Abits (US:ABTS)2023-05-15 21:10Financial Performance - Revenue for the year ended December 31, 2022, was $164,428, a decrease of 25% from $219,330 in 2021[344] - The company reported a net loss of $22,544,693 for the year ended December 31, 2022, compared to a net loss of $2,739,850 in 2021, indicating a significant increase in losses[344] - Total stockholders' equity rose to $23,917,962 as of December 31, 2022, compared to $6,567,016 in 2021, reflecting a substantial increase[342] - The accumulated deficit increased to $(66,333,053) as of December 31, 2022, from $(43,788,360) in 2021[342] - Cash and cash equivalents at the end of 2022 were $2,505,286, slightly down from $2,507,404 at the end of 2021[348] - The company experienced a net cash used in operating activities of $7,198,718 for the year ended December 31, 2022[348] Capital Raising and Share Issuance - The company raised $40 million in early 2022 through a private placement of 16 million new ordinary shares at $2.50 per share[162] - The company issued 16 million new ordinary shares in February 2022, raising $40 million to support its bitcoin mining operations[351] Mining Operations - Mining operations in Buffalo and Columbus, Georgia were discontinued by the end of May due to unprofitability and fluctuations in electricity prices, leading to an impairment charge of $11.9 million[188] - The company acquired a property in Eastern Tennessee for bitcoin mining, with construction of a new mining center expected to be completed by August 2023[186] - The latest mining equipment, including 1,140 units of supercomputing servers, was acquired at competitive prices to enhance mining operations[188] - The company aims to capitalize on the long-term future of bitcoin mining despite current market challenges[188] Corporate Governance - The Audit Committee is chaired by Lionel Choong, who is recognized as an "audit committee financial expert" under NASDAQ rules[209] - The Company has established a Compensation Committee responsible for reviewing and approving executive compensation and employment agreements[211] - The Corporate Governance and Nominating Committee is tasked with evaluating director independence and recommending candidates for directorships[212] - The Board of Directors has determined that all independent directors meet NASDAQ independence standards, ensuring compliance with regulatory requirements[215] - The company has established board committees and strengthened financial personnel to improve governance and oversight[297] - The company is committed to high standards of corporate governance and complies with NASDAQ requirements[316] Executive Compensation - Conglin Deng's total compensation for 2022 was $120,000, a significant increase from $33,333 in 2021[202] - Wanhong Tan, the Chief Financial Officer, also received $120,000 in total compensation for 2022, up from $75,000 in 2021[202] - The Company has awarded Conglin Deng 600,000 restricted stock units (RSUs) as part of his employment agreement, vesting over 36 months[204] - Wanhong Tan has been awarded 180,000 RSUs under his employment agreement, also vesting over 36 months[205] Internal Controls and Audit - As of December 31, 2022, the company's disclosure controls and procedures were deemed ineffective due to a lack of formal documented controls[297] - Management identified material weaknesses in internal control over financial reporting, including insufficient understanding of NASDAQ requirements and inadequate record-keeping[301] - The company has implemented measures to address identified weaknesses, including educating senior management on NASDAQ requirements and maintaining a Fixed Asset Register[302] - The company appointed Audit Alliance LLP as its independent registered public accounting firm for the fiscal year ending December 31, 2022[312] - Management does not believe that any of the financial statements issued to date contain a material misstatement despite the identified weaknesses[302] Tax Considerations - U.S. Holders generally must include cash dividends paid on shares in gross income as ordinary income, with distributions treated as dividends to the extent paid out of current or accumulated earnings[248] - Non-corporate U.S. Holders may be subject to lower long-term capital gains tax rates on dividends if certain conditions are met, including that shares are readily tradable on an established securities market[249] - A U.S. Holder's capital gain or loss upon the sale or other taxable disposition of securities is generally equal to the difference between the amount realized and the adjusted tax basis in the securities[252] - U.S. Holders may be subject to a 3.8% Medicare contribution tax on unearned income, including dividends and gains from the sale of securities, if their income exceeds certain thresholds[254] - The tax consequences of a cashless exercise of redeemable warrants are unclear, and U.S. Holders should consult tax advisors regarding potential tax implications[259] - If a U.S. Holder does not make a timely Qualified Electing Fund (QEF) election, they may be subject to special tax rules if the company is determined to be a PFIC during their holding period[262] - Any gain recognized by a U.S. Holder on the sale of shares or redeemable warrants may be treated as an excess distribution if the company was a PFIC during the holding period[266] - The company has not engaged U.S. tax advisers to determine its PFIC status, creating uncertainty regarding its classification[261] - U.S. Holders should consult their tax advisors regarding the tax consequences of their ownership and disposition of the company's securities[254] Company Operations and Structure - The company has ceased all business operations in China as of July 2022, maintaining only a small administrative office[185] - The Company divested its entire interest in Moxian (Hong Kong) Limited in July 2022, ceasing its business footprint in China and focusing on opportunities in the United States and globally[189] - The Company operated on sundry jobs in its Beijing subsidiary, with no significant financial comparisons to the previous year due to relative inactivity[189] - The company has a total of 12 full-time employees, with 3 in Finance and Administration and the rest in the bitcoin mining business[220] - As of March 31, 2023, the company has 35,554,677 ordinary shares outstanding, with Danqing Sun owning 1,852,000 shares, representing 5.2% of the total[223] - Conglin Deng, the CEO and Director, holds approximately 45.7% of the outstanding voting power due to preferred shares held by Bridgeforrest (BVI) Inc[224] - The company has never declared or paid any cash dividends on its ordinary shares and does not expect to do so in the foreseeable future[226] - The company's ordinary shares are traded on the NASDAQ Capital Market under the ticker symbol "MOXC" since November 16, 2016[228] - The company is not currently a party to any material legal or administrative proceedings[225] - The company has adopted an Insider Trading Policy applicable to all directors and employees[219] - The company has a code of business conduct and ethics that applies to directors, officers, and employees, with amendments disclosed on its website[218] - The company has the capacity to carry on any business or activity as per its Amended and Restated Memorandum of Association[231] Financial Reporting and Compliance - The financial statements present fairly the financial position of the Company as of December 31, 2022, in conformity with accounting principles generally accepted in the United States[326] - The audit included evaluating the accounting principles used and significant estimates made by management[329] - The critical audit matter involved significant judgment in assessing the impairment of assets and the allowance for credit losses[330] - The audit procedures included examining evidence regarding amounts and disclosures in the financial statements[329] - The recoverable amount for impairment assessments is determined based on discounted cash flows[330] - The Company adopted ASU 2016-13 for measuring and recognizing current expected credit losses since January 1, 2020[338] - Audit fees for the fiscal year ended December 31, 2022, amounted to $90,000, an increase from $75,135 in the previous year[309] - There were no changes in internal controls over financial reporting that materially affected the company's internal controls during the reporting period[303]