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RNS
Argo Blockchain PLC   -  ARB   

Final Results

Released 14:39 17-Apr-2019

RNS Number : 5277W
Argo Blockchain PLC
17 April 2019
 

PRESS RELEASE

17 April 2019 

 

Argo Blockchain Plc 

("Argo" or "the Group") 

 

 

2018 Preliminary Results

 

 

Argo Blockchain Plc, a UK-based provider of cryptocurrency mining services (LSE: ARB), announces its preliminary maiden audited results for the period from incorporation on 7 December 2017 to 31 December 2018. 

 

Summary 

 

·    Revenue amounted to £0.76m, reflecting start-up of mining services from mid-2018

 

·    Pre-tax loss of £4.1m

 

·    Cash as at year end amounted to £16m.

 

·    Achieved London Stock Exchange listing in August 2018, the first crypto-mining business to float on one of the world's leading exchanges

 

·    Successfully launched and rolled out a consumer-facing mining as a service platform (MaaS) with two operational centres in Canada

 

·    Despite challenging market conditions sold more than 10,000 monthly packages by the year end, exceeding internal growth targets

 

 

Post period items

 

·    On 15 February 2019 announced a strategic refocus involving a temporary closure of the MaaS business in light of continuing tough industry conditions and a shift to mining for the Group's own account, which is expected to be EBITDA break-even from the second half of 2019.

 

·    Cash of £15m as of 31st March 2019

 

Commenting on the results, Jonathan Bixby, executive chairman of Argo, said: "The results reflect our first year's performance from start-up and were better than our expectations. In response to challenging market conditions the Group has taken prudent steps to transition its mining business to ride out the current downturn and position Argo for new opportunities being presented by the downturn. As a result the Group expects to turn EBITDA break-even in the second half of this year, which is earlier that its original expectations at the time of flotation, while also stepping-up investments in both its existing infrastructure and new mining capabilities to create long term value for shareholders."

 

For further information please visit www.argoblockchain.com or contact:

 

 

Argo Blockchain

 

Timothy Le Druillenec

Chief Financial Officer

Neil Thapar 

Financial Communications Advisor

Via Tancredi +44 203 434 2334

 

 

 

 

 

+44 (0) 7876 455323

Tancredi Intelligent Communication

 

Media relations

Georgia Hanias

Georgia@tancrediGroup.com

Salamander Davoudi

salamander@tancrediGroup.com

Emma Valgimigli

emma@tancredigroup.com

+44 7812 211 403

 

 

+44 7957 549 906

 

 

+44 203 434 2322

 

 

About Argo:

 

Argo Blockchain plc is a global data centre management business that provides a flexible platform for the mining of leading cryptocurrencies. Argo is headquartered in London, UK and operates state-of-the art data centres in Quebec, Canada. The Company's shares are listed on the main market of London Stock Exchange under the ticker: ARB.

 

ARGO BLOCKCHAIN PLC

 

CHAIRMAN'S STATEMENT

 

 

The Group incurred a pre-tax loss of £4,117,285 in the period from incorporation until 31st December 2018. These losses reflect the costs of the start-up of the business; the professional costs and related costs of achieving the Group's listing on the Official List of the UK Listing Authority by way of a standard listing; the roll out of the infrastructure to support the MaaS subscribers; maintaining the Group's listing; and include directors' and employees fees and salaries; general administration costs and professional fees. 

 

Despite tumultuous industry conditions in 2018, Argo completed its maiden period of operations in a strong financial position. Following its inception in December 2017, the Group became the first cryptocurrency miner to achieve an LSE listing in August 2018. Within four months of our flotation we rapidly established and rolled out a successful MaaS platform aimed at the consumer market worldwide from outsourced operational centres in Canada. As a result, Argo exceeded its internal growth targets with the sale of more than 10,000 monthly mining packages.

 

Our early success was achieved in the face of deteriorating market conditions throughout the year, which saw cryptocurrency prices slump by as much as 80% with Bitcoin down from $13,791 USD to $3,768 between January 1st 2018 to January 1st 2019.

 

Notwithstanding the excellent progress made in our first year, and in the light of a prolonged and unexpectedly severe industry downturn, in February 2019 the Board took the difficult but necessary decision to temporarily cease Argo's subscription-based consumer mining service and transition to mining for its own account.

 

The move is aimed at de-risking the business in an uncertain industry environment, shorten our path to profitability by reducing support and marketing costs, and reposition Argo to take full advantage of opportunities as industry dynamics change and competition dissipates.

 

I am particularly pleased with the prudent management of cash throughout the year, enabling Argo to close the year with cash of £16m. Our strong balance sheet is a major competitive advantage and provides the business with agility to adapt to changing industry conditions.  As of 31st March 2019, cash amounted to £15m.

 

 

2019/20 Vision and Strategy Refocus

 

We continue to believe strongly that the cryptocurrency market has considerable long-term potential to become a major asset class and a store of enduring value.  As institutions adopt the blockchain technology underlying cryptocurrencies, they will create and maintain infrastructure that will help propel the next evolution of the market.  This will allow for wide adoption and acceptance of custody and trading solutions that will, in turn, drive the adoption of crypto-mining (both Proof of Work and Proof of Stake) on a global scale.

 

The technology underlying crypto-mining is also moving between Proof of Work and Proof of Stake. We intend to continue to be a market leader in Proof of Work mining while at the same time exploring Proof of Stake mining technology with the goal of ultimately providing a leading product offering and trusted brand in both areas. This is entirely in line with our existing investment in hardware and our team's expertise.

 

Further to the announcement of 15th February 2019, Argo moved quickly to implement its strategy refocus, streamline the business and cut costs. The MaaS operation has ceased and existing infrastructure and capital have been redeployed for mining on Argo's own account, effective from 1st April 2019.  As part of the transition, staff numbers have been cut by 40% and the marketing and customer support functions were significantly reduced and reassigned.  The Group has also renegotiated its major input costs, contributing to an overall saving in ongoing mining operational costs by 35%.

