|
|
-
|
4,637
|
1,393
|
6,030
|
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 year end date as the
amount is to be paid in Argo shares.
30.
COMMITMENTS
The
Group’s material contractual commitments relate to the master
services agreement with Core Scientific, which provides hosting,
power and support services. 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.
Capital
expenditure contracted for at the year end of the reporting period
but not recognised as liabilities, relating to the Texas assets in
the course of construction, amounted to
£9,639,000.
31.
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: £36,769
paid to POMA Enterprises Limited in respect of fees of Matthew Shaw
(Non-executive director); £534,683 due to Vernon Blockchain
Inc in respect of fees of Peter Wall (CEO), of which £215,586
was outstanding at the year end.
From
Argo Blockchain PLC, Alex Appleton (CFO) through Appleton Business
Advisors Limited was due £215,844 during the year, a bonus of
£92,515 was outstanding at the year end. Ian MacLeod
(Chairman) through Tenuous Holdings was paid £209,100, this
was all paid as at the year end.
Pluto Digital PLC
On 3
February 2021 Argo invested in Pluto Digital PLC, a crypto venture
capital and technology company. The investment was satisfied with
75,000 Polkadot with a fair value at the time of £1,091,850.
Further to this in a second round of funding Argo invested a
further £7,352,970 on 8 March 2021. There have been no
transactions with this associate during the period.
Argo
owns 24.65% of the total share capital and voting rights of the
business and is entitled to nominate a director to the Pluto Board
of Directors. In accordance with IAS28 the Group considers the
Pluto Digital PLC investment as an associate and has been accounted
for accordingly.
32.
CONTROLLING
PARTY
There is no controlling party of the Group.
33.
POST
BALANCE SHEET EVENTS
In
mid-January 2022 Argo announced that the group invested
approximately 10% of the group's crypto assets in its "HODL"
to Argo Labs. Argo Labs is the group’s in-house
innovation arm established to identify opportunities within the
disruptive and innovative sectors of the cryptocurrency ecosystem
while supporting the decentralization of various blockchain
protocols. Argo Labs is primarily focused on two key areas:
network participation and strategic diversification through
the efficient deployment of the company's crypto treasury
assets. Network participation consists of providing
infrastructure support, running nodes and validators, and staking
innovative projects. Efficient deployment of the group's
crypto treasury assets includes, among other things, supporting
early-stage projects and participating in decentralized finance
(DeFi), as well as the NFT & metaverse ecosystem, in each case
in furtherance of the group's general business
operations.
In a
statement released 7 January 2022 it was announced that
construction of Argo's 200 MW flagship cryptocurrency mining
facility, Helios, in Dickens County, Texas facility remains on
time and the main structure, outside facade, and roof have now been
completed. The next phase of construction and build out of
essential infrastructure are ongoing, with a projected
completion date in the first half of 2022. Furthermore, in early
March 2022 the company announced that it has placed an order with
PA Transformer for four additional Main Power Transformers which
will provide an additional 600 MW of total power to Argo's Helios
facility. They are identical in specification to the initial order
of transformers the group is currently installing on site, and they
will be delivered in Q1 and Q2 2023.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
Date:
27 04 2022
|
ARGO BLOCKCHAIN PLC
By:
Name:
Peter WallTitle: Chief Executive Officer
Name:
David ZapffeTitle: General Counsel
|