ARGO BLOCKCHAIN PLC
Company Registration No. 11097258 (England and Wales)
ARGO BLOCKCHAIN PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
1
ARGO BLOCKCHAIN PLC
COMPANY INFORMATION
Directors
Company secretary
Company number
Registered office
Auditor
Broker
Bankers
Registrar
Solicitors
P G Wall
A Appleton
R Chopra
S Gow
M Perrella
M I Shaw
A Appleton
11097258
Argo Blockchain PLC
9th Floor, 16th Great Queen Street,
London, England, WC2B 5DG
PKF Littlejohn LLP
15 Westferry Circus, Canary Wharf
London, United Kingdom
E14 4HD
finnCap Limited
1 Bartholomew Close
London, United Kingdom
SW1E 5DH
Canadian Imperial Bank of Commerce
South Vancouver Island, 1175 Douglas
Street, Victoria, BC, Canada, V8W 2E1
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol, United Kingdom
BS13 8AE
Fladgate LLP
16 Great Queen Street
London, United Kingdom
WC2B 5DG
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ARGO BLOCKCHAIN PLC
CONTENTS PAGE
COMPANY INFORMATION ......................................................................................................................................... 2
CONTENTS PAGE ...................................................................................................................................................... 3
BOARD OF DIRECTORS ............................................................................................................................................ 7
STRATEGIC REPORT ................................................................................................................................................. 8
DIRECTORS’ REPORT ............................................................................................................................................. 14
REMUNERATION COMMITTEE REPORT ............................................................................................................... 19
CORPORATE GOVERNANCE REPORT .................................................................................................................. 32
DIRECTORS’ RESPONSIBILITIES STATEMENT .................................................................................................... 35
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARGO BLOCKCHAIN PLC .................................. 36
GROUP STATEMENT OF COMPREHENSIVE INCOME ......................................................................................... 43
GROUP STATEMENT OF FINANCIAL POSITION ................................................................................................... 44
COMPANY STATEMENT OF FINANCIAL POSITION .............................................................................................. 46
COMPANY STATEMENT OF CHANGES IN EQUITY .............................................................................................. 50
GROUP STATEMENT OF CASH FLOWS ................................................................................................................ 51
COMPANY STATEMENT OF CASH FLOWS ........................................................................................................... 53
NOTES TO THE FINANCIAL STATEMENTS ............................................................................................................ 54
1. COMPANY INFORMATION .......................................................................................................................... 54
2.
3.
4.
5.
6.
BASIS OF PREPARATION ........................................................................................................................... 54
ACCOUNTING POLICIES ............................................................................................................................. 55
FINANCIAL RISK FACTORS ........................................................................................................................ 63
ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS......................................... 65
KEY JUDGEMENTS AND ESTIMATES ........................................................................................................ 65
7. REVENUES ................................................................................................................................................... 67
8.
9.
EXPENSES BY NATURE .............................................................................................................................. 67
AUDITOR’S REMUNERATION ..................................................................................................................... 68
10. EMPLOYEES ................................................................................................................................................ 68
11. DIRECTOR’S REMUNERATION .................................................................................................................. 69
12. EARNINGS PER SHARE .............................................................................................................................. 69
13. TAXATION ..................................................................................................................................................... 69
14.
INVESTMENT IN SUBSIDIARIES ................................................................................................................. 71
15.
INVESTMENTS AT FAIR VALUE THROUGH INCOME OR LOSS .............................................................. 72
16.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ......................................................... 73
17. BUSINESS COMBINATION .......................................................................................................................... 75
18.
INTANGIBLE FIXED ASSETS ...................................................................................................................... 76
19. TANGIBLE FIXED ASSETS .......................................................................................................................... 78
20. OTHER RECEIVABLES (NON-CURRENT) .................................................................................................. 80
21. TRADE AND OTHER RECEIVABLES / INTERCOMPANY .......................................................................... 80
22. DIGITAL ASSETS ......................................................................................................................................... 81
23. SHARE OPTIONS AND WARRANTS ........................................................................................................... 82
24. ORDINARY SHARES .................................................................................................................................... 84
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ARGO BLOCKCHAIN PLC
25. RESERVES ................................................................................................................................................... 84
26. TRADE AND OTHER PAYABLES ................................................................................................................ 85
27. LOANS AND BORROWINGS ....................................................................................................................... 85
28. LEASE LIABILITIES ...................................................................................................................................... 86
29. FINANCIAL INSTRUMENTS ......................................................................................................................... 86
30. COMMITMENTS ........................................................................................................................................... 88
31. RELATED PARTY TRANSACTIONS ............................................................................................................ 88
32. CONTROLLING PARTY ................................................................................................................................ 88
33. POST BALANCE SHEET EVENTS ............................................................................................................... 88
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ARGO BLOCKCHAIN PLC
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
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ARGO BLOCKCHAIN PLC
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
27 April 2022
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ARGO BLOCKCHAIN PLC
BOARD OF DIRECTORS
Peter Wall (CEO and Interim Executive Chairman)
Peter Wall is the CEO of Argo Blockchain. Peter launched the company alongside the Argo management team and
runs the company from his base in Canada. He began his entrepreneurial journey when he co-founded the first
coworking space in Bali, Hubud, a dedicated space for techies, startups, and change-makers. Peter is passionate
about how blockchain and cryptocurrencies can impact our everyday lives. Known as a guy who gets things done,
Peter’s varied career highlights include work as a technology entrepreneur, journalist, and filmmaker.
Alex Appleton (CFO and Executive Director)
Alex Appleton (CA) is the CFO of Argo Blockchain and has been with the company since [2020]. Alex is a member of
the Institute of Chartered Accountants of Scotland and brings [19] years of experience in auditing and corporate
finance. He brings 8 years of board level experience to the role as both a Finance Director and as Chief Operations
Officer. Alex has previously held roles within large multinational organizations and worked within the cryptocurrency
sector. He specializes in financial planning, business analysis and financial modelling.
Raghav Chopra (Non-Executive Director)
Raghav Chopra is a digital assets and technology investor with over 15 years of experience. He was most recently a
Portfolio Manager for AllianceBernstein LP, and has a decade of experience in managing a significant and wide range
of technology investments at leading hedge funds. Prior to that, Mr. Chopra was an Associate in private equity at The
Carlyle Group and an Analyst in investment banking at Goldman, Sachs & Co. Mr. Chopra serves on the Board of the
Harvard Club of New York City Foundation and is a member of the Economic Club of New York.
Sarah Gow (Non-Executive Director)
Sarah Gow has over 19 years of experience in the banking industry, including over 11 years at Citigroup Asset
Management where she served as a Director of Global Operations in New York as well as the Head of Operations in
London. She also worked at HSBC Global Asset Management for two years as a Project Manager. She was also a
founding partner of UK-based asset management company, TrinityCapM Ltd.
Maria Perrella (Non-Executive Director)
Maria Perrella most recently served as the Chief Financial Officer of MDA, a Canadian-based international space
mission partner, and the previous twelve years at ATA, a TSX-listed automation company with over 4,500 employees
across six countries. Her various roles have allowed her to develop skills in financial planning and corporate
governance and compliance, and her many years as a Chief Financial Officer have provided her with extensive
experience in M&A, capital markets, and strategic corporate finance. Maria is a Chartered Public Accountant in
Ontario, Canada
Matthew Shaw (Non-Executive Director)
Matthew Shaw brings over 25 years' experience as an international banker, corporate adviser and serial entrepreneur
specialising in the technology and the cryptocurrency sectors. His current portfolio of leadership roles include Protos
Asset Management, a Swiss company he founded that manages a cryptocurrency fund, which invests in early stage
cryptocurrency and blockchain businesses and actively manages risk for liquid tokens using advanced quantitative
strategies. He is also currently CEO of Blimp Technologies, a real estate technology company which incorporates a
cryptocurrency token and is also president of a proprietary family investment company investing in digital assets,
fintech and other technology sectors.
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ARGO BLOCKCHAIN PLC
STRATEGIC REPORT
The directors present their strategic report on the Group for the year ended 31 December 2021.
Principal activity
The Group’s principal activity is that of cryptocurrency mining.
Review of the business and future developments
Argo Blockchain plc (the “Company”) was incorporated on 5 December 2017. Argo Blockchain plc is the parent holding
company of the Argo group of companies including Argo Innovation Labs Inc., a British Columbia, Canada
Corporation, and Argo Innovation Facilities (US), Inc., a Delaware, United States Corporation (collectively “the
Group”).
On 3 August 2018 the Company’s Ordinary Shares were admitted to the standard segment of the Official List of the
UK Listing Authority and to trading on the London Stock Exchange. The Company’s Ordinary Shares traded on the
OTCQB® Venture Market under the ticker symbol “ARBKF” from January 13, 2021 until February 23, 2021, and began
trading on the OTCQX on February 24, 2021. The Company’s American Depositary Shares have traded on Nasdaq
since September 24, 2021.
My Chairman’s statement provides an in-depth review of 2021; rather than repeating that, I have concentrated on
looking forward in this report.
Argo entered 2022 with two clear goals: complete Phase 1 of the Group’s Helios facility in Dickens County, Texas
while continuing to optimize the performance of its existing mining fleet.
The Group is nearing completion of Phase 1 of Helios and anticipates mining activities to commence in May 2022.
Construction has progressed on schedule despite a challenging supply-chain environment due to COVID-19 and
geopolitical conflict. In order to fully utilize the initial 200 MW of capacity, additional capital expenditures in the range
of £93 million to £100 million ($125 million to $135 million) remain to be spent. Funding for the remaining capital
expenditures of Phase 1 is expected to come from debt financing and proceeds from selling a portion of the Group’s
Bitcoin holdings.
On the second goal, the Group continues to be in the top tier of publicly listed miners with respect to operational
performance. Mining margin for Q1 2022 averaged 73%, which remains among the highest of its peers. This mining
margin is expected to remain strong as operating costs are reduced when Helios becomes operational and the Group’s
hashrate begins to increase starting in Q2 2022.
In March 2022, Argo signed an agreement to swap approximately 10,000 S19 mining machines currently hosted at
Core Scientific facilities for new S19J Pro mining machines to be delivered to the Helios facility. Upon completion of
this machine swap, Argo will no longer have any hosted machines and will have completed its strategic pivot away
from hosting to a fully vertically-integrated model.
Argo has also improved its access to mining machines by signing a supply agreement with Intel to purchase their new
Blockscale ASIC chips. Intel’s entrance into the Bitcoin mining industry is an important step as miners continue to
innovate and develop new technologies to drive efficiency and lower costs. Argo is working with a third party to design
and manufacture custom mining rigs specifically to utilize the Blockscale ASIC chips and to be used with immersion
cooling technology. This is expected to provide Argo with proprietary technology and the potential to develop
sustainable competitive advantages. The cost for these custom mining rigs is significantly lower than the existing
options available on the market and are efficient to operate. Additionally, the supply agreement provides access to
the chips at a fixed price, which eliminates price fluctuations based on market conditions. The deployment of the
Blockscale ASIC chips is expected to begin in H2 2022 and will significantly increase Argo’s hashrate by approximately
1.8 EH/s by the end of the year.
With the installation of the 20,000 Bitmain machines and the deployment of the Intel Blockscale chips, Argo expects
its hashrate to increase from approximately 1.6 EH/s to approximately 5.5 EH/s by the end of 2022.
While the universe of Bitcoin miners continues to expand and the industry becomes more competitive, Argo is uniquely
positioned for success with its significant runway for growth at Helios and its relationship with Intel. As a result, the
Board remains optimistic for the future.
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ARGO BLOCKCHAIN PLC
Group strategy and business model
Upon completion of the machine swap agreement with Core Scientific, Argo will have completed its transformation
from using third party hosts to owning and operating its own data centres. Being vertically-integrated will allow Argo’s
management to have more operational control over its mining machines and drive increased performance.
Additionally, controlling operational expenses will be critical as the next Bitcoin halving cycle takes place in 2024 and
the Bitcoin block reward is reduced by 50%.
In 2021, Argo’s overall mining capacity increased from approximately 7,000 machines to approximately 24,000
machines, with an increase in hashrate capacity from 645 petahash to 1,605 petahash. Operations are expected to
commence at Helios in May 2022, at which point Argo will begin taking delivery of the new S19J Pro machines from
the machine swap agreement with Core Scientific, as well as the 20,000 S19J Pro machines purchased in September
2021. In H2 2022, mining machines with the Intel Blockscale ASIC chips will begin to be deployed at Helios. This is
expected to fully utilize the 200 MW of capacity at Phase 1, and Argo’s hashrate is expected to increase from 1.6 EH/s
to 5.5 EH/S by Q4 2022.
Performance of the business during the period and the position at the end of the year
The results for 2021 reflect a watershed year for Bitcoin. As Bitcoin experienced more widespread adoption, the price
hit all time highs in April 2021 ($59,911) and again in November 2021 ($67,617). Additionally, the Chinese ban on
Bitcoin mining resulted in a hashrate dip, which increased Argo’s percentage of the global hashrate. Overall, Argo’s
mining capacity increased by 149%, compared to an 8% increase in the global hashrate in 2021.
Key performance indicators
The Board monitors the activities and performance of the Group on a continuing basis. The main performance
indicator applicable for the Group is its mining profit.
KPI
Mining revenue (£000s)
Mining profit1 (£000s)
Mining margin
Bitcoin mined2
2021
£70,325
£59,268
84%
2,045
2020
£18,947
£7,737
41%
2,465
% Change
271%
660%
43%
(17%)
1. Mining profit defined as mining revenue minus direct costs (excluding depreciation and amortization of mining
equipment).
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2. Decrease in number of Bitcoin mined 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
Non-IFRS Reconciliation
The following table shows a reconciliation of Bitcoin and Bitcoin Equivalent Mining Margin to gross margin, the most
directly comparable IFRS measure, for the years ended December 31, 2021 and December 31, 2020.
Year ended
Year ended
31 December
31 December
2021
£’000
53,646
11,129
(1,191)
(437)
(3,879)
59,268
84%
2020
£’000
3,921
5,896
(2,084)
14
(10)
7,737
41%
Gross profit
Depreciation of mining equipment
Change in fair value of digital currencies
Realized gain (loss) on sale of digital currencies
Cryptocurrency management fees
Mining profit
Bitcoin and Bitcoin Equivalent Mining Margin
Principal risk and uncertainties
While the Group focuses on self-mining, the Board considers the principal risk for the Group to be volatility in the
cryptocurrency market and the general sentiment of crypto assets as a whole. The Group operates in an uncertain
environment and is subject to a number of risk factors. The Board considers the following to be of particular relevance,
but this is by no means an exhaustive list as there may be other risk factors not currently known.