 

This repositioning is expected to turn the Group EBITDA break-even in the second half of this year - ahead of the Group's original plans at the time of its flotation - even if industry conditions continue to remain challenging. In the event of a sustained recovery in market conditions, the revised strategy stands to deliver significant incremental gains long term.

 

The restructuring and strategy refocus is already making a positive impact and is expected to deliver the following benefits:

 

·      35% reduction in Group's annual operating cost base

·      Generate mining profits by utilising Argo's existing hardware and hashing capacity,

·      Deliver Group EBITDA break-even on a monthly basis from the second half of 2019 at current cryptocurrency market prices.

 

In addition, due to collapse in cryptocurrency prices, the Group now has the opportunity to step-up long term investment in new mining capacity as marginal players exit the industry and some hardware prices tumble by as much as 70 per cent.

 

The combination of lower procurement and operating costs together with easing competition significantly improve Argo's potential for mining profitably. Investment in new hardware has the potential to enhance returns further.  Based on our internal analysis, the Group believes new hardware has the capability to generate operating margins of between 30% and 40% at current cryptocurrency prices. 

 

Accordingly, the Group plans to commence a phased expansion of its mining infrastructure in the current year.   These investments will be made as new generation hardware becomes available and the Return on Investment for this hardware makes sense. The Company feels confident that it can rapidly scale operations with the combination of in-house staff and its relationships with its current outsourcing partners.

 

In addition to prudent investments in Proof of Work mining, the Group plans to commence a significant investment in Proof of Stake (POS) mining. Proof of Stake mining at scale is coming and the Group believes that it has significant potential as it addresses some of the major limitations of Proof of Work (POF) mining including the amount of electricity needed to power the mining network and the lengthy confirmation process involved. The Group believes that utilizing its existing investments in hardware and the expertise of its existing team it can become a recognized leader in this space in 2019.    

 

The Board strongly believes that Argo's refreshed strategy, strong balance sheet, business agility and technology experience provides a strong foundation to ride out the current challenging market conditions and deliver long term shareholder value.

 

On behalf of the Board, I would also like to take this opportunity to thank all our shareholders for their unstinting support as well as commend our employees for their hard work and dedication in this landmark period for the Group.

 

Jonathan Bixby

Executive Chairman

 

ARGO BLOCKCHAIN PLC

 

GROUP STATEMENT OF COMPREHENSIVE INCOME

 

FOR THE PERIOD ENDED 31 DECEMBER 2018

 

 

 

Period

 

 

ended

 

 

31 December

 

 

2018

 

 

Notes

 

£

 

 

 

 

Revenue

 4

764,562

 

 

 

 

 

Cost of sales

5

 

          (1,175.964)

 

 

 

 

Gross Profit

 

 

(411,402)

 

 

 

 

Administrative expenses

5

 

(3,731.913)

 

 

 

 

Operating loss

 

 

(4,143,315)

 

Interest expense

(9,934)

 

 

 

Finance income

 

 

35,964

 

 

 

 

 

 

 

 

Loss before taxation

 

(4,117,285)

 

 

 

Tax on loss

9

 

-

 

 

 

 

 

 

 

 

Total comprehensive loss attributable to the equity holders of the company

 

 

(4,117,285)

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to equity owners (pence

 

 

 

 

 

 

 

Basic and diluted loss per share

10

 

(2.2p)

 

 

 

 

 

 

 

             

 

 

 

The income statement has been prepared on the basis that all operations are continuing operations

 

 

 

 

ARGO BLOCKCHAIN PLC

 

GROUP BALANCE SHEET

 

AS AT 31 DECEMBER 2018

 

 

 

2018

 

 

Notes

 

£

 

ASSETS

Non-current assets

 

Intangible fixed assets

12

 

619,500

 

Tangible fixed assets

13

 

2,457,240

 

 

 

 

 

 

 

 

 

 

 

Total non-current assets

3,076,740

 

 

 

Current assets

 

Trade and other receivables

15

 

2,179,057

 

Other current assets

16

 

2,082

 

Cash and cash equivalents

 

 

16,389,443

 

 

 

 

 

 

Total current assets

 

18,570,582

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

21,647,322

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

Equity

 

 

Share capital

19

293,750

 

Share premium account

20

25,252,288

 

Retained loss

 

(4,117,285)

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

 

21,428,753

 

 

 

 

 

 

 

 

 

Current liabilities

 

Trade and other payables

22

 

218,569

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

218,569

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

21,647,322

 

 

 

 

 

               

 

 

ARGO BLOCKCHAIN PLC

 

COMPANY BALANCE SHEET

 

AS AT 31 DECEMBER 2018

 

 

 

 

 

 

2018

 

 

Notes

 

£

 

ASSETS

Non-current assets

 

Investment in subsidiary

11

 

1

 

 

 

 

 

 

 

 

 

 

 

Total non-current assets

1

 

 

 

Current assets

 

Trade and other receivables

15

 

16,764

 

Loan to Subsidiary

 

 

10,695,589

 

Cash and cash equivalents

 

 

13,117,072

 

 

 

 

 

 

Total current assets

 

23,829,425

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

23,829,426

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

Equity

 

 

Share capital

19

293,750

 

Share premium account

20

25,252,288

 

Retained losses

 

(1,779,612)

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

 

23,766,426

 

 

 

 

 

 

 

 

 

Current liabilities

 

Trade and other payables

22

 

63,000

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

63,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

23,829,426

 

 

 

 

 

               

 

ARGO BLOCKCHAIN PLC

 

GROUP STATEMENT OF CHANGES IN EQUITY

 

FOR THE PERIOD ENDED 31 DECEMBER 2018

 

 

 

 

 

Share capital

 

Share premium account

 

Share  based payment  reserve

 

Retained losses

 

Total

 

 

 

£

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 5 December 2017:

    -

 

-

 

  -

 

                   -

 

               -

 

 

 

 

 

 

 

 

 

 

 

 

Period ended 31 December 2018:

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the period

 

  -

 

      -

 

   -

 

(4,117,285)

 

(4,117,285)

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with equity owners

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital net of issue costs

 

293,750

 

25,252,288

 

