Financial Performance - Net revenues for the year ended December 31, 2023, were $6.78 million, a decrease of 36.5% compared to $10.64 million in 2022[467]. - The net loss for the year ended December 31, 2023, was $6.12 million, improving from a net loss of $8.85 million in 2022[467]. - Total revenues decreased by $3.86 million, or 36%, from $10.64 million in 2022 to $6.78 million in 2023[485]. - Sales of products revenue fell by $3.82 million, or 44%, from $8.63 million in 2022 to $4.80 million in 2023, primarily due to fewer customer purchase orders[487]. - Hosting service revenue decreased by $0.94 million, or 72%, from $1.30 million in 2022 to $0.37 million in 2023, attributed to clients requesting frequent power-offs due to low BTC prices[488]. - Mining pool revenue declined by $0.37 million, or 54%, from $0.68 million in 2022 to $0.31 million in 2023, influenced by BTC price fluctuations[489]. - Mining revenue surged by $1.27 million, or 3839%, from $0.03 million in 2022 to $1.30 million in 2023, reflecting the increased scale of mining operations launched in July 2023[490]. - Gross profit decreased by $0.68 million, from $1.14 million in 2022 to $0.46 million in 2023, with gross margin dropping from 11% to 7%[493]. - General and administrative expenses decreased by $0.38 million, or 6%, from $6.08 million in 2022 to $5.70 million in 2023, mainly due to reduced depreciation and salary expenses[495]. - Research and development expenses increased by $0.38 million, or 79%, from $0.48 million in 2022 to $0.85 million in 2023, driven by higher share-based compensation[497]. - Total comprehensive loss improved by $3.21 million, or 34%, from $9.39 million in 2022 to $6.18 million in 2023[486]. Bitcoin Holdings and Mining Operations - The company operates a self-mining datacenter in Marietta, Ohio, with 712 bitcoin mining machines, achieving a hash rate of approximately 106.39 PH/s[474]. - As of December 31, 2023, the company held 65.98 bitcoins, a slight increase from 3.05 bitcoins held as of December 31, 2022[476]. - The company expects future revenue to include bitcoin transaction fees and income from resales of waste heat from its operations[468]. - The next bitcoin halving is anticipated to occur in April 2024, reducing the block reward from 6.25 bitcoin to 3.125 bitcoin[475]. Customer Concentration and Accounts Receivable - For the year ended December 31, 2023, three customers accounted for 33%, 23%, and 17% of total revenues, indicating a concentration risk[543]. - As of December 31, 2023, three customers accounted for 63%, 25%, and 11% of the total balance of accounts receivable, highlighting significant customer reliance[544]. Financial Position and Liquidity - Net cash used in operating activities for the year ended December 31, 2023, was $3.1 million, compared to $5.0 million in 2022[527]. - As of December 31, 2023, the total operating lease obligations amount to $809,650, with $274,408 due within one year and $535,241 due after one year[538]. - Liquidity risk is managed through financial position analysis and may involve seeking loans for short-term funding needs[545]. - The company is exposed to liquidity risk and may seek loans from financial institutions for short-term funding needs[545]. Accounting and Financial Reporting - The financial statements are prepared in accordance with U.S. GAAP, and significant accounting estimates include allowance for doubtful receivables and impairment losses[552]. - The company classified all proceeds from bitcoin sales as investing activities during the year ended December 31, 2023[564]. - The company early adopted ASU 2023-08, which requires crypto assets to be measured at fair value, impacting the financial statements starting January 1, 2023[575]. - The company has identified two material weaknesses in internal control over financial reporting as of December 31, 2023, 2022, and 2021[579]. - The identified material weaknesses include a lack of key monitoring mechanisms and formal financial closing policies, leading to late adjustments by management[580]. - The Company plans to establish an internal audit department and enhance the effectiveness of its internal control system to remediate the identified weaknesses[582]. - The Company qualifies as an "emerging growth company" with less than $6.78 million in revenue for the last fiscal year, allowing it to take advantage of reduced reporting requirements[583]. Currency and Economic Factors - Foreign currency exchange net losses of $0.06 million were recognized in 2023, while a net gain of $0.06 million was recorded in 2021[547]. - The year-over-year percent change in the consumer price index in China for December 31, 2023, was an increase of 0.2%[548]. - The exchange rate for RMB to USD as of December 31, 2023, was 7.0827, compared to 6.9646 as of December 31, 2022[554]. - The average exchange rate for the year ended December 31, 2023, was 7.0422 RMB to 1 USD, compared to 6.7190 RMB in 2022[554]. - Year-over-year percent changes in the consumer price index for China were increases of 0.2% in 2023, 2% in 2022, and 3.13% in 2021[548]. Regulatory and Compliance Matters - The company has not entered into any financial guarantees or derivative contracts that are indexed to its own shares[539]. - The ability to pay dividends is primarily dependent on receiving distributions from its PRC subsidiary and VIE, which are subject to statutory reserve requirements[540]. - The company has terminated control agreements with its variable interest entity, eliminating uncertainties related to the VIE structure[541]. - The company has not recognized any significant unrecognized uncertain tax positions as of December 31, 2022, and 2023[570]. - The company is currently evaluating the impact of ASU 2023-09, which expands income tax disclosures, effective for annual periods beginning after December 15, 2024[574]. - The Company has not yet performed a comprehensive assessment of internal control under the Sarbanes-Oxley Act, which may reveal additional material weaknesses[581]. - The Company is hiring a qualified consultant to assess compliance readiness with the Sarbanes-Oxley Act and improve internal control over financial reporting[582].
SAI.TECH (SAI) - 2023 Q4 - Annual Report