Market conditions
Market conditions, including the cryptocurrency market values and general economic conditions and their effect on
exchange rates, interest rates and inflation rates, may impact the ultimate value of the Group regardless of its
operating performance. The Group also faces competition from other organisations, some of which may have greater
resources.
Cyber risk
The Group holds digital assets via software and hardware which may prove to be vulnerable to data security breaches
in the future. Data security breach incidents may compromise the confidentiality, integrity or availability of data such
that the data is vulnerable to access or acquisition by unauthorised persons. These data security breaches may result
in the unrecoverable loss of digital assets. The Group’s hardware devices and remote servers holding the Group’s
data may be breached and result in the loss of valuable data. Loss of the private keys required to access the digital
assets may result in irrecoverable loss of access to the digital assets, which may not be covered by insurance (whether
in full or part). In order to mitigate these risks, the Group holds its assets with third party specialist crypto-currency
custodians with a number of security measures in place.
Cryptocurrency price volatility
Revenues are denominated in cryptocurrency or tokens. These ‘digital assets’ can be subject to high levels of volatility,
and it may not always be possible for the Group to trade out or effectively hedge its position. The Group will always
seek to manage the price volatility risk and actively monitor its portfolio of digital assets. The majority of the Group’s
crypto assets (as per note 22) are stored in Bitcoin, which dominates the crypto market. Cryptocurrency exchange
rates have exhibited strong volatility. Many factors outside of the control of the Group can affect the market price of
cryptocurrencies, including, but not limited to, national and international economic, financial, regulatory, political,
terrorist, military, and other events, adverse or positive news events and publicity, and generally extreme, uncertain,
and volatile market conditions. Extreme changes in price may occur at any time, resulting in a potential loss of value
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ARGO BLOCKCHAIN PLC
of our entire portfolio of cryptocurrencies, complete or partial loss of purchasing power, and difficulty or a complete
inability to sell or exchange our digital currency.
Capital Raising
The Company’s activities are capital intensive and the Company may need to raise additional capital to fund its
operations, pursue growth strategies, including potential acquisitions of complementary businesses, and respond to
competitive pressures or unanticipated working capital requirements. The Company has previously raised equity and
debt, however may not be able to obtain additional debt or equity financing on favourable terms, if at all, which could
impair its growth and adversely affect its existing operations. The Company may be required to accept terms that
restrict its ability to incur additional indebtedness or to take other actions including terms that require it to maintain
specified liquidity or other ratios. In order to mitigate these risks, the Company keeps its financing requirements under
review and actively manages its activities and operations within the resources available to it.
Property and development risk
As part of the Company’s evolving strategy focused on owning and operating its own mining facilities, the Company
is developing a new mining facility in Texas. The development of the Texas mining facility may be subject to
unexpected problems and delays that could adversely impact the Company’s ability to develop or operate the project
as planned or increase the costs of the project. There a range of risks applicable to the development of the facility
and, once operational, the continued operation of the facility. In order to mitigate the risks in developing the project,
the Company has engaged suitably qualified counterparties in the development of the project, has proactively
engaged with infrastructure providers and the local authorities. Once operational, the Company will actively manage
the facility to avoid or mitigate the operational and other risks associated with owning and operating such a facility.
Climate change
The Group is aware that Bitcoin mining is power intensive and has an environmental impact as a consequence. The
Board engaged Guidehouse, a leading consultancy and solutions provider, to research and advise on science-based
solutions towards Argo's long-term strategy to eliminate its climate impact. This work provided a full climate action
plan to achieve Argo's goal of becoming a net zero greenhouse gas (GHG) company. The full climate action report
for 2020 is available on the Group’s website, and the report for 2021 is forthcoming.
Electricity Supply and Price
The Company’s activities require substantial and sustained electrical provision and its profitability is dependent on
securing acceptable electricity prices. Should electricity not be available in the quantities the Company’s operations
require (whether intermittently or for a sustained period) or should the service be unreliable, the Company’s
operations, revenue and profitability may be materially adversely affected. If the price of electricity increases (whether
as a result of local, national or international events or pressures), the Company’s profitability may be materially
adversely affected.
Technology and supply risks
Argo operates within a highly technological environment where software and hardware are consistently updated. To
ensure the Group remains as a leading provider and stays ahead of its competitors, it needs to continue to invest in
its technology, software, and hardware which requires a large amount of capital. The Company procures its software
and hardware from third party providers and is reliant on those third parties complying with their obligations to the
Company. Should a third party fail to comply with its obligations to the Company, the Company’s operations, revenue
and profitability may be materially adversely affected.
Risk relating to the Group’s business strategy
The Group is dependent on the ability of the Directors to identify suitable opportunities and to implement the Group’s
strategy. There is no assurance that the Group’s activities of mining for itself will continue to be successful even
though internal forecasts continue to suggest otherwise.
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ARGO BLOCKCHAIN PLC
Dependence on key personnel and management risks
The Group’s business is dependent on retaining the services of a small executive management team, and the loss of
a key individual could have an adverse effect on the future of the Group’s business. The Group’s future success will
also depend in large part upon its ability to attract and retain highly skilled personnel. This risk is managed by offering
salaries and share options that are competitive in the current market.
Regulatory risk
The Company operates in a rapidly evolving sector, the regulatory approach to which is not always certain and is still
developing. The Company seeks to comply with all applicable law and regulation, however the event of a breach with
any regulatory requirements may give rise to reputational, financial, or other sanctions against the Group. The Board
considers these risks seriously and designs, maintains, and reviews the policies and processes so as to mitigate or
avoid these risks. While the Board has a good record of compliance, there is no assurance that the Group’s activities
will always be compliant.
Gender composition
During the year the Group had the following gender composition of employees and directors:
Gender Composition
Directors
Senior Management
Employees
Male
4
9
31
Female
2
-
8
Promotion of the Company for the benefit of the members as a whole
The Director’s believe they have acted in the way most likely to promote the success of the Company for the benefit
of its members as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
• Consider the likely consequences of any decision in the long term
• Act fairly between the members of the Company
• Maintain a reputation for high standards of business conduct
• Consider the interests of the Company’s employees
• Foster the Company’s relationships with suppliers, customers and others
• Consider the impact of the Company’s operations on the community and the environment
The Company operates as a crypto mining business, which is inherently speculative in nature and, with volatile
revenue, at times may be dependent upon fund-raising for its continued operation. The nature of the business is well
understood by the Company’s members, employees, and suppliers, and the Directors are transparent about the cash
position and funding requirements.
The application of the s172 requirements can be demonstrated in relation to the some of the key decisions made
during 2021, in addition to the disclosures made in the Directors’ Report and the Strategic Report:
Change in strategy from third party hosting to owned and operated model: the Board believes that the management
can deliver better operational and financial performance by owning and operating the Group’s own infrastructure. This
is why the Group acquired the two data centres in Quebec and the Helios project in Texas. As Bitcoin mining becomes
more competitive and as the next halving cycle approaches, it is critical that Argo continues to be in the top tier of
miners. The vertical integration model allows for more control over operational expenses, capital expenditures, and
mining performance.
Expanding our position to Texas: in early 2021 Argo acquired the Helios project in Texas. After extensive due
diligence, the Board determined that this transformative acquisition would provide Argo with a significant runway for
growth. Additionally, the project is located in a jurisdiction that is favourable for Bitcoin mining with advantaged
electricity costs, unique demand response programs, and a stable, pro-business regulatory environment.
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ARGO BLOCKCHAIN PLC
Pursuing a dual listing on Nasdaq: while Argo has been listed on the London Stock Exchange since 2018, the Board
sought to gain access to a new and larger pool of potential investors by listing American Depositary Shares (ADS) on
Nasdaq. This strategic decision provides Argo with more flexibility around capital allocation. It also allows more
American investors, both retail and institutional, to own Argo stock and ultimately is expected to help Argo achieve a
greater valuation and increased return for its shareholders.
As a crypto mining company with operations in Canada and the United States, the Board takes seriously its ethical
responsibilities to the communities and environments in which it works.
The interests of employees are a primary consideration for the Board, and an inclusive share-option program allows
them to share in the future success of the Company. Personal development opportunities are encouraged and
supported.
This report was approved by the Board on 27 April 2022 and signed on its behalf by
Peter Wall
Interim Executive Chairman
13
ARGO BLOCKCHAIN PLC
DIRECTORS’ REPORT
General Information
The Directors present the Annual Report and audited consolidated financial statements for the year ended 31
December 2021.
The Company was incorporated on 5 December 2017. Argo Blockchain plc is the parent holding company of the
Argo group of companies including Argo Innovation Labs Inc., a British Columbia, Canada Corporation, and Argo
Innovation Facilities (US), Inc., a Delaware, United States Corporation.
On 3 August 2018 the Company’s Ordinary Shares were admitted to the standard segment of the Official List of the
UK Listing Authority and to trading on the London Stock Exchange. The Company’s Ordinary Shares traded on the
OTCQB® Venture Market under the ticker symbol “ARBKF” from January 13, 2021 until February 23, 2021, and
began trading on the OTCQX on February 24, 2021. The Company’s American Depositary Shares have traded on
Nasdaq since September 24, 2021.
Future developments
The Group continues to focus its strategy on self-mining cryptocurrencies as detailed further in the Strategic Report.
Dividends
The directors do not propose a dividend in respect of the period ended 31 December 2021.
Directors
The Board is responsible for the Company’s objectives and business strategy and its overall supervision.
Acquisition, divestment and other strategic decisions will all be considered and determined by the Board including,
when circumstances permit, whether the payment of dividends, issue or buy back of shares is appropriate.
Attendance at Board meetings:
Member
Peter Wall
Matthew Shaw
Ian MacLeod
James Savage
Marco D’Attanasio
Alex Appleton
Maria Perrella
Sarah Gow
Colleen Sullivan
Meetings
attended
13 of 13
12 of 13
7 of 7
6 of 7
5 of 7
6 of 6
6 of 6
5 of 6
2 of 4
The Board will provide leadership within a framework of appropriate and effective controls. The Board will set up,
operate and monitor the corporate governance values of the Company, and will have overall responsibility for setting
the Company’s strategic aims, defining the business objective, managing the financial and operational resources of
the Company and reviewing the performance of the officers and management of the Company’s business. The Board
will take appropriate steps to ensure that the Company complies with Listing Principles 1 and 2 as set out in Chapter
7 of the Listing Rules and (notwithstanding that they only apply to companies with a Premium Listing) the Premium
Listing Principles as set out in Chapter 7 of the Listing Rules.
The Company supports the concept of an effective Board leading and controlling the Company. The Board is
responsible for approving Company policy and strategy. It meets regularly and has a schedule of matters specifically
reserved to it for decision. Management supplies the Board with appropriate and timely information and the Directors
are free to seek any further information they consider necessary. All Directors have access to advice from the
Company Secretary and independent professionals at the Company’s expense. Training is available for new Directors
and other Directors as necessary.
14
ARGO BLOCKCHAIN PLC
All Directors are subject to re-election every three years and, on appointment, at the first AGM after appointment.
During the year, the Company established a nomination committee. Prior to this, and given the size of the Board, all
director appointments were approved by the Board as a whole.
Communications with shareholders
Communications with shareholders are given a high priority. In addition to the publication of an annual report and an
interim report, there will be regular dialogue with shareholders and analysts. The Annual General Meeting is viewed
as a forum for communicating with shareholders, particularly private investors. Shareholders may question the
Chairman and other members of the Board at the Annual General Meeting. All published information for shareholders
is also available on the Company website, including annual and interim reports, circulars, announcements and
significant shareholdings.
Accountability and Audit
The Board presents a balanced and understandable assessment of the Company's position and prospects in all
interim and price sensitive reports to regulators as well as in the information required to be presented by statutory
requirements.
During the year, the Company established an audit committee. Prior to this, and given the size of the Board all matters
normally considered by an Audit Committee were considered by the Board as a whole.
Internal control
The Board has responsibility for designing and implementing systems of internal control and for reviewing the
effectiveness of these systems. The risk management process and systems of internal control are designed to manage
rather than eliminate the risk of the company failing to achieve its strategic objectives. It should be recognised that
such systems can only provide reasonable and not absolute assurance against material misstatement or loss. As the
Company has expanded, the Company has reviewed and developed its internal systems and processes, and will
continue to do so going forwards.
Political donations and political expenditure
The Group did not make any political donations or expenditure.
Post balance sheet events
The directors have considered the impact of the Ukraine / Russia war and have not, and do not, anticipate any material
impact on the business other than the larger macroeconomic factors which are impacting all companies and
individuals.
Directors and directors’ interests
The directors who held office during the period and up to the date of signature of the financial statements were as
follows:
Director
Peter Wall
Matthew Shaw
Ian MacLeod
James Savage
Marco D’Attanasio
Alex Appleton
Maria Perrella
Sarah Gow
Raghav Chopra
Colleen Sullivan
Appointment/resignation
during the year
Appointed 1 January 2020
Appointed 17 July 2019
Resigned 28 July 2021
Resigned 29 July 2021
Resigned 29 July 2021
Appointed 29 July 2021
Appointed 29 July 2021
Appointed 29 July 2021
Appointed 23 February 2022
Appointed 29 July 2021,
resigned 8 November 2021
15
ARGO BLOCKCHAIN PLC
Directors’ share holdings
Director
Peter Wall
Sarah Gow
Matthew Shaw
Ordinary Shares at 31
December 2021
Percentage of Issued
Share Capital
1,116,000
2,740,000
137,289
0.24%
0.59%
0.03%
Directors’ option holdings
Name
Date of Grant
Aggregate
number of
options
granted
Exercise Price
Exercise
Conditions
Lapse Date
Peter Wall
25 July 2018
1,000,000
16 pence
Peter Wall
5 Feb 2020
3,700,000
7 pence
Matthew Shaw
17 July 2019
537,037
16 pence
Matthew Shaw
5 Feb 2020
294,048
7 pence
Alex Appleton
3 Feb 2021
158,898
94 pence
Alex Appleton
22 Sept 2021
1,250,000
157 pence
Matthew Shaw
22 Sept 2021
250,000
157 pence
Maria Perrella
22 Sept 2021
500,000
157 pence
16
1/3 on the first
anniversary of
admission, 1/36
of the total
options monthly
thereafter
1/12 per month
commencing of
4th month from
issue
1/3 on the first
anniversary of
admission, 1/36
of the total
options monthly
thereafter
1/12 per month
commencing of
4th month from
issue
1/24/month
starting on 4th
month from
issue
6/36th after 6
month
anniversary,
1/36th thereafter
6/36th after 6
month
anniversary,
1/36th thereafter
6/36th after 6
month
anniversary,
1/36th thereafter
25 July 2024
4 Feb 2030
17 July 2025
4 Feb 2030
2 Feb 2031
21 Sept 2031
21 Sept 2031
21 Sept 2031
ARGO BLOCKCHAIN PLC
Sarah Gow
22 Sept 2021
500,000
157 pence
6/36th after 6
month
anniversary,
1/36th thereafter
21 Sept 2031
Going Concern
The Directors, having made due and careful enquiry, are of the opinion that the Group has adequate working capital
to meet its obligations over the next 12 months. The Directors therefore have made an informed judgement, at the
time of approving the financial statements, that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. As a result, the Directors have adopted the
going concern basis of accounting in the preparation of the annual financial statements, more detail can be found in
the accounting policies (Note 3).