  -

 

       -

 

25,546,038

 

Total transactions with owners

 

293,750

 

25,252,288

 

  -

 

       -

 

25,546,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2018

 

293,750

 

25,252,288

 

  -

 

(4,117,285)

 

21,428,753

 

 

 

 

 

 

 

 

 

 

 

                                     

 

 

ARGO BLOCKCHAIN PLC

 

COMPANY STATEMENT OF CHANGES IN EQUITY

 

FOR THE PERIOD ENDED 31 DECEMBER 2018

 

 

 

 

 

 

 

 

Share capital

 

Share premium account

 

Share  based payment  reserve

 

Retained losses

 

Total

 

 

 

£

 

£

 

£

 

£

 

£

 

Balance at 5 December 2017:

-

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Period ended 31 December 2018:

 

 

Total comprehensive loss for the period

 

-

 

-

 

-

 

(1,779,612)

 

(1,779,612)

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with equity owners

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital net of issue costs

 

293,750

 

25,252,288

 

-

 

-

 

25,546,038

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

293,750

 

25,252,288

 

-

 

-

 

25,546,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2018

 

293,750

 

25,252,288

 

-

 

(1,779,612)

 

23,766,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARGO BLOCKCHAIN PLC

 

GROUP STATEMENT OF CASH FLOWS

 

FOR THE PERIOD ENDED 31 DECEMBER 2018

 

 

 

 

 

 

Period ended 31 December 2018

 

 

Notes

£

£

 

 

Cash flows from operating activities

 

 

Operating loss

23

 

(4,153,249)

Depreciation/Amortisation

 

 

487,697

Equity settled share based payments

 

 

60,000

Crypto asset purchases for resale

16

 

329,088

Decrease/(increase) in trade and other receivables

 

 

(2,181,139)

(Decrease)/increase in trade and other payables

 

 

218,569

 

 

 

 

 

 

 

 

 

 

Net cash flow used in operating activities

 

 

(5,239,034)

 

 

 

 

 

Investing activities

 

Purchase of intangible assets

 

(671,921)

 

Purchase of tangible fixed assets

 

(2,892,516)

 

Crypto asset purchases for resale                                                                                  16

 

(329,088)

 

Interest received

35,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(3,857,561)

 

Financing activities

 

Proceeds from issue of shares net of issue costs

25,486,038

 

 

 

 

 

 

 

 

 

Net cash generated from/(used in) financing activities

 

25,486,038

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

16,389,443

 

 

Cash and cash equivalents at beginning of period

 

-

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

16,389,443

 

 

 

 

 

 

 

 

               

 

ARGO BLOCKCHAIN PLC

 

COMPANY STATEMENT OF CASH FLOWS

 

FOR THE PERIOD ENDED 31 DECEMBER 2018

 

 

 

 

Period ended 31 December 2018

 

 

 

Notes

£

£

 

 

 

 

Cash flows from operating activities

 

 

 

 

Operating loss

23

 

(1,815,576)

 

Equity settled share based payments

 

 

60,000

 

Decrease/(increase) in trade and other receivables

 

 

(16,764)

 

(Decrease)/increase in trade and other payables

 

 

63,000

 

 

 

 

 

 

 

 

 

 

 

Net cash flow used in operating activities

 

 

(1,709,340)

 

 

 

 

 

 

 

 

Investing activities

 

 

Investment in subsidiary

 

(1)

 

 

Decrease/(increase) in loan to subsidiary

 

(10,695,589)

 

 

Purchase of tangible fixed assets

 

-

 

 

Interest received

35,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(10,659,626)

 

 

 

Financing activities

 

 

Proceeds from issue of shares net of costs

25,486,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash generated from/(used in) financing activities

 

25,486,038

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

13,117,072

 

 

 

 

Cash and cash equivalents at beginning of period

 

-

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

13,117,072

 

 

 

 

 

 

 

 

                     

 

 

ARGO BLOCKCHAIN PLC

 

NOTES TO THE FINANCIAL STATEMENTS

 

FOR THE PERIOD ENDED 31 DECEMBER 2018

 

 

 

1

Accounting policies

 

 

Company information

 

Argo Blockchain plc ("the company") is a public limited company incorporated in England and Wales. The registered office is Room 4, 1st Floor 50 Jermyn Street, London, United Kingdom, SW1Y 6LX. 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 Blockchain Canada Holdings Inc. (together "the Group"), incorporated in Canada, on 12 January 2018.

 

On 3 August 2018 the company placed 156,250,000 ordinary shares at a price of 16 pence per ordinary share and gained admission to the official list (by way of Standard Listing under chapter 14 of the Listing Rules) and to trading on the London Stock Exchange's main market for listed securities.

 

The principal activity of the group is that of the provision of crypto mining services.

 

 

Reporting period

 

 

The financial statements cover the period from incorporation 5 December 2017 to 31 December 2018.

 

 

Significant accounting policies

 

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

 

1.1

Basis of preparation

 

 

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  The financial statements have been prepared under the historical cost convention.

 

 

The financial statements are prepared in sterling, which is the functional currency of the company and Group. Monetary amounts in these financial statements are rounded to the nearest £.  Entities within the Group which have a functional currency that is different to that of the parent, are presented in the Group's presentational currency of Sterling. Where group entities' functional currencies are different from the parent, the assets and liabilities presented are translated at the closing rate as at the Balance Sheet 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 in conformity with IFRS 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.

 

1.2

Going concern

 

 

The preparation of consolidated financial statements requires an assessment on the validity of the going concern assumption. The Directors have reviewed projections for a period of at least 12 months from the date of approval of the Financial Statements. The Group currently has a low level of revenues but significant cash resources were raised, following its listing, to finance its activities.  In making their assessment of going concern, the Directors acknowledge that the Group has considerable cash reserves and can therefore 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. Accordingly, the Board believes it is appropriate to adopt the going concern basis in the preparation of the Financial Statements.

