Abits (US:ABTS)2024-04-30 20:30Financial Performance - The company generated a total output of 43.93 bitcoins in the fiscal year 2023, resulting in revenue of approximately $1.68 million[185]. - Total revenue for the year ended December 31, 2023, was $1,681,533, a significant increase from $164,428 in 2022, representing a growth of approximately 923%[335]. - The company reported a comprehensive loss of $12,605,303 for the year ended December 31, 2023, compared to a loss of $21,520,114 in 2022, indicating an improvement of about 41%[335]. - The loss from operations for the year ended December 31, 2023, was $11,013,871, down from $19,260,227 in 2022, showing a reduction of about 43%[335]. - Net loss for the year ended December 31, 2023, was $12,585,250, a significant improvement from a net loss of $21,520,114 for the year ended December 31, 2022, representing a reduction of approximately 41%[341]. - The basic and diluted loss per ordinary share improved from $(0.629) in 2022 to $(0.355) in 2023, indicating a reduction in loss per share of about 43%[335]. - Net cash used in operating activities decreased to $1,755,913 in 2023 from $7,315,421 in 2022, indicating improved operational efficiency[341]. - The company reported a provision for dimunition in value for miners of $7,364,650 in 2023, down from $11,889,000 in 2022, showing a reduction of about 38%[341]. - The addition/utilization of digital assets resulted in a positive cash flow of $5,893,591 in 2023, compared to a negative cash flow of $2,000,000 in 2022[341]. - The total cash outflows for the year were $1,601,034, a significant improvement from $22,401 in the previous year[341]. Assets and Liabilities - Digital assets decreased from $7,087,747 as of December 31, 2022, to $1,194,157 as of December 31, 2023, reflecting a decline of approximately 83%[333]. - Total assets decreased from $24,531,417 in 2022 to $12,318,268 in 2023, a reduction of about 50%[333]. - Stockholders' equity fell from $23,917,962 in 2022 to $11,312,660 in 2023, a decrease of approximately 53%[333]. - Current liabilities increased from $613,455 in 2022 to $1,005,608 in 2023, an increase of approximately 64%[333]. - Cash and cash equivalents decreased to approximately $0.88 million, prompting the sale of 32.82 bitcoins to supplement operating cash[186]. - Cash and cash equivalents at the end of 2023 were $884,199, down from $2,505,286 at the end of 2022, reflecting a decrease of approximately 65%[341]. Operational Developments - The company completed the construction of a new mining center in September 2023 at a total cost of $6.5 million[184]. - The company purchased land for $1.2 million in April 2023 to support its bitcoin mining operations[184]. - The company has not entered into any material contracts other than in the ordinary course of business[233]. - The company did not issue new shares in 2023, contrasting with the issuance of 16 million new shares in 2022, which raised $40 million for bitcoin mining operations[344]. Management and Governance - The company’s name was changed from "Moxian (BVI) Inc" to "Abits Group Inc." effective November 17, 2023, with a new ticker symbol "ABTS" on the Nasdaq Capital Market[166]. - The company has a total of 11 full-time employees, with 4 in Finance and Administration and the rest in the bitcoin mining business[216]. - Mr. Conglin Deng, the Chief Executive Officer, has an annual base salary of $120,000 and is awarded 600,000 restricted stock units (RSUs) over three years[201]. - Mr. Wanhong Tan, the Chief Financial Officer, also has an annual base salary of $120,000 and is awarded 180,000 RSUs over three years[202]. - The Audit Committee is chaired by Lionel Khuat Leok Choong and includes Tao Xu and Chuan Zhan, focusing on financial reporting and compliance[204]. - The Compensation Committee, chaired by Tao Xu, is responsible for reviewing and approving executive compensation and incentive plans[207]. - The Corporate Governance and Nominating Committee, chaired by Chuan Zhan, oversees the selection of director candidates and corporate governance practices[208]. - The company adopted a Code of Business Conduct and Ethics on November 14, 2023, applicable to all directors, officers, and employees[214]. - The company has complied with NASDAQ requirements, maintaining at least 50% independent directors on the board[209]. - The total compensation for the Chief Executive Officer and Chief Financial Officer remained consistent at $120,000 for both 2022 and 2023[199]. Compliance and Internal Controls - As of December 31, 2023, the company's disclosure controls and procedures were deemed ineffective due to a lack of formal documented controls applicable to all officers and directors[292]. - Management identified material weaknesses in internal control over financial reporting, including a lack of understanding of NASDAQ requirements and inadequate mining record maintenance[297]. - The company's internal controls over financial reporting were not effective in detecting inappropriate application of US GAAP rules as of December 31, 2023[296]. - There were no changes in internal controls over financial reporting that materially affected the company's reporting during the period covered[299]. - The audit committee consists of independent directors, with Khuat Leok Choong meeting the criteria of an audit committee financial expert[300]. - Management has initiated remediation measures, including educating senior management on NASDAQ listing requirements and designing controls over financial reporting[298]. Tax and Regulatory Matters - The company is classified as a Passive Foreign Investment Company (PFIC), which affects U.S. Holders' tax obligations regarding capital gains and distributions[267]. - U.S. Holders who make a Qualified Electing Fund (QEF) election will not be subject to PFIC tax and interest charge rules for shares held during the PFIC status[267]. - A purging election allows U.S. Holders to recognize gain as if they sold shares at fair market value, impacting their adjusted tax basis and holding period[268]. - Non-U.S. Holders generally are not subject to U.S. federal income tax on dividends or gains unless connected to a U.S. trade or business[275]. - The company does not expect to be treated as a PFIC for the taxable years ending December 31, 2021, and 2022[257]. Risks and Challenges - The upcoming halving of bitcoin rewards in April 2024 poses challenges for miners, although previous halvings have historically led to price increases[187]. - Inflationary pressures may adversely affect operating results, but the company has not experienced significant impacts to date[287]. - The company has not entered into any hedging transactions to mitigate interest rate risk, as operations are not directly sensitive to interest rate fluctuations[285]. - The subsidiary in China incurs annual operating expenses of approximately RMB 1 million, exposing the company to minimal foreign exchange risk[286]. - The company did not identify any cybersecurity threats that materially affected its business strategy or financial condition in 2023[312]. - The company has implemented cybersecurity risk management processes, including limited access to critical systems and continuous monitoring[310].