The Directors have considered the impact of Covid-19 on the Group, in the context of their operations and the wider
crypto currency market. The Group’s management and staff are operating remotely, and all mining facilities are
running as normal. The Directors continue to monitor the crypto currency market and consider the corresponding
difficulty adjustments to be balancing the price fluctuations. At this stage, the Directors do not envisage a long term
impact to the Group resulting from Covid-19, but will continue to monitor the situation.
Financial Risk Management
The Group has a simple capital structure and its principal financial assets are cash and digital assets. The Group is
subject to market risk by way of being exposed to volatility in crypto asset value and variations in foreign exchange
rates. The Group has little exposure to credit risk due to holding its reserves with credible institutions. The Group may
also be exposed to liquidity and capital risk, due to the nature of operations and the requirements for mining hardware
acquisition. The Group manage these risks through portfolio management and maintenance of sufficient working
capital. Further details of risks can be seen within the Strategic Report or in the Notes to the accounts.
Substantial shareholdings
Name
Ordinary Shares at date
of this report
Percentage of Share
Capital
BLOK ETF (Toroso Asset Management)
23,404,917
5.00%
These are the substantial shareholdings as at the date of the report.
Controlling shareholder
The Group does not have a controlling shareholder.
Greenhouse gas emissions
Greenhouse gas emissions, energy consumption and energy efficiency disclosures have not been provided because
the Company has consumed less than 40,000 kWh of energy during the period in the UK. However, in August 2021,
the Group announced it is the first publicly traded cryptocurrency mining company to report it has become climate
positive from Scope 1, 2 and Greenhouse Gas (GHG) emissions from the value chain associated with the Company's
respective cryptocurrency mining operations. Climate Positive means that the Company is addressing its own GHG
emissions to become carbon neutral and going even further by mitigating emissions through support of projects
outside of Argo.
The announcement marks a key milestone in the Company's climate strategy, which includes its ongoing and future
initiatives in energy efficiency, reducing e-waste, use of waste heat in partnership with local municipalities, carbon
capture, and supporting the industry with sustainability standards.
Argo has demonstrated an ongoing commitment to sustainability and believes that cryptocurrency has the potential
to spur innovation in renewable power and reduce GHG emissions. Over the past year, the Company has developed
its "Climate Positive Strategy", with input from climate strategy advisor, Guidehouse. Argo is pleased to have achieved
a number of significant milestones, including:
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ARGO BLOCKCHAIN PLC
• Purchased Renewable Energy Credits (RECs) retroactively for 2020 and for any remaining non-renewable
electricity use;
• Prioritised direct renewable purchase on-site or from a local grid;
• Purchased GHG offsets for any emissions associated with Argo value chain; and
• Purchased additional offsets such as Verified Emissions Reductions to encourage reduction of emissions
further and have a "climate positive" overall impact
Furthermore, Argo is pleased to announce that it is now a participant in the UNFCCC's Climate Neutral Now initiative.
As a participant, Argo undertakes to measure, reduce, contribute, and report emissions on a yearly basis in order to
achieve a Climate Neutral world by 2050. Argo will also release an annual climate report, providing an overview of
developments both within the Company and the wider sector.
The Company is also partnering and collaborating with competitors, consultants, and councils including REBA, RE100
and the Crypto Climate Accord to ensure the industry can derive solutions faster and more efficiently to create a more
sustainable mining industry in the long term.
Employee and business relationships
The Group consists of a small team, currently 2 Executive directors, 4 Non-executive directors and 9 (including the 2
Executive directors) key management personnel, which facilitates the direct and frequent communication between all
parties and thereby the interests of all concerned are considered on a regular basis. Due to the nature of a small team
and the wide and varied skills possessed all key strategic business decisions are discussed and analysed by all
concerned.
A significant part of any business is maintaining a good relationship with its suppliers and the Group is well aware of
the need to ensure that its current main supplier Core Scientific, which provides hosting and power facilities, is
managed carefully. We maintain a close working relationship with Core Scientific with regular meetings and an open
dialogue. As we move to an owned and operated model and we move away from Core Scientific, the key supplier
relationships going forward will be with the power companies supplying our sites, infrastructure and construction
companies and the mining machine component and main manufacturers. We seek to maintain good relationships with
all these suppliers by having regular meetings and continuing to meet our accounts payable as they fall due.
The Chairman’s statement discusses in more detail the Group’s social and community impact.
Provision of Information to Auditor
So far as each of the Directors is aware at the time this report is approved:
•
•
there is no relevant audit information of which the Company's auditor is unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant
audit information and to establish that the auditor is aware of that information.
Auditors
The auditors, PKF Littlejohn LLP have indicated their willingness to continue in office, and a resolution that they be
re-appointed will be proposed at the annual general meeting.
This report was approved by the board on 27 April 2022 and signed on its behalf by:
Peter Wall
Chief Executive Officer
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ARGO BLOCKCHAIN PLC
REMUNERATION COMMITTEE REPORT
This remuneration committee report sets out the Group’s policy on the remuneration of executive and non-executive
Directors together with details of Directors' remuneration packages and service contracts for the financial year ended
31 December 2021.
Key activities during the year
During the year, the Company established a Remuneration Committee. Prior to this, and, given the size of the Board,
all matters normally considered by the Remuneration Committee were considered by the Board as a whole.
The Company engaged Compensia and FIT Remuneration Consultants LLP to provide the Group with advice on
remuneration for the Company’s directors and senior management.
The Company developed, in light of the advice from Compensia and FIT Remuneration, a new remuneration policy
which was approved by shareholders at the General Meeting held on 6 September 2021.
In connection with the Company’s admission to Nasdaq, the Company undertook a review of the remuneration
packages for the Company’s directors and employees.
The Board, prior to the establishment of the Remuneration Committee, reviewed the fees payable to Company’s non-
executive directors.
Changes to directors’ remuneration
Following the advice received from Compensia and FIT Remuneration, the company made the following changes to
directors’ remuneration:
Director
Peter Wall
Alex Appleton
2020 Base
Salary**
£211,200
£120,000
2021 Based
Salary**
£252,018
£187,871*
*Being the pound sterling amount calculated based on the average exchange rate for the year using the Fedex closing bank rate.
** Includes payment in lieu of benefits
The changes to base remuneration were determined in light of the Company’s admission to Nasdaq, industry
comparables as reported by Compensia and FIT Remuneration, however remain below industry averages given the
strategic priorities of the Company on developing its infrastructure and operations. The Company has sought to pay
salaries which fairly compensate the executive directors for their responsibilities and time commitment to the
Company.
Discretion exercised during the year
In light of the additional significant time commitment and effort required to deliver the Company’s admission to Nasdaq
during the year, the Remuneration Committee exercised its discretion to award bonuses to each of Peter Wall
(US$130,000) and Alex Appleton (in the sum of US$75,000).
Remuneration Policy
Setting the policy
The Company sought advice from remuneration consultants in respect of the market approach to remuneration in the
US and UK respectively. The advice provided by Compensia (US) and FIT Remuneration Consultants (UK) included
benchmarking against comparable businesses. On the basis of these reports and the Company’s anticipated future
requirements, the Board has developed the Policy.
The Policy has been reviewed and approved by the independent directors, and is designed to enable the Company
to offer appropriate levels of remuneration to ensure the Company is able to attract, retain and motivate the Company’s
directors. The Policy is designed to provide appropriate incentives to reward good performance, management of risk
and the pursuit of the Company’s strategic objectives.
The Board and the independent directors have considered the guidance issued by organisations representing
institutional shareholders. The Company does not currently have a significant institutional shareholder base, and as
19
ARGO BLOCKCHAIN PLC
such has not been in a position to consider the views of such shareholders in setting the Policy. Due to the retail heavy
and disparate nature of the Company’s existing shareholder base, it has not been possible for the Board to engage
with the Company’s existing shareholder base in advance of proposing the Policy. The last Remuneration Policy was
approved at the General Meeting held on 6 September 2021 where 77% of votes were held in favour.
Historical arrangements
The Policy is without prejudice to existing remuneration awards and arrangements that existed prior to the adoption
of the Policy. At the time these existing awards expire or are exercised, new awards will be considered and granted
in line with the Policy (subject to approval of the Policy by shareholders).
Introduction:
This Directors’ Remuneration Policy (Policy) contains the information required to be set out as the directors’
remuneration policy for the purposes of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Policy applies in respect of all executive officers appointed to the Board of Directors (Executive Directors) and
non-executive directors. The Company aims to provide sufficient flexibility in the Policy to account for differences in
the market norms in each jurisdiction in which the Group operates, unanticipated changes in compensation practices
and business conditions, and to ensure the Remuneration Committee has appropriate discretion to retain its top
executives who perform. The Remuneration Committee reserves the right to approve any payments that may be
outside the terms of this Policy, where the terms of that payment were agreed before the Policy came into effect, or
before the individual became a director of the Company.
Maximum caps are provided to comply with the required legislation and should not be taken to indicate an intent to
make payments at that level. The maximum caps are valid at the time that the relevant employment agreement or
appointment letter is entered into and the caps may be adjusted to take into account fluctuations in exchange rates.
Remuneration Policy for Executive Directors
Future Policy Table – Executive Directors
Purpose and link to
strategy
Base salary
To provide fixed
remuneration at an
appropriate level, and award
for services provided.
Intended to be sufficient to
attract, retain and develop
high-calibre individuals.
Operation
Maximum opportunity
When setting base pay, the Remuneration
Committee gives consideration to a range of
factors, including but not limited to:
•
•
•
•
•
the prevailing market rate for the
services provided;
recognition of the individual’s
performance and contribution to the
Company;
the individual’s skills and expertise;
the responsibilities of the individual and
their job role; and
the relative base salaries within the
Company’s Group.
• Base pay is reviewed on an annual
basis and paid monthly.
While the Company has not
set a formal maximum,
remuneration will normally be
based on the market norm for
the role undertaken and the
experience of the candidate.
Increases will generally be in
line with the increases
awarded to the Company’s
employees, however higher
increases may be made if the
Remuneration Committee
considers it appropriate, for
example where there is:
an increase in the
responsibilities or nature of
the role; or
the individual has developed
within the role.
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ARGO BLOCKCHAIN PLC
Purpose and link to
strategy
Annual Bonus
To incentivise and reward
short term performance
against targets and individual
objectives aligned with the
Group’s strategy.
Operation
Maximum opportunity
Annual bonus awards are dependent on
performance, which is measured over one
year and the bonus becomes payable after
the year end.
The maximum annual bonus
opportunity is equivalent to
100% of base pay.
The Remuneration Committee sets the
targets annually, based on the strategic
priorities identified by the Board. The targets
are closely aligned to the Company’s
strategy and targeted to reward good
performance, management of risk and the
pursuit of the Company’s strategic
objectives.
Individual performance is reviewed following
the year end and, if the targets are met (in
whole or in part) awards are payable as
determined by the Remuneration
Committee. Where targets are partially met,
then a proportion of the maximum bonus,
determined by the Remuneration
Committee, will be payable.
The Remuneration Committee has
discretion to claw back from individuals
some or all of the cash bonus award in
certain circumstances, including but not
limited to where the individual is found to
have committed gross misconduct.
Pensions & Retirement Savings
To provide pension
contributions and retirement
savings to attract and retain
high-calibre individuals.
The pension or retirement savings
allowance for executive directors will be
based on market norms and may be paid
into a pension scheme or retirement savings
plan or taken as cash, at the election of the
relevant director.
The maximum pension
allowance that may be
provided will be capped at a
level consistent with the
pension arrangements of the
Company’s employees
generally.
Benefits
To provide a market
competitive benefits package
to attract and retain high-
calibre individuals.
The Company may offer a range of benefits,
including but not limited to private medical
insurance, company car, additional holiday
or other benefits made available by the
Company from time to time.
The level of benefits will be
based on the market norm for
the role undertaken and the
experience of the candidate.
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ARGO BLOCKCHAIN PLC
Purpose and link to
strategy
Operation
Maximum opportunity
Equity Incentives
To align the variable pay of
the executive directors with
the long term execution of
the Company’s strategy.
While the Company has not
set a formal maximum, equity
incentivisation will normally
be based on the market norm
for the role undertaken and
the experience of the
candidate.
The Company may pay cash in lieu of
benefits where it is necessary or desirable to
do so (for example, in situations where the
Company does not have sufficient number
of employees to establish company
sponsored arrangements).
Equity remuneration (commonly in the form
of share options or restricted stock units)
over Ordinary Shares or American
Depositary Shares (ADSs) depending on
the country in which the director is based.
Stretching performance targets are set by
the Remuneration Committee on grant of
the awards. The performance conditions are
determined by reference to the individual’s
job role and responsibilities, and are
designed to align the reward to both
individual performance and the performance
of the Company as a whole. The
Remuneration Committee will set the
relative weighting between the performance
measures based on, among other factors,
their relevance to the individual and their job
role and their relative importance taking into
account the Company’s strategic priorities.