 

 

 

1.3

Revenue recognition

 

 

Subscription revenue

 

The Group recognised revenue during the period based on subscription revenues received monthly in advance of the MaaS facilities offered.  Each contract was renewable on a monthly basis and the Group did not offer any longer term agreements to subscribers. The Group enters into contracts with the subscriber. Revenue arising from subscription sales under these subscription contracts is recognised when the price is determinable, the product has been delivered in accordance with the terms of the contract, the significant risks and rewards of ownership have been transferred to the customer and collection of the sales price is reasonable assured. These criteria are assessed to have occurred once the crypto mining service has been delivered to the customer. 

 

Mined income

 

The Group recognised revenue during the period in relation to mined crypto. The Group enters into contracts with the blockchain. 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 yahoo finance on the transaction date, and this is allocated to the number of crypto mined. These criteria are assessed to have occurred once the crypto has been received in the Group's wallet.

 

 

 

1.4

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. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

The group consists of Argo Blockchain plc and its wholly owned subsidiaries Argo Innovation Labs Inc and Argo Innovation Labs Limited, the latter remaining dormant.

 

In the parent company financial statements, investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

 

 

The consolidated financial statements incorporate those of Argo Blockchain plc and all of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).  Subsidiaries acquired during the year are consolidated using the purchase method.  Their results are incorporated from the date that control passes.

 

All financial statements are made up to 31 December 2018.  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.

 

 

Argo Innovation Labs Inc. has been included in the group financial statements using the purchase method of accounting. Accordingly, the group profit and loss account and statement of cash flows include the results and cash flows of Argo Innovation Labs Inc. for the period from its incorporation and acquisition on 12 January 2018. 

 

 

 

1.5

Segmented reporting

 

 

The directors consider that the Group has only one reporting segment. Accordingly, no segmental analysis is considered necessary.

 

 

1.6

Intangible assets

 

 

Intangible fixed assets comprising of the Group's website and supporting software platform relates to the user interface for customers, and as such is revenue generating.

 

Intangible assets are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Costs relating to the development of website and software are capitalised once all the development phase recognition criteria of IAS 38 "Intangible Assets" are met.  When the software is available for its intended use, 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.

 

1.7

Tangible fixed assets

 

 

Tangible fixed assets comprise of computer equipment and data centre improvements.

 

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation 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.

 

 

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 computer equipment and 5 years in the case of the data centre improvements.

 

 

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, such as changes in technology.

 

 

1.8

Fixed asset investments

 

 

In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

 

 

1.9

Impairment of fixed assets

 

 

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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 company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

1.10

Cash and cash equivalents

 

 

Cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and other financial institutions, that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

 

1.11

Financial instruments - initial recognition and subsequent measurement

 

 

(1)   Financial assets

 

Financial assets are recognised in the Balance Sheet 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 or fair value through OCI, 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

 

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. IFRS 9.5.4 The Group's financial assets at amortised cost include other receivables and cash and cash equivalents.

 

 

Derecognition

 

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated Balance sheet) when:

 

·      The rights to receive cash flows from the asset have expired; or

·      The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

 

 

Impairment of financial assets

 

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

 

The Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

 

For 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.

 

(2)   Financial liabilities

 

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables and loans.

 

 

Subsequent measurement

 

The measurement of financial liabilities depends on their classification, as described below:

 

Loans and borrowings and trade and other payables

 

After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.

 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.

 

This category generally applies to trade and other payables.

 

 

Derecognition

 

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.

 

 

1.12

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.

 

1.13

Financial risk management

 

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.

 

Financial Risk Factors

 

The Group's activities expose it to a variety of financial risks: market risk (price 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.

 

The Group has no borrowings, but is exposed to market risk in terms of foreign exchange risk. 

 

Risk management is undertaken by the Board of Directors.

 

Market Risk - price risk

 

The Group is exposed to price risk primarily for the costs of power and hosting at its data centres as well as the costs of computer equipment acquired to facilitate mining cryptocurrencies.

 

The Group is also exposed to commodity price risk by way of the values of cryptocurrencies. The Directors review all these costs on a regular basis and aim to achieve the best possible terms for the Group at the time of acquisition.

 

Credit risk

 

Credit risk arises from cash and cash equivalents as well as any outstanding receivables. Management does not expect any losses from non-performance of these receivables. The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board.

 

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk, which is stated under the cash and cash equivalents accounting policy.

 

 

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.

Controls over expenditure are carefully managed, in order to maintain its cash reserves.

 

Financial liabilities are all due within one year.

 

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. The Group has no borrowings.

 

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 monitors capital on the basis of the total equity held by the Group, being £21,428,753.

 

 

1.14

Taxation

 

 

The tax expense represents the sum of tax currently payable and deferred tax.

 

 

 

Current tax

 

 

The tax currently payable is based on taxable profit for the year.  Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

 

 

Deferred tax

 

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. 

 

 

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.

 

 

1.15

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.

 

 

1.16

Retirement benefits

 

 

The group does not have any pension schemes.

 

 

1.17

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.

 

1.18

Leases

 

 

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees.  All other leases are classified as operating leases. 

 

 

 

Rentals payable under operating leases, less any lease incentives received are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which the benefits from the lease asset are consumed.

 

 

1.19

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.

 

 

2

Adoption of new and revised standards

 

 

These are the first financial statements of the company.  The company has therefore 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 2018.

 

 

 

Standards which are in issue but not yet effective

 

At the date of authorisation of these financial statements, the following Standards and Interpretation, which have not yet been applied in these financial statements, were in issue but not yet effective.

 

 

 

 

Standard or Interpretation

Description

Effective date for annual accounting period beginning on or after

 

 

 

 

 

IFRS 3

Amendments to IFRS 3' 'Business Combinations' to clarify the definition of a business

1 January 2020

 

IFRS 16

Leases - new standard

1 January 2019

 

IAS 1

Amendments to IAS 1, 'Presentation of Financial Statements' regarding the definition of 'material'

1 January 2020

 

IAS 8

Amendments to IAS 8, 'Accounting Policies, Changes in Accounting Estimates and Errors' regarding the definition of 'material'

I January 2020

 

 

 

 

 

 

IAS 12

Amendments to IAS 12, 'Income Taxes' resulting from Annual Improvements 2015-2017 Cycle (income tax consequences of dividends)

1 January 2019

 

IFRIC 23

Uncertainty over Income Tax Treatments

1 January 2019

 

 

 

The company have not early adopted any of the above standards and the directors are assessing the impact on future financial statements.

 

3

Judgements and key sources of estimation uncertainty

 

 

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.

 

 

Share-based payments

 

During the course of the period certain share based payments were made based on the fees due to certain individual 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.

 

Valuation of intangible fixed assets

 

The directors considered at length whether any further impairments were required on the value of the computer equipment and website.  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.

 

Valuation of cryptocurrencies

 

The Board monitors regularly 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 IAS38. 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.  As at 31st December 2018 the Group did not hold any significant amounts of crypto currency.

 

4

Revenue

 

 

 

 

2018

 

 

 

 

 

 

 

£

 

 

UK (corporate reseller)

227,561

 

 

Canada (corporate reseller)

370,993

 

 

Website - worldwide

77,044

 

 

Crypto currency mining

88,964

 

 

 

 

 

 

 

764,562

 

 

 

 

 

5

Expenses by nature

 

 

 

2018

 

 

£

 

 

 

         Administration expenses

 

 

Salary and other employee costs

202,839

 

 

Depreciation and amortisation

67,842

 

 

Mirabaud Securities Limited provision (see below)

834,000

 

 

Legal, professional and regulatory fees

520,610

 

 

Foreign Exchange losses

152,748

 

 

Consulting fees

925,411

 

 

Advertising fees

350,564

 

 

Travel and subsistence

208,894

 

 

Crypto asset fair value movement (see note 16)

235,196

 

 

Other administration expenses

233,809

 

 

 

 

 

 

 

 

 

 

 

Total administration expenses

3,731,913

 

 

 

 

 

 

 

2018

 

 

£

 

 

 

          Cost of sales

 

 

Crypto asset disposal (see note 16)

414,970

 

 

Depreciation of computer hardware

419,856

 

 

Hosting and other costs

341,139

 

 

 

 

 

 

 

 

 

 

 

Total cost of sales

1,175,965

 

 

 

 

 

 

Mirabaud provision

The Group has still not received £834,000 of the Placing monies due from Mirabaud Securities Limited as part of the Listing process on 3rd August 2018.  It is in constant dialogue with its advisers and Mirabaud with the aim of recovering those monies under the contractual agreement between the two parties.   In the meantime, the Board has taken the prudent step of providing against this amount during the period notwithstanding the fact that efforts are being made to recover the monies.

 

6

Auditor's remuneration

 

 

 

2018

 

 

Fees payable to the company's auditor and associates

£

 

 

 

 

For audit services

 

 

 

In relation to listing

 

40,000

 

 

Audit of the financial statements of the group for the period ended 31 December 2018

 

45,000

 

 

 

 

 

 

 

 

7

Employees

 

 

 

 

The average monthly number of persons (including directors) employed by the group during the period was:

 

 

 

 

2018

 

 

 

Number

 

 

 

 

 

 

Management

9

 

 

 

 

 

 

 

 

2018

 

 

Their aggregate remuneration comprised:

£

 

 

 

 

 

 

Wages and salaries

177,531

 

 

Social security costs

4,854

 

 

Pension costs

2,353

 

 

Share based payments

35.000

 

 

 

 

 

 

 

 

 

 

 

 

219,738

 

 

 

 

 

 

 

 

 

 

8

Directors' and key management personnel remuneration

 

 

 

 

2018

 

 

 

£

 

 

Director's remuneration for qualifying services

596,742

 

 

Other key management personnel remuneration for qualifying services

305,271

 

 

 

 

 

 

 

 

 

 

 

 

902,012

 

 

 

 

 

 

 

 

 

 

 

                     

 

The amounts above are remunerated through both salaries (of which, some are included in Note 7) and through service companies (as disclosed in Note 29). Details of Directors remuneration are available in the Remuneration report.

 

 

 

9

Taxation

 

 

 

The actual charge for the period can be reconciled to the expected charge based on the profit or loss and the standard rate of tax as follows:

 

 

 

 

2018

 

 

£

 

 

 

Loss before taxation

 

4,117,285

 

 

 

 

 

 

Expected tax credit based on a weighted average of 24% (UK and Canada)

(996,941)

 

 

Effect of expenses not deductible in determining taxable profit

44,068

 

 

Capital allowances in excess of depreciation

(161,140)

 

 

Other tax adjustments

63,503

 

 

Unutilised tax losses carried forward

1,050,510

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

Taxation charge in the financial statements

-

 

 

 

 

 

 

 

 

The group has tax losses available to be carried forward and used against trading profits arising in future periods of £4,248,640.

 

 

 

A deferred tax asset of £1,026,354 calculated at a weighted average rate of 24% has not been recognised in respect of the tax losses carried forward on the basis that there is insufficient certainty over future profits to utilise against this amount.

 

 

             

 

10

Earnings per share

 

 

 

The basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue.

 

 

 

 

 

The Group and Company has in issue 48,230,103 warrants and options at 31 December 2018.  The loss attributable to equity holders and weighted average number of ordinary shares for the purposes of calculating diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share.  This is because the exercise of warrants and options would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive

 

 

 

2018

 

 

 

£

 

 

 

 

 

 

Net loss for the period attributable to ordinary equity holders for continuing operations

(4,117,285)

 

 

 

 

 

 

Weighted average number of ordinary shares in issue

186,019,809

 

 

 

 

 

 

Basic and diluted loss per share for continuing operations

(2.2)p

 

 

 

 

 

 

         

 

 

11

Investments in subsidiaries

 

 

 

 

 

Company

Shares in subsidiaries

 

 

£

 

Cost and carrying value

 

 

At 5 December 2017

-

 

Additions

1

 

 

 

 

 

 

 

 

At 31 December 2018

1

 

 

 

 

 

 

 

 

Details of the company's subsidiaries at 31 December 2018 are as follows:

 

 

 

 

 

Name of undertaking

Country of incorporation

Ownership interest (%)

Voting power held (%)

Nature of business

 

 

 

 

 

 

 

Argo Blockchain Canada Holdings Inc.