Performance is usually assessed over a
three year period with vesting at the end of
the performance period. Once vested, no
further performance conditions attach to the
award.
Subject to meeting minimum performance
thresholds, the awards will vest on a
proportionate basis depending on the
performance of the individual against the
relevant performance measures, as
determined by the Remuneration
Committee. The Remuneration Committee
may adjust or waive a performance target if
the circumstances result in that performance
target no longer being applicable or
appropriate.
The Remuneration Committee has
discretion to reduce or cancel any unvested
award in certain circumstances, including
but not limited to where the individual is
found to have committed gross misconduct.
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ARGO BLOCKCHAIN PLC
Remuneration Scenarios for Executive Directors
The charts below illustrate how much the current Executive Directors could receive under different performance
scenarios in 2021. To compile the charts below, the following assumptions have been made:
•
•
•
base pay is that under the arrangements in force as at 18 August 2021;
taxable benefits are those currently in force as at 18 August 2021; and
no pension payments are currently awarded.
Director
Base Pay
Taxable Benefits
Pension
Total
Peter Wall (CEO)
£192,000
£19,200
Alex Appleton (FD)
£120,000
£nil
£nil
£nil
£211,200
£120,000
The remuneration scenarios are as follows:
Remuneration in line with
expectation
Maximum Remuneration
Share Price Appreciation
The Company’s current remuneration policy provides that all
bonuses are at the Chairman’s discretion, and therefore for the
purposes of this table a bonus payment of 12.5% of base salary has
been calculated.
The currently granted options vest over time, and are not subject to
performance conditions. As such, full vesting has been assumed for
purposes of this calculation, and the options have been valued using
the Black-Scholes model.
The Company’s current remuneration policy provides that all
bonuses are at the Chairman’s discretion, and therefore for the
purposes of this table a bonus payment of 25% of base salary has
been calculated.
The currently granted options vest over time, and are not subject to
performance conditions. As such, full vesting has been assumed for
purposes of this calculation, and the options have been valued using
the Black-Scholes model.
The share price appreciation assumes the maximum scenario a
50% increase in share price based on the share price at grant.
The currently granted options vest over time, and are not subject
to performance conditions. As such, full vesting has been assumed
for purposes of this calculation, and the options have been valued
using the Black-Scholes model.
23
ARGO BLOCKCHAIN PLC
Peter Wall (%) (See note below)
Minimum
In line
Maximum
Share Price
Appreciation
Note:
19%
18%
18%
13%
2%
2%
2%
1%
0%
3%
4%
3%
Total £
1,015,880
1,039,880
1,063,880
1,500,623
79%
77%
76%
83%
The share option payments assume that all outstanding but as yet unexercised share options vest
Wall. These share option awards were priced at the market price when the share price was
consistently significantly lower than the current market price.
Alex Appleton (%)
Minimum
In line
Maximum
Share Price
Appreciation
96%
86%
77%
73%
Base
pay
0%
0%
0%
0%
0%
10%
20%
18%
4%
4%
3%
9%
Taxable
Benefits
Bonus
Share option
payment
Total £
124,999
139,999
154,999
165,264
24
ARGO BLOCKCHAIN PLC
Approach to recruitment remuneration for executive directors
The Company's policy on the recruitment of directors is to pay a fair remuneration package for the role being
undertaken and the experience of the individual being recruited, within the limits of our approved Policy and the Future
Policy Table. The Remuneration Committee will offer a remuneration package that it considers appropriate in the
particular circumstances of the recruitment, giving due regard to the interests of the Company’s shareholders and
taking into account factors such as market practice of other companies of a similar size and sector, existing
arrangements for the other executive directors, internal relativities and market positioning. When an individual is
recruited at below market norms, they may be re-aligned over time, subject to performance in the role.
The Remuneration Committee may find it necessary to compensate a new recruit for forfeiture of entitlements as a
consequence of the recruit leaving his or her previous employment to join the Company. There is no limit to the value
of such buy-out award, however the Remuneration Committee will rigorously consider the appropriate value so as not
to pay more than the compensation being forfeited.
For external and internal appointments, the Board may agree that the Group will meet certain relocation and/or
incidental expenses as appropriate.
Service Contracts for Executive Directors
It is intended that the service contracts for new Executive Directors will not contain terms that are materially different
from those summarised below or contained in this Policy.
Notice Period
The service contracts for the Executive Directors are generally for an
indefinite term and terminable on notice. The maximum length of
notice is 12 months, however the Company may agree an initial
minimum term of not more than 2 years in certain circumstances.
Payment in lieu of notice
The Company may include the right to pay employees in lieu of
notice, determined by reference to their base salary and contractual
benefits (including pension).
Garden Leave
The Company may include the right to place employees on garden
leave.
Summary dismissal
In particular circumstances (such as gross misconduct) the Company
may summarily dismiss employees without further payment.
Directors’ and Officers’
Insurance
The Company intends to provide directors’ and officers’ liability
insurance and an indemnity to the fullest extent permitted by law and
the Company’s articles of association.
Differences in remuneration policy for other employees
The Company’s approach to determining the appropriate remuneration and reviewing the rewards of the Executive
Directors and the Group’s employees generally is the same. The Remuneration Committee takes into account the
market norms for the relevant role, with assistance from external remuneration consultants as required. The Company
seeks to ensure the benefits package is appropriate for the seniority of the role concerned.
Employees and Executive Directors will all be considered for inclusion in the Company’s equity incentive plans from
time to time, depending on their seniority.
Payments for loss of office
The Company does not make additional payments for loss of office, other than, as appropriate, payment in lieu of
notice or payments in respect of damages if the Company terminates an Executive Directors’ service contract in
breach of contract.
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ARGO BLOCKCHAIN PLC
Non-statutory redundancy payments
Executive directors are not entitled to non-statutory redundancy payments.
Payments required by law
The Remuneration Committee will may any other payments in connection with an Executive Director’s cessation of
office or employment where the payments are made in a good faith discharge of an existing legal obligation (or by
way of damages for breach of such an obligation) or by way of settlement of any claim arising in connection with the
cessation of an Executive Director’s office or employment.
Remuneration Policy for Non-Executive Directors
Future Policy Table – Non-Executive Directors
Purpose and link to strategy
Operation
Maximum opportunity
Annual Board Fees
Intended to be sufficient to
attract, retain and develop high-
calibre individuals.
Board fees for non-executive directors
are set by the Remuneration Committee,
taking into account a range of factors,
including but not limited to:
the prevailing market rate for the services
provided;
recognition of the individual’s
performance and contribution to the
Company;
the individual’s skills and expertise;
the responsibilities of the individual (for
example, their service on committees)
The aggregate ordinary
remuneration for directors is
limited to £500,000 as set in
the Company’s Articles of
Association.
Any directors who serves on
any committee, or who
devotes special attention to
the business of the Group, or
who otherwise performs
services which in the opinion
of the directors are outside of
the scope of the ordinary
duties of a directors, may be
paid such extra remuneration
as the directors may
determine.
Benefits
Intended to be sufficient to
attract, retain and develop high-
calibre individuals.
Equity Incentives
The Company provides directors’ and
officers’ liability insurance and an
indemnity to the fullest extent permitted
by law and the Company’s articles of
association.
The maximum amount
payable in respect of these
costs and cost of insurance
will be the reimbursement of
the Non-Executive Directors’
benefits grossed up for any
tax payable by the individual.
To align the pay of the non-
executive directors with the long
term execution of the
Equity remuneration (commonly in the
form of share options or restricted stock
units) over Ordinary Shares or American
While the Company has not
set a formal maximum,
equity incentivisation will
26
ARGO BLOCKCHAIN PLC
Purpose and link to strategy
Operation
Maximum opportunity
Company’s strategy and the
creation of shareholder value.
Depositary Shares (ADSs) depending on
the country in which the director is based.
normally be based on the
market norm for the role
undertaken and the
experience of the candidate.
Other costs and expenses
To reimburse non-executive
directors for legitimately incurred
costs and expenses.
Awards will not be subject to
performance conditions, but will be
subject to the non-executive director
continuing to be engaged by the Group.
The Company will pay for all travel, hotel
and other expenses reasonably incurred
by Non-Executive Directors (and any
associated tax thereon) in the course of
the Company’s business.
The maximum amounts
payable in respect of these
costs and expenses will be
the reimbursement of the
Non-Executive Directors’
costs and expenses grossed
up for any tax
payable by the individual.
Letters of Appointment
The appointments of non-executive directors are subject to a 3-year term and to termination upon 3 months’ notice
given by either party.
Payments for loss of office
Non-executive directors are subject to three months’ notice periods prior to termination of service and are not entitled
to any compensation on termination save for accrued fees as at the date of termination and reimbursement of any
expenses properly incurred prior to that date.
Consideration of employment conditions elsewhere in the Group
The Board and the independent directors have not consulted with employees about executive pay but considers that
the current remuneration of executive directors is consistent with pay and employment benefits across the wider
Group.
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ARGO BLOCKCHAIN PLC
Directors' remuneration (audited)
Details of directors’ remuneration during the year ended 31 December 2021 is as follows:
Director
Salary
and fees
Bonus
Gain on
exercise
of options/
warrants
Loss of
office
2021 Total
Fixed
element
Variable
element
£
£
£
£
£
£
£
Executive Directors
P Wall
A Appleton
I MacLeod
221,404
66,968*
77,000
Non-executive Directors
S Gow
M Perrella
16,282
16,282
M Shaw
M D’Attansio
J Savage
C Sullivan
Total
36,769
25,000
25,577
-
221,404
148,877
3,611,369
-
- 4,447,052
215,844
-
221,404
66,968
4,133,773
148,877
- 2,014,087
132,100
2,223,187
77,000
2,146,187
-
-
-
-
-
-
16,282
16,282
16,282
16,282
-
-
- 1,203,810
- 1,240,579
36,769
1,203,810
-
-
-
-
-
-
-
-
25,000
25,577
25,000
25,577
-
-
-
-
-
485,283
370,280
7,130,266
132,100
8,117,929
485,283
7,632,646
Note – there were no taxable benefits or pension paid to any of the Directors during the year
*Fees from when he became a director on 29 July 2021
Ian MacLeod resigned on 28 July 2021, Marco D’Attanasio and James Savage both resigned on 29 July 2021,
Colleen Sullivan resigned on 8 November 2021. Please refer to Directors Report for dates of appointments during
the 2021 financial year.
Ian MacLeod’s compensation for loss of office was calculated in accordance with giving 12 month’s notice, which is
in line with other executive directors and is comparable with other publicly listed entities.
Details of Directors’ remuneration during the year ended 31 December 2020 is as follows:
Director
Salary and fees
Bonus
£
£
Executive Directors
P Wall
I MacLeod
T Le Druillenec
J Savage*
Non-executive Directors
M D’Attansio
J Savage
M Shaw
Total
211,200
128,539
21,500
47,035
12,500
8,750
36,532
27,049
36,444
-
-
-
-
466,056
63,493
Gain on
exercise of
options/
warrants
£
-
-
-
-
-
-
-
28
2020 Total
Fixed
element
Variable
element
£
£
£
238,249
164,983
21,500
211,200
128,539
21,500
47,035
47,035
12,500
8,750
36,532
12,500
8,750
36,532
27,049
36,444
-
-
-
-
-
529,549
466,056
63,493
ARGO BLOCKCHAIN PLC
Note – there were no taxable benefits or pension benefits paid to any of the Directors during the year
Details of the share options and warrants granted to the Directors during the period are included within the
Directors’ Report. These shares were issued in accordance with the Canadian share option plan and UK share
option and warrant plan. The shares were issued at a price above that of market value with vesting conditions
attached to length of service to encourage retention of Directors over a longer period in line with the Group’s long
term strategy and to align with long term growth in shareholder value.
Total pension entitlements (audited)
The Company does currently not have any pension plans for any of the Directors and does not pay pension amounts
in relation to their remuneration.
The Company has not paid out any excess retirement benefits to any Directors or past Directors.
Payments to past Directors (audited)
The Company has not paid any compensation to past Directors.
Statement of Directors’ shareholding and share interests (audited)
The Directors who held office at 31 December 2021 and who had beneficial interests in the Ordinary Shares of the
Company are summarised as follows:
Director
Peter Wall
Sarah Gow
Matthew Shaw
Position
Chief Executive Officer and Chairman
Non-Executive Director
Non-Executive Director
Details of these beneficial interests can be found in the Directors' Report.
Service Agreements and Letters of Appointment
The service contract with Peter Wall and Alex Appleton are on a continuous basis, subject to termination provisions,
and subject to termination upon 12 months’ notice given by either party. The appointments of Sarah Gow, Maria
Perrella, Matthew Shaw and Raghav Chopra are subject to a 3 year term and to termination upon 3 months’ notice
given by either party.
Terms of appointment
The services of the Directors, provided under the terms of agreement with the Group are dated as follows:
Director
Peter Wall
Matthew Shaw
Alex Appleton
Maria Perrella
Sarah Gow
Raghav Chopra
Year of
appointment
2020
2019
2021
2021
2021
2022
Number of
years
completed
2
2
-
-
-
-
Date of current
engagement letter
14 January 2020
7 September 2019
4 September 2020
21 July 2021
21 July 2021
23 February 2022
Performance relative to market index
Comparing the total shareholder return of an ordinary share in Argo Blockchain plc against the total shareholder return
of the FTSE All-share index. For the year ended 2021, ARB saw a rise in share price from 33 pence to 98.7 pence,
an increase of 199%. In the same period, FTAS rose from 3,673.63 to 4,208.02, an increase of 15%.
29
ARGO BLOCKCHAIN PLC
UK 10-year CEO table and UK percentage change table
The Directors have considered the requirement for a UK 10-year CEO table and UK percentage change table. The
Directors do not currently consider that including these tables would be meaningful because, the CEO remuneration
is not currently linked to performance, therefore any comparison across years or with the employee group would be
significantly skewed and would not add any information of value to shareholders. The CEO’s remuneration is disclosed
in full in the Directors’ remuneration section. The Directors will review the inclusion of this table for future reports.
Relative importance of spend on pay
The Directors have considered the requirement to present information on the relative importance of spend on pay
compared to shareholder dividends paid. Given that the Company does not currently pay dividends we have not
considered it necessary to include such information.