Canada

100%

100%

**

 

 

 

 

 

 

 

** The provision of cryptocurrency mining services.

 

 

The company's interest in Argo Blockchain Canada Holdings Inc. was acquired on incorporation of Argo Blockchain Canada Holdings Inc. on 12 January 2018.

 

 

 

The registered office of Argo Blockchain Canada Holdings Inc. is 700-401 West Georgia Street, Vancouver BC V6B 5A1 Canada.

 

 

12

Intangible assets

 

 

 

 

 

 

 

 

 

Group

 

 

Website

 

 

 

 

 

£

 

 

 

Cost

 

 

 

 

 

At 5 December 2017

 

 

-

 

 

 

Additions

 

 

671,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2018

 

 

671,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

At 5 December 2017

 

 

-

 

 

 

Amortisation charged in the period

 

 

52,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2018

 

 

52,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

At 31 December 2018

 

 

619,500

 

 

 

 

 

 

 

 

 

 

All intangible assets are held by the subsidiary.

 

 

 

 

 

 

 

                       

 

13

Tangible fixed assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

Computer equipment

 

Improvements to Datacentre

 

Total

 

 

 

 

 

 

£

 

 

Cost

 

 

 

 

 

 

 

At 5 December 2017

 

 

 

 

-

 

 

Additions

2,807,589

 

84,927

 

2,892,516

 

 

 

 

 

 

 

 

 

 

At 31 December 2018

2,807,589

 

84,927

 

2,892,516

 

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 5 December 2017

-

 

 

 

-

 

 

Depreciation charged in the period

421,711

 

13,565

 

435,276

 

 

 

 

 

 

 

 

 

At 31 December 2018

421,711

 

13,565

 

435,276

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

At 31 December 2018

2,385,878

 

71,362

 

2,457,240

 

 

 

 

 

 

 

 

        All property, plant and equipment is owned by the subsidiary.

                       

 

 

14

Financial instruments

 

 

 

Group

Company

 

 

2018

2018

 

 

£

£

 

 

Carrying amount of financial assets

 

 

 

Debt instruments measured at amortised cost

1,630,600

10,699,089

 

 

 

 

 

 

 

 

 

 

1,630,600

         10,699,089

 

 

 

 

 

 

 

 

 

 

 

Carrying amount of financial liabilities

 

 

 

Measured at amortised cost

218,589

63,000

 

 

 

 

 

 

 

 

 

 

 

 

The directors consider the carrying amounts of financial instruments carried at amortised cost in the financial statements approximate to their fair values.

 

 

 

 

 

 

15

Trade and other receivables

 

 

 

Group

Company

 

 

2018

2018

 

 

Amounts falling due within one year:

£

£

 

 

 

 

Amounts due from group companies

-

10,695,589

 

 

Other receivables

1,643,424

16,764

 

 

Other taxation & social security

535,633

-

 

 

 

 

 

 

 

 

 

 

 

2,179,057

10,712,353

 

 

 

 

 

 

 

 

 

 

 

Amounts due from group companies consist of an intercompany loan made to the 100% subsidiary, Argo Blockchain Canada Holdings Inc. and is eliminated on consolidation.

 

 

 

 

 

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

 

 

 

 

 

During the period, the directors made a provision against a receivable due to the company for £834,000, as described in Note 5. No other significant receivable balances are impaired at the reporting date.

 

 

 

 

 

 

 

16

Other current assets

 

 

 

 

 

 

 

 

 

Group

 

 

Crypto assets

 

 

 

 

 

£

 

 

 

At 5 December 2017

 

 

-

 

 

 

 

 

 

 

 

 

 

Additions

 

 

 

 

 

 

Crypto assets purchased for resale

 

 

329,088

 

 

 

Crypto assets purchased for contractual obligation

 

 

234,196

 

 

 

Crypto assets mined

 

 

88,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value movements

 

 

 

 

 

Fair value movements on Crypto assets held

 

 

(235,196)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disposals

 

 

 

 

 

Disposal of Crypto assets

 

 

(414,970)

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

At 31 December 2018

 

 

2,082

 

 

 

 

 

 

 

 

 

                               

 

During the period, the Group entered into transactions involving the purchase, mining and disposal of Crypto assets.

 

Throughout the period, the Group used spare hardware capacity to accumulate Crypto currencies and held the assets with the intention of short-term capital growth. Crypto assets amounting to the value of £88,964 were mined.

 

Between 11 October 2018 and 14 November 2018, the Group identified an opportunity to make short term gains from a low prevailing price on the Crypto currency market, purchasing Bitcoin and Ethereum to the value of £329,088. However, due to the continued poor performance of the Crypto currency market, only losses were realised.

 

During the months of October, November and December 2018, the Group entered into contracts for the provision of mining as a service. The Directors concluded that given the poor performance of the Crypto currency market in the period approaching the year end, it would not be financially advantageous to purchase the additional hardware required to satisfy the contracts. Instead, the Directors reached an agreement with the customers to supply an equivalent amount of Bitcoin equal to the amount of Crypto currency expected to be mined in accordance with the contracts. In order to fulfil the new obligation, the Group purchased additional Bitcoin to the value of £234,196. The amounts purchased for resale and the amounts mined, were also converted into Bitcoin and also transferred in the transaction above.  

 

During the period, the fair value of Crypto assets held fell by £235,196. The fair value of the Crypto assets disposed of in order to satisfy the contracts described above was £414,970. At the period end, the Group held Crypto assets representing less than 1 Bitcoin, being a fair value of £2,082.