Description
Wages, salaries and remuneration
Bonus
Compensation for loss of office
Share based payment
Total
2021
£’000
485
370
132*
431
1,418
*Please see above for further details of how this is calculated.
Consideration of shareholder views
The Board will consider shareholder feedback received and guidance from shareholder bodies. This feedback, plus
any additional feedback received from time to time, is considered as part of the Group’s annual policy on
remuneration.
At the AGM held on 6 September 2021 the following votes were cast on the remuneration policy, equity incentive plan
and equity awards for non-executives:
Resolution
To approve the remuneration policy
To approve the equity incentive plan
To approve equity awards for non-executives
For
77%
33%
82%
Against
23%
67%
18%
Policy for new appointments
Base salary levels will take into account market data for the relevant role, internal relativities, the individual’s
experience and their current base salary. Where an individual is recruited at below market norms, they may be re-
aligned over time (e.g. two to three years), subject to performance in the role. Benefits will generally be in accordance
with the approved policy.
For external and internal appointments, the Board may agree that the Group will meet certain relocation and/or
incidental expenses as appropriate.
Other matters
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ARGO BLOCKCHAIN PLC
The Company does not currently have any annual or long-term incentive schemes in place for any of the Directors
and as such there are no disclosures in this respect. The share options granted are discussed above.
This report was approved by the Board on 27 April 2022 and signed on its behalf by:
Sarah Gow
Chair of the Remuneration Committee
31
ARGO BLOCKCHAIN PLC
CORPORATE GOVERNANCE REPORT
The QCA 10 Principles of Corporate Governance
The Board of Directors of Argo Blockchain PLC recognises the importance of corporate governance and has decided
to apply the Corporate Governance Code published by the Quoted Companies Alliance (the ”QCA Code”).
The QCA Code sets out a standard of best practice for small and midsize quoted companies. The QCA’s ten principles
of corporate governance are set out below, along with a description of the Company’s approach to the relevant
principle.
Principle 1: Establish a strategy and business model which promotes long-term value for shareholders
The Group is a UK based provider of cryptocurrency mining with its facilities located in Canada and the US. The
business focusses on acquiring the most up to date and efficient hardware to support its mining facilities with a focus
on return on investment and prioritises the utilisation of renewable energy sources (wherever possible) at the most
competitive prices.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Group seeks to communicate with shareholders to ensure that its financial performance and strategy are clearly
understood. This is achieved through regular updates by RNS to the London Stock Exchange, filings with the Security
and Exchange Commission in the United States and meetings with various shareholders. The Group attends investor
conferences in the UK and USA and ensures its website provides accurate information and is kept up to date.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long
term success
Our stakeholder groups include our employees in Canada, the United Kingdom, United States of America and our
business partners. Employees are kept informed of the Company’s progress and development by way of weekly
meetings and have access to the Board at all times. We aim to recruit and retain our staff by ensuring our pay and
conditions are competitive in the market place and offer training and career development where appropriate. We seek
to maintain a good business relationship with our business partners who are well-respected experts in their field.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Group has six directors and, until recently, had a small number of employees. As part of the Company’s growth
and increase in size, the Company has invested time and effort into building its processes and procedures
commensurate to its size and stage of operations, including financial controls. With the shift to vertical integration, the
Company has gained greater involvement in and control of its operations, and considers this increases its ability to
manage risk and consider opportunities and threats at all levels of the organisation.
The Board is responsible for overall company strategy and ensuring it is implemented and operates close supervision
of all purchasing and revenue functions. Regular financial reporting is performed in Canada, USA and the UK and
consolidated results are prepared and then reviewed by the Board and clarification sought where necessary. As part
of the Company’s growth, the Company has developed an appropriate oversight structure to ensure appropriate
supervision of all aspects of the business. These reporting structures ensure the Board is kept informed of material
developments and the general progress of the business, and enables action to be taken if inefficiencies or irregularities
are uncovered.
Principle 5: Maintain the board as a well-functioning, balanced team led by the chair
The Board is led by Peter Wall as the Company’s Interim Executive Chairman, supported by the Company’s non-
executive directors. Peter Wall was appointed as the Company’s Interim Executive Chairman following a significant
change to the board and the departure of the Company’s previous Chairman. He is supported by Alex Appleton, the
Company’s Chief Financial Officer, and the Company’s four non-executive directors.
The Company acknowledges that the combination of the roles of Chairman and Chief Executive Officer is not regarded
as best practice, but has not yet identified a suitable candidate for appointment as Non-Executive Chair. The Company
intends to continue its search for an appropriate Non-Executive Chair and in the meantime the Company’s non-
executive directors have provided and will continue to provide the appropriate support and challenge to the Company’s
32
ARGO BLOCKCHAIN PLC
executive team. The Board considers that each director has the required level of expertise and experience in his field
and regular Board meetings are held to discuss all key matters and, notwithstanding the combination of the role of
Chairman and Chief Executive officer, the Board functions well and is appropriately led.
Principle 6: Ensure that, between them, the directors have the necessary up-to-date experience, skills and
capabilities
The Board is comprised of individuals with appropriate expertise and experience, each of whom brings a differing but
complementary skillset to the Board. All the directors receive regular updates on the Group’s operational and financial
performance and attend frequent Board meeting where key issues are discussed at length. The Board is responsible
for the appointment, removal and re-election of directors and when such a decision is required it will take account of
the Company’s need for a balance of market, operational and financial expertise. All directors have the ability to take
independent professional advice at the Company’s expense where they consider it necessary to ensure they fulfil
their duties in an appropriate manner.
Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous
improvement
The Board is constantly reviewing the Group’s and its own performance based on internally set performance indicators
and utilises those performance evaluations and indicators to identify areas of success and the potential for
improvement.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Board is conscious to impart and maintain a forward looking corporate culture throughout the Group, based on
ethical values and respect for the contributions of the Company’s staff. The Board leads by example and sets high
standards and expectations for the Company’s staff.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision
making by the board
As a company with a Standard Listing, the Company is not required to comply with the provisions of the Corporate
Governance Code published by the Financial Reporting Council (FRC Corporate Governance Code). The Company
notes that it will not undertake the following steps required by the FRC Corporate Governance Code in that:
•
•
•
given the composition of the Board and the Company’s stage of development, certain provisions of the FRC
Corporate Governance Code (in particular the provisions relating to the composition of the Board and the
division of responsibilities between the Chairman and chief executive) are not currently being complied with;
the FRC Corporate Governance Code recommends that the submission of all directors for re-election at
annual intervals. In accordance with the Company’s articles of association, directors will be submitted for re-
election at the first Annual General Meeting following their appointment and on a three yearly basis thereafter.
the Board does not comply with the provision of the FRC Corporate Governance Code that it has not
appointed a senior independent director. The Company will keep this under review.
However, in the interests of observing best practice on corporate governance, the Company intends to comply with
the provisions of the QCA Code insofar as is appropriate having regard to the size and nature of the Company and
the size and composition of the Board.
The Company’s Standard Listing means that it is also not required to comply with those provisions of the Listing Rules
which only apply to companies on the Premium List. The UK Listing Authority will not have the authority to (and will
not) monitor the Company’s compliance with any of the Listing Rules which the Company has indicated that it intends
to comply with on a voluntary basis, nor to impose sanctions in respect of any failure by the Company so to comply.
Principle 10: Communicate how the company is governed and is performing by maintaining dialogue with
shareholders and other relevant stakeholders
The Company is proactive in communicating with shareholders and other relevant stakeholders, on an annual basis
by way of the Annual Report and the financial statements, and more regularly through the half year Interims, monthly
operational updates and regulatory announcements. Outside of formal communications, the Company engages with
33
ARGO BLOCKCHAIN PLC
shareholders and interested parties through Q&A sessions and other informal updates. The Company maintains a
comprehensive website, which is available at www.argoblockchain.com.
34
ARGO BLOCKCHAIN PLC
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.
On behalf of the Board
Peter Wall
CEO and Interim Executive Chairman
27 April 2022
35
ARGO BLOCKCHAIN PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARGO BLOCKCHAIN PLC
Opinion
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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the group and parent company in accordance with
the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s
and parent company’s ability to continue to adopt the going concern basis of accounting included a review of
management’s cash flow forecasts to December 2023, along with an assessment of the “disaster scenario” forecast,
together with an assessment as to its likelihood. The audit team performed sensitivity analysis on the price of Bitcoin
and the related level of difficulty, including an overall assessment on the effect on the mining industry were the price
to significantly decrease, by assessing estimated power costs per miner. The audit team performed stress testing to
identify the point at which the price of Bitcoin would have to fall to, net of the effect of difficulty, in order for the group
to no longer be considered a going concern, which was assessed to be extremely unlikely. We have reviewed all key
inputs into the cash flow forecasts, with particular emphasis on those areas of judgement and estimation uncertainty,
and ensured they are appropriate and no evidence of management bias exists.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group’s or parent company's ability to
continue as a going concern for a period of at least twelve months from when the financial statements are authorised
for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
36
ARGO BLOCKCHAIN PLC
Our application of materiality
For the purposes of determining whether the financial statements are free from material misstatement, we define
materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably
knowledgeable person, relying on the financial statements, would be changed or influenced. We also determine a
level of performance materiality which we use to assess the extent of testing needed to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
The group materiality for the financial statements as a whole was set at £758,400 (2020: £190,000). This was
calculated based on 1% of total revenue for the year, being the same benchmark used in the prior year. Using our
professional judgement, we have determined this to be the principal benchmark within the financial statements as it
will be most relevant to stakeholders in assessing the financial performance of the group. This benchmark is key in
being able to demonstrate to stakeholders year on year growth in revenue, and achieving greater mining profitability
as a result. The percentage used is a reflection of the perceived risk in the industry and the significant growth of the
group, which therefore enabled greater coverage of revenue from the audit procedures undertaken. Revenue is also
a key performance indicator of the group, as disclosed within the strategic report, and hence supports the principal
benchmark used to calculate overall materiality of the group.
The parent company materiality for the financial statements as a whole was set at £118,700 (2020: £23,000). This
was calculated based on 2% of total expenditure. The same benchmark was used in the prior year. We have
determined this to be the principal benchmark of the parent company, as revenue is generated solely through its
subsidiary. A key management target is to minimise parent company expenditure, in order to maximise the utilisation
of funds within the trading subsidiary. Materiality for the trading subsidiary has been calculated on the same basis as
that of the group.
Other significant components of the group, which were acquired during 2021, were audited to a level of materiality
ranging from £54,200 to £758,000. Performance materiality was set at 60%.
Performance materiality for the group financial statements was set at £455,000 (2020: £114,000) and the parent
company was set at £83,000 (2020: £16,100), being 60% and 70% of materiality for the financial statements as a
whole respectively. The performance materiality for the group and all subsidiaries is based on our assessment of the
relevant risk factors e.g. previous experience of misstatements, management’s attitude towards proposed
adjustments, and the level of estimation inherent within the group and parent company. We agreed to report to those
charged with governance all corrected and uncorrected misstatements we identified through our audit with a value in
excess of £37,920 (2020: £9,950) for the group and for the parent company a value in excess of £5,935 (2020:
£1,150). We also agreed to report any other audit misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
Our approach to the audit
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing and extent of our audit procedures.
We assessed all components of the group for their significance in order to determine the extent of the work to be
performed on them in order to obtain sufficient and appropriate audit evidence on which to base the group audit
opinion. Those entities of the group which were considered to be significant components, being Argo Blockchain Plc,
Argo Innovation Labs Inc, Argo Innovation Facilities Inc., GPUone 9377-2556 Inc. and GPUone 9366-5230 Inc. were
subject to full scope audit procedures by PKF Littlejohn LLP. Procedures were performed to address the assessed
risks of material misstatement.
We did not rely on the work of any component auditors.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
37
ARGO BLOCKCHAIN PLC
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key Audit Matter
How our scope addressed this matter
Evaluation of the accounting for and disclosure of
cryptocurrency mining revenue recognised (Note 7)
In responding to the identified key audit matter we
completed the following audit procedures:
The group recognises revenue in accordance with IFRS
15, Revenue from Contracts with Customers.
The group provides computing power services to a digital
asset mining pool (the “Pool”) and has executed a
contract with the Pool operator to provide the computing
power. The contract is terminable at any time by either
party and the group’s enforceable right to compensation
begins when the group provides computing power to the
Pool.
In exchange for providing computing power, the group is
entitled to a fractional share of the fixed cryptocurrency
award the Pool operator receives for successfully adding
a block to the blockchain, plus a fractional share of the
transaction fees attached to that block. The group’s
fractional share is based on the proportion of computing
power the group contributed to the Pool as compared to
the total computing power contributed by the Pool
participants in solving the current algorithm.
revenue
cryptocurrency mining
During the year ended 31 December 2021, the group
of
recognised
£70,325,000. The group’s management has exercised
significant judgment in their determination of how IFRS
15 should be applied to the accounting for and disclosure
In
of cryptocurrency mining
addition, a portion of the group’s cryptocurrency mining
hardware that provides computing power to the Pool is
currently hosted at a third party facility. As such, the
overall accounting for and disclosure of cryptocurrency
mining revenue recognised involved the IT environment
of both the group and the third party hosting facility.
recognised.
revenue
We identified the accounting for and disclosure of
cryptocurrency mining revenue recognised as a key audit
matter due to the complexities involved in auditing
completeness and occurrence of the revenue recognised
by the group, particularly in light of the risks involved in
the design and effectiveness of certain internal controls
over the IT environment.
Evaluation of the accounting for and disclosure of
Digital assets (Note 18 and 22)
38
• Evaluated the design and effectiveness of the
internal control environment, including general
controls over the group’s IT environment and key
financially relevant systems. We also performed a
walkthrough to ensure that the key controls in place
are appropriate and have been operating in the
period under audit;
• Evaluated management’s
IFRS 15
awards
the
its
application of
cryptocurrency
including
evaluating the provisions of the contract between
the group and the Pool;
rationale
to account
earned,
for
for
• Performed substantive transactional testing of
income recognised, by vouching a sample of
transactions from the group’s digital wallets to the
Bitcoin blockchain, and recalculating the fair value
on recognition;
• Vouched a sample of transactions directly from the
Bitcoin blockchain back to the group’s digital
wallets;
• Vouched a sample of cryptocurrencies outwards
to supporting documentation and
transfers
recalculated any gain or loss on transfer;
• Performed a reconciliation of the gain or loss on
revaluation of digital assets at the year- end;
• Evaluated management’s disclosures of
its
cryptocurrency activity in the financial statements;
• Evaluated and tested management’s rationale and
supporting documentation associated with the
valuation of cryptocurrency awards earned; and
• Performed substantive analytical procedures to
determine completeness and occurrence of digital
assets earned by the group as consideration for
services rendered by assessing total hashpower
contributed to the network by the group against the
total block rewards and transaction fees issued
over the year.