 

 

17

Share options and warrants

 

 

 

 

 

 

The following options and warrants over Ordinary Shares have been granted by the company and are outstanding:

 

 

 

 

 

Options / warrants

Grant date

Expiry date

Exercise price

Number of options and warrants outstanding at 31 December 2018

Number of options and warrants exercisable at 31 December 2018

 

 

 

 

 

 

 

 

 

 

Warrants

2 February 2018

2 February 2023

£0.08

2,250,000

2,250,000

 

 

Warrants

23-26 February 2018

23-26 February 2021

£0.08

6,580,000

3,290,000

 

 

Warrants

23 February 2018

23 February 2021

£0.08

1,400,000

-

 

 

Warrants

14 - 17 June 2018

14-17 June 2021

£0.16

650,000

325,000

 

 

Warrants

15 June 2018

15 June 2021

£0.16

210,453

-

 

 

Warrants

3 August 2018

3 August 2023

£0.16

11,781,600

11,781,600

 

 

Options

25 July 2018

25 July 2024

£0.16

25,358,050

7,532,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,230,103

25,178,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Movements in the number of options and warrants outstanding and their related weighted average exercise prices are as follows:

 

 

 

 

 

 

Number of options and warrants

Weighted average exercise price £

 

 

 

2018

2018

 

 

At beginning of period

-

-

 

 

Granted

48,230,103

0.14

 

 

Exercised

-

-

 

 

Lapsed

-

-

 

 

 

 

 

 

 

Outstanding at 31 December 2018

48,230,103

0.14

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at 31 December 2018

25,178,650

0.14

 

 

 

 

 

 

 

 

 

 

 

The weighted average remaining contractual life of options and warrants as at 31 December 2018 is 4 years.

 

 

If the exercisable shares had been exercised on 31st December 2018 this would have represented 8% of the enlarged

 

 

share capital.

 

 

 

 

 

 

At the grant date, the fair value of the warrants issued have been 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 the grant date. Risk free interest has been based on UK Government Gilt rates for an equivalent term.  As the exercise price was equal or above the market value of the shares during the period to 31 December 2018, and share prices fell during the period, the marketability of shares was low and as such a discount rate of between 75% and 90% was placed on the fair value of the shares depending on amounts and timing. The Directors note that the expense for the fair value of options and warrants are not material during the period and therefore not included in the accounts.

 

 

18

Share options and warrants (continued)

 

 

 

 

 

 

 

 

2 February

23-26 February

14-17 June

3 August

25 July

 

 

Grant date share price

£0.08

 

£0.08

 

£0.08

 

£0.16

 

£0.08

 

 

 

Exercise price

£0.08

 

£0.08

 

£0.16

 

£0.16

 

£0.16

 

 

 

Expected volatility

40%

40%

40%

40%

40%

 

 

Option life

5/3 years

3 years

3 years

5 years

6 years

 

 

Risk-free interest rate

1%

1%

1%

1%

1%

 

 

Marketability discount

75%

75%

75%

90%

75%

 

 

 

 

 

 

 

 

 

19

Share capital

 

 

 

Group and company

 

 

2018

 

 

Ordinary share capital

£

 

 

Issued and fully paid

 

 

 

293,750,000 Ordinary Shares of £0.001 each

 

293,750

 

 

 

 

 

 

 

 

 

 

Reconciliation of movements during the year:

 

 

 

2018

2018

 

 

 

Number

Number

 

 

 

Ordinary Shares of £0.001 each

Ordinary Shares of £1 each

 

 

 

 

 

 

 

1 Ordinary Share of £1 issued at £1 on incorporation

-

1

 

 

Subdivision of ordinary shares on 20 December 2017

1,000

(1)

 

 

89,999,000 Ordinary Shares issued at £0.001 each on 20 December 2017 for cash

89,999,000

-

 

 

10,000,000 Ordinary Shares issued at £0.01 each on 2 January 2018 for cash

10,000,000

-

 

 

31,250,000 Ordinary Shares issued at £0.08 each on 2 February 2018 for cash

31,250,000

-

 

 

750,000 Ordinary Shares issued at £0.08 each on 2 February 2018 for services

750,000

-

 

 

5,500,000 Ordinary Shares issued at £0.001 each on 15 June 2018 on exercise of warrants

5,500,000

-

 

 

156,250,000 Ordinary Shares issued at £0.16 each on 3 August 2018 on placing

156,250,000

-

 

 

 

 

 

 

 

 

293,750,000

-

 

 

 

 

 

 

 

On incorporation, the Company issued 1 ordinary share for consideration of £1. The Company later passed a written resolution to subdivide the 1 Ordinary Share into 1,000 ordinary shares, with a nominal value of £0.001 each.

 

 

 

 

20

Share premium account

 

 

 

Group and company

 

 

2018

 

 

 

£

 

 

 

 

 

 

At beginning of period

 

-

 

 

Issue of new shares

 

27,461,750

 

 

Share issue expenses

 

(2,209,462)

 

 

 

 

 

 

 

 

 

25,252,288

 

 

 

 

 

 

 

 

 

21

Reserves

 

 

 

 

 

The following describes the nature and purpose of each reserve:

 

 

 

 

 

Reserve

Description

 

 

Share capital

Represents the nominal value of equity shares

 

 

Share premium

Amount subscribed for share capital in excess of nominal value

 

 

Retained earnings

Cumulative net gains and losses and other transactions with equity holders not recognised elsewhere.

 

 

 

 

 

22

Trade and other payables

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                               Group          Company             

 

 

 

                                                                                                 2018                   2018

 

                                                                                                                                                                                          £                       £

 

 

 

 

 

Other creditors

15,801

5,000

 

 

Accruals

202,768

58,000

 

 

 

 

 

 

 

 

 

 

 

218,569

63,000

 

 

 

 

 

 

 

 

 

 

Within other creditors is an amount of £5,000 owed to related parties in relation to securing trade agreements and facilitating the business and expenditure accrued during the early stages of the business. See Note 29 for additional disclosure.

 

 

 

 

The directors consider that the carrying value of trade and other payables is approximately equal to their fair value.

 

                                         

 

 

23

Cash generated from group operations

 

 

2018

 

 

£

 

 

 

Loss for the period after tax

 

4,117,285

 

 

Adjustments for:

 

 

Finance income

 

35,964

 

 

 

 

 

 

Operating Loss per Cash Flow

 

4,153,249

 

 

 

 

 

 

Cash generated from operations - company

 

 

2018

 

 

£

 

 

 

Loss for the period after tax

 

1,779,612

 

 

Adjustments for:

 

 

Finance income

 

35,964

 

 

 

 

 

 

Operating loss per Cash Flow

 

1,815,576

 

 

 

 

 

 

 

           

 

24

Capital management policy

 

 

 

There are currently no capital commitments contracted for by the Group.

 

 

 

 

25

Financial risk management

 

 

 

The group's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including foreign currency risk and interest rate risk).  The group's risk management policies in respect of these financial risks are set out below.

 

 

 

Credit risk

 

Credit risk arises principally from cash and cash equivalents, as well as credit exposures from outstanding receivables.

 

 

The group and company's cash balances are held with reputable financial institutions being NatWest Bank in England and CIBC in Canada.  The Group initially banked with Metrobank in England but late in 2018 was given notice that Metrobank had decided that a business dealing with cryptocurrencies, albeit through MaaS, was incompatible with their business model and therefore would cease providing banking facilities. The carrying amount of financial assets recorded in the financial statements represent the company's maximum exposure to credit risk.  The company does not hold any collateral or other credit enhancements to cover this credit risk.

 

 

 

Liquidity risk

 

Liquidity risk is the risk that the group and company will not be able to meet financial obligations as and when they fall due.   

 

 

The policy is to settle all liabilities within the terms of invoices which is normally within 30 days.

 

 

 

 

26

Financial risk management (continued)

 

 

 

The carrying amounts of the group's foreign currency denominated monetary assets and liabilities at the reporting date are as follows:

 

 

 

 

Assets

Liabilities

 

 

2018

2018

 

 

£

£

 

 

 

 

 

Cash and cash equivalents

3,272,371

-

 

Trade and other receivables

2,162,293

-

 

Trade and other payables

-

155,569

 

 

 

 

 

 

 

 

 

 

 

 

5,434,664

155,569

 

 

 

 

 

 

 

 

 

Market risk

 

The Group is very dependent on the state of the cryptocurrency market and general sentiment of crypto currencies as a whole.  The Group is set up to deal with these issues by switching to self mining at relatively short notice and cutting costs when and where necessary.

 

 

 

 

27

Retirement benefit schemes

 

 

 

There are no material company pension schemes in operation.

 

 

 

 

28

Operating lease commitments

 

 

At 31 December 2018 the Group had future minimum lease payments under non-cancellable operating leases as follows:

 

 

 

 

2018

 

 

 

£

 

 

<1 year

 

£3,956,250

 

1 - 2 years

 

£3,731,250

 

2 - 5 years

 

£2,100,000

 

 

 

 

 

£9,787,500

 

 

 

 

 

 

 

 

The above disclosure relates to the minimum power commitment in line with the GPU agreement entered into on 8 August 2018. The commitments fell with the subsidiary and now such commitments exist for the company.

 

 

 

29

Related party transactions

 

 

 

Founder agreement

The Company entered into an agreement with the Founder Shareholders, to pay them £95,000 pro rata to their percentage shareholdings in the Company. This was in consideration of their efforts to enable the Company to enter into certain memoranda of understanding and a media buying contract.

 

The outstanding balance as at the date of these financial statements is £5,000.

 

 

Share based payment

 

During the period, the Company issued shares to the value of £35,000 to Timothy Le Druillenec, a Director of the Company. This was in lieu of payment for professional services undertaken in excess of the services required by his directorship.

 

Rental agreement

 

The Company rents office space from Dukemount Capital plc, for which Timothy Le Druillenec was a Director during the period. During the period, payments of £4,620 were made with a balance of £Nil outstanding as at 31 December 2018.

 

The Group also rents office space from Vernon blockchain Inc, for which Peter Wall (considered to be key management personal) was a Director during the period. During the period, payments of £30,471 were made with a balance of £Nil outstanding as at 31 December 2018.

 

For each agreement, there is no long term commitment, and these transactions were made on an arm's length basis.

 

Fixed assets

 

During the period, the Group acquired £93,323 fixed assets from Vernon Blockchain Inc, for which Peter Wall was a Director during the period, with a balance of £Nil outstanding as at 31 December 2018.

 

Advertising services

 

During the period ended 31 December 2018, the Company paid £83,780 to Stanley Park Ventures, for which Jonathan Bixby was a Director, with a balance of £Nil outstanding as at 31 December 2018.

 

Key management compensation

 

Key management includes Directors (executive and non-executive) and senior. The compensation paid to related parties in respect of key management for employee services during the period was made only from Argo Innovation Labs Inc, amounting to: £208,612 paid to Possibilities Training Group Ltd in respect of the fees of Jonathan Bixby; £208,982 paid to MSE Management Inc. in respect of the fees of Mike Edwards; £134,706 paid to Blockchain Consulting in respect of fees of Inderpreet Hothi; £105,175 paid to Vernon Blockchain Inc in respect fees of Peter Wall.  Other key management received £65,390.  These are not inclusive of the related party transactions disclosed above.

 

 

 

30

Controlling party

 

 

 

There is no controlling party of the Group.

 

 

 

 

31

Post balance sheet events

 

 

 

On 8th January 2019 the 100% owned subsidiary, Argo Blockchain Canada Holdings Inc. changed its name to Argo Innovation Labs Inc.

 

On 1st September 2018 the Company acquired 100% of Argo Mining Limited (a company incorporated in the UK) for £1.  On 14th January 2019 that company changed its name to Argo Innovation Labs Limited.

 

On 15th February 2019 the Group announced a refocus of its business strategy in light of the continuing difficult trading conditions in the cryptocurrency market as digital currencies continued to face severe price pressure and volatility. As a result of the challenging conditions, the Company ceased accepting new mining subscriptions and decided to terminate all existing mining-as-a-service (MaaS) contracts by 1st April 2019. This shift in strategy followed more than six months of better-than-expected growth achieved by Argo's consumer business since its launch in the summer of 2018. Despite continuing demand for the services, the Company temporarily moved away from MaaS to mining directly for its own account. 

 

 

 

                     

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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