Key observations:
We are satisfied that revenue recognised in the
financial statements
is materially complete and
accurate. We have assessed the accounting treatment
of revenue recognition in line with the requirements of
IFRS 15 and determined the recognition criteria and
classification to be appropriate.
In responding to the identified key audit matter we
completed the following audit procedures:
ARGO BLOCKCHAIN PLC
As at 31 December 2021, the group’s digital assets
held as of 31 December 2021, which mainly consist
of Bitcoin, had a total value of £86,062,000. The digital
asset portfolio is accounted for under two separate
accounting standards, based on its nature.
£80,759,000 has been accounted for under IAS 2 –
Inventory, being those cryptocurrencies held in the
normal course of business. These principally comprise of
Bitcoin and similar cryptocurrencies, and are disclosed
as current assets in the statement of financial position.
Fair value movements are recognised in profit or loss.
£5,303,000 has been accounted for under the revaluation
model per IAS 38 – Intangible Assets. These assets are
made up of Ethereum stakes tokens, which are being
held for staking rewards and capital appreciation. These
cryptocurrencies are recorded as non-current assets in
the statement of financial position. Fair value movements
are recognised in other comprehensive income.
Management has exercised significant judgment in their
determination of how to apply IAS 2 and IAS 38 to the
accounting for cryptocurrencies held, the associated
financial statement presentation and the accompanying
disclosure notes.
Evaluation of the accounting for and disclosure of
the business combinations of the Mirabel and Baie
Comeau hosting facilities and the asset acquisition
of the Texas site (Helios) held by DPN LLC (Notes 17
and 19)
During the year, the group acquired two companies
which owned hosting facilities in Mirabel and Baie
Comeau, for a total consideration of £5,537,000. They
also acquired land with access to a renewable power
source in Texas for total consideration of £12,200,000.
There is a risk that the fair value of the acquired assets
and liabilities, as well as purchase consideration where
judgement and estimation is required when valuing
contingent elements, has not been calculated correctly.
The identification and valuation of separately identifiable
intangible assets, including their estimated useful
economic lives, involves judgements and assumptions
by management.
There is also a risk that the accounting entries regarding
business combinations have not been recorded
appropriately in accordance with IFRS 3, and that the
disclosures in the financial statements surrounding the
acquisitions are incomplete.
Management has assessed that the transaction with
DPN LLC, which gave the group ownership of 160 acres
of land in western Texas with access to up to 800 MW
of power where they are currently developing a mining
facility, does not constitute a business combination.
39
• Evaluated the design and effectiveness of certain
internal controls over the group’s digital storage
wallets with the assistance of internal IT specialists;
• Observed management’s access to the group’s
digital storage wallets;
• Evaluated management’s
rationale
the
application of IAS 2 and IAS 38 to account for its
cryptocurrencies held, including management’s
processes for evaluating the fair value of its
cryptocurrencies;
for
• Agreed the fair value of digital assets held at the
year-end to third party market data;
• Evaluated management’s
the
classification of cryptocurrencies as either current
or non-current assets on the balance sheet; and
rationale
for
• Evaluated management’s disclosures of
its
cryptocurrency activity in the financial statements.
Key observations:
We are satisfied that the group has title to the digital
assets as recorded within Note 22.
We are also satisfied the digital assets held and
recognised as at 31 December 2021 are stated at fair
value based upon the existence of an active market.
In responding to the identified key audit matter we
completed the following audit procedures:
• Evaluated management’s assessment of
the
acquisition of DPN LLC against the criteria of IFRS
3 and confirmed that the definition of a business
combination is not met;
• Evaluated the acquisition documents, confirming
ownership and the terms of the acquisition and
consideration payable;
• Evaluated the calculation of the deemed acquisition
cost,
contingent
consideration and the fair values of assets and
liabilities acquired;
consideration,
comprising
• Reviewed and challenged management and
management’s experts on
inputs and
assumptions into the valuation of the assets and
liabilities acquired;
the
• Evaluated and performed a
recalculation of
disclosures relating to the acquisitions; and
• Evaluated the deferred contingent consideration
related to the acquisition of the DPN LLC land,
including an assessment of the underlying terms
and milestones.
Key observations:
We are satisfied that the acquisition of the Helios site
does not meet the requirements of IFRS 3 and is
appropriately treated as an asset acquisition, and that
the deferred contingent consideration has been
accurately reflected in the financial statements.
ARGO BLOCKCHAIN PLC
Instead, the transaction is considered an acquisition of
assets, and outside the scope of IFRS 3. In addition, the
contingent consideration attached to the acquisition is a
material judgemental area, and thus subject to
management bias.
Acquisition accounting is a key audit matter as these
material transactions are non-routine, and are subject to
areas of management judgement and estimation
uncertainty.
Other information
We believe the fair values attributed to the assets and
the business combinations
liabilities acquired
accurately reflect their fair value at the completion date.
in
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual
report29. Our opinion on the group and parent company financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
the parent company financial statements and the part of the directors’ remuneration report to be audited are
not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of
the group and parent company financial statements and for being satisfied that they give a true and fair view, and for
40
ARGO BLOCKCHAIN PLC
such internal control as the directors determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the
group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the group and parent company and the sector in which they operate to
identify laws and regulations that could reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through discussions with management, industry
research and application of cumulative audit knowledge and experience of the sector.
• We determined the principal laws and regulations relevant to the group and parent company in this regard to
be those arising from:
o Companies Act 2006
o Canada Business Corporations Act
o Securities Law
o Anti Money Laundering Legislation
o Disclosure Rules and Transparency rules for listed entities
o Local tax laws and regulations
• We designed our audit procedures to ensure the audit team considered whether there were any indications
of non-compliance by the group and parent company with those laws and regulations. These procedures
included, but were not limited to:
o A review of the Board minutes throughout the year and post year-end
o A review of the RNS announcements
o A review of general ledger transactions
o Discussion with management
o Obtained confirmation from legal advisors
• We also identified the risks of material misstatement of the financial statements due to fraud. We considered,
in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls,
the risk relating to the valuation of digital assets and the valuation of assets acquired through business
combinations and asset acquisitions to be an area of potential for management bias. The valuation of the
digital assets held at the year-end have been classified as “level 2” in the fair value hierarchy table, and
supporting evidence has been obtained from a relevant trading platform to support the fair value of assets
held. In respect of the asset and business acquisitions in the year, these are subject to valuation on the
acquisition date. Management engaged experts to carry these out to support the values in the financial
statements.
• We addressed the risk of fraud arising from management override of controls by performing audit procedures
which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence
of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the
normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases
41
ARGO BLOCKCHAIN PLC
the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater
regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery,
collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the Board on 26 February 2021 to audit the financial statements for the period ending 31
December 2020 and subsequent financial periods. Our total uninterrupted period of engagement is 4 years, covering
the periods ending 31 December 2018 to 31 December 2021.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent
company and we remain independent of the group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone, other than the company and the company's members
as a body, for our audit work, for this report, or for the opinions we have formed.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
27 April 2022
42
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Note
Revenues
Direct costs
Change in fair value of digital currencies
Gross profit
Operating costs and expenses
Reversal of credit loss provision
Share based payment charge
Foreign exchange
Operating profit
Fair value revaluation of variable consideration
Fair value gain/(loss) of investments
Loss on sale of investment
Finance costs
Equity accounted loss from associate
Profit before taxation
Tax expense
Profit after taxation
Other comprehensive income
Items which may be subsequently reclassified to
profit or loss:
- Currency translation reserve
- Equity accounted OCI from associate
-
Fair value gains on intangible digital assets
Total other comprehensive income, net of tax
Total comprehensive income attributable to the
equity holders of the Company
Earnings per share attributable to equity owners
(pence)
Basic earnings per share
Diluted earnings per share
7
8
22
8
23
26
15
15
8
16
13
16
18
12
12
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
74,204
(22,186)
1,628
18,957
(17,106)
2,070
53,646
3,921
(8,298)
-
(1,938)
(589)
42,821
236
183
(629)
(2,142)
(1,198)
39,271
(8,506)
(2,167)
447
(331)
(271)
1,599
-
-
-
(157)
-
1,442
-
30,765
1,442
(410)
6,571
414
6,575
265
-
-
265
37,340
1,707
7.7p
7.4p
0.5p
0.4p
The income statement has been prepared on the basis that all operations are continuing operations.
43
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at
31 December 2021
£’000
As at
31 December 2020
£’000
Note
ASSETS
Non-current assets
Investments at fair value through profit or loss
Investments accounted for using the equity method
Intangible fixed assets
Property, plant and equipment
Right of use assets
Other receivables
Total non-current assets
Current assets
Trade and other receivables
Digital assets
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share Capital
Share Premium
Share based payment reserve
Fair value reserve
Currency translation reserve
Other comprehensive income of equity accounted
associates
Accumulated surplus
Total equity
Current liabilities
Trade and other payables
Contingent consideration
Loans and borrowings
Income tax
Deferred tax
Lease liability
Total current liabilities
Non-current liabilities
Deferred tax
Issued debt - bond
Loans
Lease liability
Total liabilities
15
16
18
19
19
20
21
22
24
24
25
25
25
25
25
26
26
27
13
13
28
13
27
27
28
403
13,817
5,604
111,604
350
-
131,778
63,359
80,759
11,803
155,921
287,699
468
139,581
1,905
414
33
6,571
52,838
201,810
15,245
8,071
23,391
7,679
286
7
54,679
541
26,908
3,391
370
85,889
1,393
-
368
10,524
7,379
4,115
23,779
2,175
4,638
2,051
8,864
32,643
303
1,541
75
-
443
-
21,965
24,327
936
-
-
-
-
3,470
4,406
-
-
-
3,910
8,316
Total equity and liabilities
287,699
32,643
44
ARGO BLOCKCHAIN PLC
The Group financial statements were approved by the Board of Directors and authorised for issue on 27 April 2022
and are signed on its behalf by:
Peter Wall
Chief Executive Officer
The accounting policies and notes on pages 52 to 88 form part of the financial statements.
Registered number: 11097258
45
ARGO BLOCKCHAIN PLC
COMPANY STATEMENT OF FINANCIAL POSITION
As at
31 December
2021
£’000
As at
31 December
2020
£’000
Note
ASSETS
Non-current assets
Investment in subsidiaries
Investments at fair value through profit or loss
Investments accounted for using the equity method
Total non-current assets
Current assets
Trade and other receivables
Intercompany receivable
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share Capital
Share Premium
Share based payment reserve
Other comprehensive income of equity accounted
associates
Accumulated surplus
Total equity
Current liabilities
Trade and other payables
Contingent consideration
Total current liabilities
Non-current liabilities
Loans and borrowings
Total liabilities
14
15
16
21
21
24
24
25
25
25
26
26
27
12,181
73
13,817
26,071
8,598
175,859
126
184,583
-
-
-
-
186
22,876
1,456
24,518
210,654
24,518
468
139,581
1,905
6,571
18,986
167,511
8,164
8,071
16,235
26,908
43,143
303
1,541
75
-
22,429
24,348
170
-
170
-
170
Total equity and liabilities
210,654
24,518
46
ARGO BLOCKCHAIN PLC
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). The Group financial statements were approved by the board of directors and authorised for issue on 27
April 2022 and are signed on its behalf by:
Peter Wall
Chief Executive Officer
The accounting policies and notes on pages 52 to 88 form part of the financial statements.
Registered number: 11097258
47
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CHANGES IN EQUITY
Share
Capital
Share
Premium
Currency
translatio
n reserve
Share
based
payment
reserve
£’000
£’000
£’000
£’000
Fair
Revalu
ation
Reserv
e
£’000
304
1,540
443
75
-
-
-
-
-
-
-
-
(410)
(410)
164
150,977
-
-
-
(12,936)
-
-
164
138,041
-
-
-
-
-
-
-
-
-
-
1,938
(108)
1,830
414
414
-
-
-
-
-
Other
comprehensi
ve income of
associates
Accumulate
d surplus/
(deficit)
Total
£’000
£’000
£’000
-
-
21,965
24,327
30,765
30,765
6,571
-
6,575
6,571
30,765
37,340
-
-
-
-
-
-
-
-
151,141
(12,936)
1,938
108
-
108
140,143
468
139,581
33
1,905
414
6,571
52,838
201,810
Balance at 1 January
2021
Total comprehensive
income for the period:
Profit for the period
Other comprehensive
income
Total comprehensive
income for the period
Transactions with equity
owners:
Share capital issued
Issue costs of share
capital
Share based payment
charge
Share options/warrants
exercised
Total transactions with
equity owners
Balance at 31 December
2021
48
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CHANGES IN EQUITY
Share
Capital
£’000
294
Share Premium
£’000
25,252
Currency
translation
reserve
£’000
178
Share based
payment
reserve
£’000
Accumulated
surplus/
(deficit)
£’000
(4,986)
Total
£’000
20,738
Balance at 1
January 2020
Total
comprehensive
profit for the
period:
Profit for the
period
Other
comprehensive
income
Total
comprehensive
income for the
period
Transactions
with equity
owners:
Shares to be
issued
Cancellation of
share premium
Share
options/warrants
charges
Share based
payments
lapsed/expired
Total transactions
with equity
owners
Balance at 30
December 2020
-
-
-
-
-
-
10
1,540
(25,252)
-
-
(23,712)
-
-
-
10
304
-
265
265
-
-
-
-
-
-
-
-
-
-
1,442
1,442
-
265
1,442
1,707
-
1,550
25,252
332
-
(257)
257
-
332
-
75
25,509
1,882
1,540
443
75
21,965
24,327
49
ARGO BLOCKCHAIN PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
Share
Capital
Share
Premium
£’000
304
£’000
1,540
Share
based
payment
reserve
£’000
75
Other
comprehensive
income of
associates
£’000
-
Accumulated
surplus/
(deficit)
Total
£’000
22,429
£’000
24,348
-
-
-
164
-
-
-
164
-
-
-
150,977
(12,936)
-
-
138,041
-
-
-
-
1,938
(108)
1,830
-
6,571
6,571
(3,551)
-
(3,551)
(3,551)
6,571
3,020
-
-
-
-
-
-
108
108
151,141
(12,936)
1,938
-
140,143
Balance at 1 January 2021
Total comprehensive income for
the period:
Loss for the period
Other comprehensive income
Total comprehensive income for
the period
Transactions with equity
owners:
Gross share capital
Issue costs of share capital
Share based payments charge
Share options/warrants exercised
Total transactions with equity
owners
Balance at 31 December 2021
468
139,581
1,905
6,571
18,986
167,511
Balance at 1 January 2020
Total comprehensive profit for
the period:
Loss for the period
Other comprehensive income
Total comprehensive income for the
period
Transactions with equity owners:
Shares to be issued
Cancellation of share premium
Share options/warrants charges
Share based payments
lapsed/expired
Total transactions with equity
holders
Balance at 31 December 2020
Share
Capital
£’000
294
-
-
-
9
-
-
-
9
303
Accumulated
surplus/
(deficit)
£’000
(2,469)
(610)
-
(610)
-
25,252
-
257
25,509
22,429
Total
£’000
23,077
(610)
-
(610)
1,550
-
332
-
1,882
24,348
Share premium
Share based
payment reserve
£’000
-
-
-
-
-
-
332
(257)
75
75
£’000
25,252
-
-
-
1,540
(25,252)
-
-
(23,712)
1,540
50
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation/Amortisation
Foreign exchange movements
Loss on disposal of tangible assets
Finance cost
Loss on sale of investment
Fair value change in digital assets through profit or loss
Impairment of intangible digital assets
Investment fair value movement
Share of loss from associate
Non-cash settlement of management fees
Revaluation of contingent consideration
Derecognition of contingent consideration
Share based payment expense
Working capital changes:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
(Increase) in digital assets
Net cash (used in)/generated from operating activities
Investing activities
Investment at fair value through profit or loss
Acquisition of subsidiaries, net of cash acquired
Investment in associate
Foreign exchange on investing activities
Interest received
Proceeds from sale of investment
Purchase of tangible fixed assets
Proceeds from disposal of tangible fixed assets
Purchase of digital assets
Proceeds from sale of digital assets
Mining equipment prepayment
Net cash used in investing activities
Financing activities
Increase/(decrease) in loans
Lease payments
Loan repayments
Interest paid
Proceeds from debt issue – net of issue costs
Proceeds from shares issued – net of issue costs
Net cash generated from/(used in) financing activities
51
Year ended
Year ended
31 December
31 December
2021
£’000
2020
£’000
39,271
1,442
11,511
589
-
2,142
629
(1,628)
535
(183)
1,198
(1,561)
(236)
(352)
1,938
(13,628)
12,289
(80,331)
(27,817)
(220)
(664)
(7,353)
-
-
772
(78,972)
-
(15,009)
11,308
(47,426)
(137,564)
22,239
(7,379)
(1,196)
(122)
26,908
134,684
175,133
6,027
271
66
157
-
(2,342)
-
-
-
-
-
332
(90)
(2,107)
(1,236)
2, 520
-
-
-
48
1
-
(1,808)
704
-
-
-
(1,055)
(968)
-
-
(157)
-
1,550
425
Note
18, 19
22
18
15
8
26
23
21
26
22
15
17
16
15
19
22
22
27
28
27
27
24
ARGO BLOCKCHAIN PLC
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
9,752
2,051
11,803
1,890
161
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 company 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
Current loans and borrowings
Current lease liability
Non-current issued debt – bonds
Non-current loans and borrowings
Non-current liability
Cash and cash equivalents
Total net debt
Year ended
31 December
2021
£’000
(23,391)
(7)
(26,908)
(3,391)
(370)
11,803
Year ended
31 December
2020
£’000
-
(3,470)
-
-
(3,910)
2,051
(42,264)
(5,329)
27
28
27
27
28
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)).
52
ARGO BLOCKCHAIN PLC
COMPANY STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit before tax
Adjustments for:
Share of loss from associate
Foreign exchange movements
Share based payment expense
Working capital changes:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Investing activities
Purchase of investments
(Increase)/decrease in loan to subsidiary
Net cash (used in(/generated from investing activities
Financing activities
Proceeds from debt issue – net of issue costs
Proceeds from shares issued – net of issue costs
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Company - net (debt) / asset table
Non-current loans and borrowings
Cash and cash equivalents
Total net (debt) / asset
Year ended
31 December
2021
Year ended
31 December
2020
Note
£’000
£’000
(3,551)
(610)
1,198
(409)
1,938
(8,411)
7,741
(1,494)
(7,353)
(154,075)
(161,428)
26,908
134,684
161,592
(1,330)
1,456
126
-
-
332
(133)
(21)
(432)
-
298
298
1,550
1,550
1,416
40
1,456
Year ended
31 December
2021
£’000
(26,908)
126
Year ended
31 December
2020
£’000
-
1,456
(26,782)
1,456
21
26
8
13
18
27
53
ARGO BLOCKCHAIN PLC
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.
54
ARGO BLOCKCHAIN PLC
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 £89m of Bitcoin at the year end.
As a crypto currency 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 crypto currencies 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.
55
ARGO BLOCKCHAIN PLC
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.
56
ARGO BLOCKCHAIN PLC
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.
57
ARGO BLOCKCHAIN PLC
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
58
ARGO BLOCKCHAIN PLC
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;
59
ARGO BLOCKCHAIN PLC
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.
60
ARGO BLOCKCHAIN PLC
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.
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ARGO BLOCKCHAIN PLC
Deferred tax: Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary differences can be utilised. Deferred income
tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates
and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and
there is sufficient taxable profit available against which the temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and
liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, 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:
62
ARGO BLOCKCHAIN PLC
•
•
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; 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 Bictoin 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.
63
ARGO BLOCKCHAIN PLC
2021
2020
2021
2020
Credit risk
Change in USD
rate
+/-10%
Effect on profit
before tax
£’000
+/-250
Effect on pre-
tax equity
£’000
+/-87
+/-10%
-
-
Change in CAD
rate
Effect on profit
before tax
£’000
Effect on pre-
tax equity
£’000
+/-10%
+/-1,611
+/-3,208
+/-10%
+/-614
+/-122
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.
At 31 December 2021
Loans and borrowings
Lease liabilities
Issued debt
At December 2020
Lease liabilities
Less than 1
year
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
23,901
21
-
2,188
42
-
693
63
26,908
3,470
3909
-
-
251
-
,
-
64
ARGO BLOCKCHAIN PLC
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.
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
IAS 1
IAS 16
IAS 37
IAS 8
IAS 1
IFRS 3
Amendments – Presentation and Classification of Liabilities as
Current or Non-current
Amendments - Property, Plant and Equipment
Provisions, Contingent Liabilities and Contingent Assets
Amendments - Definition of Accounting Estimates
Amendments – Disclosure of Accounting Policies
Amendments – Business Combinations – Conceptual
Framework
date
Effective
annual
accounting period beginning on
or after
for
1 January 2023
1 January 2022
1 January 2022
1 January 2023
1 January 2023
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
The fair value of assets acquired was assessed in line with independent valuations provide by CBRE of the properties.
Given the continued demand for power sites and data centres in the North of America, the Directors consider the
65
ARGO BLOCKCHAIN PLC
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) 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 £80,759,000 of 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.
Contingent consideration – 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.
66
ARGO BLOCKCHAIN PLC
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 digital asset 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
Crypto currency mining - worldwide
Subscriber revenue - worldwide
Crypto currency management fees – United States
Total revenue
Period ended
31 December
2021
£’000
70,325
-
3,879
Period ended
31 December
2020
£’000
18,947
10
-
74,204
18,957
Due to the nature of Cryptocurrency mining, it is not possible to provide a geographical split of the revenue stream.
Cryptocurrency mining revenues are recognised at a point in time.
Cryptocurrency management fees are services recognised over time.
8.
EXPENSES BY NATURE
Direct Costs
Depreciation of mining hardware
Hosting and other costs
Total direct costs
2021
£’000
11,129
11,057
22,186
2020
£’000
5,896
11,210
17,106
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ARGO BLOCKCHAIN PLC
Administrative expenses
Salary and other employee related costs
Depreciation and amortisation
Legal, professional and regulatory fees
Consulting fees
Insurance
Public relations and associated activities
Travel and subsistence
Audit fees
Carbon credits
Hedging costs
Impairment of intangible assets
Repairs and maintenance
Settlement re Crypto mining management fees
Write off of variable contingent consideration
Research costs
Other expenses
Total administrative expenses
Finance Costs
Interest on loans and borrowings
Total finance costs
9.
AUDITOR’S REMUNERATION
In relation to statutory audit services
Other audit assurance services
Total auditor’s remuneration
2021
£’000
2,662
382
1,533
684
1,408
699
128
239
252
326
535
939
(1,561)
(352)
-
424
8,298
2021
£’000
2,142
2,142
2021
£’000
170
52
222
2020
£’000
461
131
114
690
117
113
46
135
-
-
-
75
-
-
20
265
2,167
2020
£’000
151
151
2020
£’000
100
35
135
10.
The average monthly number of persons (including directors) employed by the group during the period was:
EMPLOYEES
Directors and employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Share based payments
68
2021
Number
26
2020
Number
6
2021
£’000
2,286
199
25
1,392
3,902
2020
£’000
191
13
-
24
228
ARGO BLOCKCHAIN PLC
The average monthly number of persons (including directors) employed by the company during the period was:
Directors and employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Share based payments
11.
DIRECTOR’S REMUNERATION
Director’s remuneration for qualifying services
Senior management loss of office
Share based payments
Total remuneration for directors and key management
2021
Number
4
2020
Number
1
2021
£’000
406
8
1
330
745
2021
£’000
856
132
431
1,419
2020
£’000
135
18
-
-
153
2020
£’000
532
-
20
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).
Net profit for the period attributable to ordinary equity holders from
continuing operations (£’000)
Weighted average number of ordinary shares in issue (‘000)
Basic earnings per share for continuing operations (pence)
Net profit for the period attributable to ordinary equity holders for continuing
operations (£’000)
Diluted number of ordinary shares in issue (‘000)
Diluted earnings per share for continuing operations (pence)
13.
TAXATION
Current tax:
Current tax on profits for the year
Adjustments in respect of prior periods
Total current tax
69
2021
30,765
397,513
7.7
30,765
415,201
7.4
2021
£’000
7,679
-
7,679
2020
1,442
303,436
0.5
1,442
344,638
0.4
2020
£’000
-
-
-
ARGO BLOCKCHAIN PLC
Deferred tax:
Origination and reversal of temporary differences
Total deferred tax
Total tax charge
2021
£’000
827
827
8,506
2020
£’000
-
-
-
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 expense
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted
average tax rate applicable to profits of the consolidated entities as follows:
Profit before taxation
Expected tax charge based on a weighted average of 25%
(2020 - 24%) (UK, US and Canada)
Effect of expenses not deductible in determining taxable
profit
Capital allowances in excess of depreciation
Other tax adjustments
Other timing differences
Origination and reversal of temporary differences
Unutilised tax losses carried forward
Taxation charge in the financial statements
2021
£’000
39,271
9,746
1,779
(3,770)
(137)
(385)
827
445
8,506
2020
£’000
1,442
346
3
(101)
(703)
-
-
455
-
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 unutilised 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
Fair value gains:
Digital assets
Gain on fair value of property acquired (see note 17)
Share of other comprehensive income of associates
Total deferred tax
2021
£’000
286
442
99
827
2020
£’000
-
-
-
-
No deferred tax liability was recognised in the year ended 31 December 2020 as there were losses to offset such a
gain.
70
ARGO BLOCKCHAIN PLC
Deferred tax liabilities
Current liabilities
Non-current liabilities
Total deferred tax
14.
INVESTMENT IN SUBSIDIARIES
Company
2021
£’000
286
541
827
2020
£’000
-
-
-
Details of the Company’s subsidiaries at 31 December 2021 and 31 December 2020 are as follows:
Name of Undertaking
Argo Innovation Labs Inc.
Argo Innovation Labs Limited
Argo Innovation Facilities (US) Inc.
9377-2556 Quebec Inc.
9366-5230 Quebec Inc.
* The provision of cryptocurrency mining services
** The provision of cryptocurrency mining sites
Investment in subsidiaries
At 1 January
Additions
At 31 December
Country of
Incorporation
Canada
UK
USA
Canada
Canada
Ownership
Interest (%)
100%
100%
100%
100%
100%
Voting Power
Held (%)
100%
100%
100%
100%
100%
Nature of
Business
*
Dormant
*
**
**
2021
£’000
-
12,181
12,181
2020
£’000
-
-
-
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.
71
ARGO BLOCKCHAIN PLC
15.
INVESTMENTS AT FAIR VALUE THROUGH INCOME OR LOSS
Non-current
Group
At 1 January
Additions
Foreign exchange movement
Fair value through profit or loss
Disposals
At 31 December
Non-current investments include:
GPUone Holding Inc.
2021
£’000
1,393
219
-
183
(1,392)
403
2020
£’000
58
1,336
(1)
-
-
1,393
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
At 1 January
Additions
At 31 December
Non-current investments include:
Luxor Technology Corporation as described above.
2021
£’000
-
73
73
2020
£’000
-
-
-
72
ARGO BLOCKCHAIN PLC
16.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Opening balance
Acquired during the period
Share of loss
Share of fair value gains on intangible assets
through other comprehensive income
Closing balance
As at 31
December
2021
As at 31
December 2020
£000’s
-
8,444
(1,198)
6,571
13,817
£000s
-
-
-
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
relationship
of
Measurement
method
Pluto Digital PLC Hill Dickinson LLP, 8th
The Broadgate
Floor
Primrose
20
Tower,
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).
73
ARGO BLOCKCHAIN PLC
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
Current
Cash and cash equivalents
Other current assets (excluding cash)
Total current assets
Trade payables
Other current liabilities (excluding trade
payables)
Total current liabilities
Non-current
Tangible fixed assets
Investments and other non-current assets
Total non-current assets
Financial liabilities
Total non-current liabilities
Net assets
Pluto Digital plc
As at 31 December
2021
£000’s
1,759
335
2,094
88
1,494
1,582
49
56,000
56,049
2,807
2,807
53,754
Pluto was incorporated in 2021, therefore, no comparatives are available.
Summarised Statement of Comprehensive Income, Pluto Digital plc
Operating costs and expense
Realised gains – digital assets
Loss from continuing operations
Income tax expense
Post-tax loss from continuing operations
Other comprehensive income
Total comprehensive Income
January 12 – December 31, 2021
£000’s
(7,652)
2,394
(5,258)
575
(4,867)
26,991
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.
74
ARGO BLOCKCHAIN PLC
Reconciliation of summarised financial information
Summarised financial information
Net assets at acquisition
Profit/(loss) for the period
Other comprehensive income
Foreign exchange differences
Closing net assets
Interest in associates (24.65%; 0%)
Goodwill
Carrying value
2021
£000’s
34,228
(4,867)
26,691
-
56,052
13,817
-
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
Cash
Payment for deposits
Cancellation of prepayment and deposits
Total consideration
75
£’000
213
668
4,656
5,537
ARGO BLOCKCHAIN PLC
Recognised amounts of identifiable assets acquired, and liabilities assumed
Cash and cash equivalents
Property, plant and equipment (Note 11)
Trade and other receivables
Trade and other payables
Property mortgages
Lease liability
Goodwill
Total
£’000
4
10,779
387
(326)
(5,010)
(377)
80
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
Goodwill
£’000
Digital
assets
£’000
Website
£’000
Group
Cost
At 1 January 2020
Additions
Disposals
At 31 December 2021
Amortisation and
impairment
At 1 January 2020
Foreign exchange movement
Impairment
Fair value gain
Amortisation charged during the period
At 31 December 2021
-
80
-
80
-
-
-
-
-
-
-
18,216
(12,792)
5,424
-
-
535
(414)
-
121
2021
Total
£’000
671
18,296
(12,792)
6,175
303
9
535
(414)
138
571
2020
Website
£’000
671
-
-
671
190
-
-
-
113
303
5,604
368
671
-
-
671
303
9
-
-
138
450
221
Balance At 31 December 2021
80
5,303
Digital assets are cryptocurrencies not mined by the Group. The Group held crypto assets during the year,
which are recorded at cost on the day of acquisition. Movements in fair value between acquisition (date mined)
and disposal (date sold), and the movement in fair value in crypto assets held at the year end, impairment of
the intangible assets and any increase in fair value are recorded in the fair value reserve.
The digital assets held below are held in Argo Labs (a division of the Group) as discussed above. The assets
are all held in secure custodian wallets controlled by the Group team and not by individuals within the Argo Labs
team.
The assets detailed below are all accessible and liquid in nature. Those assets (immaterial in total) held longer
term are inaccessible have been valued either at cost or £nil depending upon the information available as at the
year end.
76
ARGO BLOCKCHAIN PLC
As at 31 December 2021
Crypto asset name
Polkadot – DOT
Ethereum - ETH
Cosmos Hub – ATOM
Solana - SOL
USDC (stable coin – fixed to USD)
Alternative coins
At 31 December 2021
Coins/tokens
71,303
558
31,789
6,249
274,110
-
Fair value
£000
1,527
1,415
601
579
203
978
5,303
77
ARGO BLOCKCHAIN PLC
19.
TANGIBLE FIXED ASSETS
Group
Cost
At 1 January 2021
Foreign exchange movement
Acquisition through business
combination
Additions
Transfer to another class
At 31 December 2021
Depreciation and impairment
At 1 January 2021
Foreign exchange movement
Depreciation charged during the
period
Transfer to another class
At 30 December 2021
Carrying amount
At 1 January 2021
At 31 December 2021
Right
of use
Assets
£’000
7,379
-
358
-
(7,379)
358
-
-
3,281
(3,273)
8
7,379
350
Assets Under
Construction
Leasehold
Improvements
£’000
-
-
12,180
49,126
-
61,306
-
-
-
-
-
-
61,306
£’000
85
-
-
-
85
48
-
17
-
65
-
20
Data centres
£’000
Total
£’000
-
25,329
-
10,466
-
-
10,466
-
-
229
-
229
(62)
23,004
82,492
-
130,763
7,491
(65)
11,383
-
18,810
-
10,237
17,904
111,954
Office
Equipment
£’000
Mining and
Computer
Equipment
£’000
-
-
49
-
49
-
-
-
-
-
49
17,865
(62)
-
33,317
7,379
58,499
7,443
(65)
7,856
3,273
18,507
10,487
39,992
78
ARGO BLOCKCHAIN PLC
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
Cost
At 1 January 2020
Foreign exchange
movement
Additions
Disposals
At 31 December 2020
Depreciation and
impairment
At 1 January 2020
Foreign exchange
movement
Depreciation charged during
the period
Depreciation on Disposals
At 31 December 2020
Carrying amount
At 1 January 2020
At 31 December 2020
£’000
-
-
7,379
-
7,379
-
-
-
-
-
-
7,379
Mining and
Computer
Equipment
£’000
Data centres including
improvement
£’000
Total
£’000
17,833
(136)
1,808
(1,640)
17,865
2,488
15
5,896
(1,021)
7,377
15,345
10,487
85
17,918
-
-
-
85
31
-
17
-
48
54
37
(136)
9,187
(1,640)
25,329
2,519
15
5,913
(1,021)
7,425
15,399
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
79
ARGO BLOCKCHAIN PLC
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
Share based payment
Contingent consideration to be settled in shares
Total
Allocated as follows
Tangible fixed assets (Asset under construction)
Total
20.
OTHER RECEIVABLES (NON-CURRENT)
Deposits
Brought forward
Exchange movement
Cancelled on acquisition of GPUone subsidiaries
Total carrying amount of other receivables
£’000
3,521
8,659
12,180
£’000
12,180
12,180
As at 31
December
2021
As at 31
December 2020
£’000
4,115
-
(4,115)
-
£’000
4,151
(36)
-
4,115
On this deposit was used as part of the acquisition of the GPUone Holding Inc subsidiaries detailed in note 17.
21.
TRADE AND OTHER RECEIVABLES / INTERCOMPANY
Prepayments and other receivables
Mining equipment prepayments
Other taxation and social security
Total trade and other receivables
Group
2021
Company
2021
Group
2020
Company
2020
£’000
13,194
47,426
2,739
63,359
£’000
8,008
-
590
8,598
£’000
812
-
1,364
2,176
£’000
108
-
78
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
80
ARGO BLOCKCHAIN PLC
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
Amounts due from group companies
Company
2021
£’000
175,859
Company
2020
£’000
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
At 1 January
Additions
Crypto assets purchased and received
Crypto assets mined
Total additions
Disposals
Crypto assets sold
Total disposals
Fair value movements
Gain/(loss) on crypto asset sales
Movements on crypto assets held at the year end
Total fair value movements
At 31 December
Carrying value of digital assets pledged as
collateral
81
2021
£’000
4,637
16,569
70,325
86,894
2020
£’000
1,041
9,897
18,948
28,845
(12,400)
(12,400)
(27,318)
(27,318)
437
1,191
1,628
80,759
(14)
2,083
2,069
4,637
49,759
-
ARGO BLOCKCHAIN PLC
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
Bitcoin - BTC
Polkadot – DOT
Ethereum - ETH
Binance Coin - BNB
USDT,USDC & Tether (stable coin – fixed to USD)
Alternative coins
At 31 December 2020
23.
SHARE OPTIONS AND WARRANTS
Coins/tokens
183
75,000
254
1,243
26,509
-
Fair value
£000
3,930
515
138
34
19
1
4,637
The following options and warrants over Ordinary Shares have been granted by the company and are outstanding:
Options/
Warrants
Warrants
Warrants
Warrants
Warrants
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Grant Date
Expiry date
15 January 2021
19 April 2021
19 January 2021
17 June 2021
25 July 2018
17 July 2019
5 February 2020
5 February 2020
3 February 2021
27 June 2021
24 June 2021
1 July 2021
13 July 2021
22 September 2021
17 December 2021
23 November 2021
15 January 2031
19 March 2024
18 January 2026
1 March 2024
25 July 2024
16 July 2024
4 February 2030
4 February 2030
2 February 2031
26 June 2031
23 June 2031
30 June 2031
12 July 2031
22 September 2031
16 December 2031
23 November 2031
Exercis
e Price
£1.25
£1.35
£0.87
£1.50
£0.16
£0.16
£0.07
£0.07
£0.94
£1.35
£1.26
£1.16
£1.00
£1.57
£0.86
£1.30
Number of
options/warran
ts outstanding
2021 ‘000
240
224
110
22
1,000
537
2,254
3,700
232
500
1,000
500
1,000
5,000
870
500
17,689
Number of
options/warran
ts exercisable
2021 ‘000
240
149
110
22
1,000
357
1,937
3,463
106
83
167
83
167
479
12
14
8,389
At 1 January 2021
Granted
Exercised
Lapsed
Outstanding at 31 December 2021
Exercisable at 31 December 2021
82
Number of
options and
warrants ‘000
42,202
10,698
(34,351)
(860)
17,689
7,596
Weighted
average exercise
price £
0.13
1.63
0.12
0.95
0.81
0.26
ARGO BLOCKCHAIN PLC
At 1 January 2020
Granted
Exercised
Lapsed
Outstanding at 31 December 2020
Exercisable at 31 December 2020
Number of
options and
warrants ‘000
45,037
11,400
(9,686)
(5,549)
41,202
34,439
Weighted
average exercise
price £
0.14
0.07
0.16
0.16
0.13
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
25 July 2018
17 July 2019
5 February 2020
15 January 2021
19 January 2021
3 February 2021
19 April 2021
17 June 2021
24 June 2021
27 June 2021
1 July 2021
13 July 2021
22 September 2021
23 November 2021
Grant date
share price
Exercise
price
Volatility
Life
Risk Free
interest
rate %
Marketability
discount
0.08
0.09
0.07
1.07
0.94
0.94
1.35
1.35
1.26
1.35
1.23
1.00
1.57
1.30
0.16
40%
6 years
0.16
40%
6 years
0.07
40%
6 years
1.25
112%
10 years
0.87
112%
5 years
0.94
112%
10 years
1.35
112%
3 years
1.50
112%
3 years
1.26
112%
10 years
1.35
112%
10 years
1.16
112%
10 years
1.00
112%
10 years
1.57
112%
10 years
1.30
112%
10 years
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
75%
90%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
83
ARGO BLOCKCHAIN PLC
24.
ORDINARY SHARES
Ordinary share capital
Issued and fully paid
303,435,997 Ordinary Shares of £0.001 each
Issued in the period
164,646,338 Ordinary Shares of £0.001 each
Fully paid not yet issued
Ordinary Shares of £0.001 each
468,082,335 Ordinary Shares of £0.001 each
Share premium
At beginning of the period
Cancelled during the period
Issued in the period
Issue costs
Fully paid not yet issued
At the end of period
25.
RESERVES
As at 31
December
2021
£’000
As at 31 December
2020
£’000
303
165
-
468
1,540
-
150,977
(12,936)
-
139,581
294
-
9
303
25,252
(25,252)
-
-
1,540
1,540
The following describes the nature and purpose of each reserve:
Reserve
Ordinary Shares
Description
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
Accumulated surplus
The other comprehensive income of any associates is recognised in this reserve
Cumulative net gains and losses and other transactions with equity holders not
recognised elsewhere.
84
ARGO BLOCKCHAIN PLC
26.
TRADE AND OTHER PAYABLES
Trade payables
Accruals and other payables
Short term loans
Other taxation and social security
Total trade and other creditors
Group
2021
Company
2021
Group
2020
Company
2020
£’000
10,259
4,986
-
-
15,245
£’000
8,023
141
-
-
8,164
£’000
548
271
116
1
936
£’000
10
159
-
1
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.
Contingent 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 (see note 19).
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 profit or loss, which for the year ended 31 December 2021 amounted to
£236,000.
If any of the milestones are not achieved then that element of contingent consideration is recognised in profit or loss.
The amount derecognised and recorded as a gain during the year ended 31 December 2021 amounted to £352,000.
27.
LOANS AND BORROWINGS
Non-current liabilities
Issued debt - bond
Assumed mortgage on acquisition
Total
Current liabilities
Short term loan
Assumed mortgage on acquisition
Total
As at 31 December
2021
£’000
As at 31 December
2020
£’000
26,908
3,391
30,299
22,239
1,152
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
85
ARGO BLOCKCHAIN PLC
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
Lease liability – current
Lease liability – non current
As at 31
December 2021
£’000
7
370
As at 31
December 2020
£’000
3,470
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
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
Carrying amount of financial assets
Measured at amortised cost
- Mining equipment prepayments
47,426
-
-
Trade and other receivables
13,194
183,867
- Cash and cash equivalents
Measured at fair value through profit or
loss
Total carrying amount of financial
assets
Carrying amount of financial liabilities
Measured at amortised cost
-
Trade and other payables
- Short term loans
-
-
-
Long term loans
Issued debt – bonds
Lease liabilities
Measured at fair value
-
Fair value of contingent
consideration
Total carrying amount of financial
liabilities
11,803
403
126
73
-
145
2,051
1,393
-
22,949
1,456
-
72,826
184,066
3,589
24,405
10,259
23,391
3,391
26,908
377
8,163
-
-
26,908
-
8,071
8,071
548
116
-
7,409
10
-
-
-
72,397
43,142
8,073
10
86
ARGO BLOCKCHAIN PLC
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.
Assets
Financial assets at fair value
through profit or loss
- Equity holdings
- Digital assets
Total at 31 December 2021
Liabilities
Financial liabilities at fair
value through profit or loss
- Deferred contingent
consideration
Total at 31 December 2021
Assets
Financial assets at fair value
through profit or loss
Equity holdings
Digital assets
Total at 30 December 2020
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
329
-
329
-
-
-
80,759
80,759
73
-
73
402
80,759
81,161
-
-
8,071
8,071
8,071
8,071
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
-
-
-
-
4,637
4,637
1,393
-
1,393
1,393
4,637
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.
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ARGO BLOCKCHAIN PLC
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); £442,808 due to Vernon Blockchain Inc in respect of fees of Peter Wall (CEO), of which
£123,711 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.
88