Abits Group Inc. — FY2023 Form 20-F
Reporting period: Year ended December 31, 2023. This is an annual report, not a standalone 2023 fourth-quarter filing. The company is a British Virgin Islands holding company whose principal business is bitcoin mining in the United States. Its Duff, Tennessee facility began operating in October 2023, so the year included only about three months of production. Financial statements are audited and prepared under U.S. GAAP.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $1.682 million | $164,428 |
| Direct costs of revenue | $891,919 | $461,290 |
| Revenue less direct costs | $789,614 | Not stated |
| Operating loss | $11.014 million | $19.260 million |
| Loss before tax | $12.585 million | $21.520 million |
| Comprehensive loss | $12.605 million | $21.520 million |
| Basic and diluted loss per share | $0.355 | $0.629 |
| Cash and cash equivalents at year-end | $884,199 | $2.505 million |
| Digital assets at year-end | $1.194 million | $7.088 million |
| Total assets | $12.318 million | $24.531 million |
| Total liabilities | $1.006 million | $613,455 |
| Stockholders’ equity | $11.313 million | $23.918 million |
- Direct-cost gross profit was approximately $790,000, or 47% of revenue, before operating overhead, depreciation and impairment. The company mined 43.93 bitcoins and reported approximately $1.68 million in mining revenue.
- A $7.365 million provision for impairment in miners was a major expense; FY2022 included an $11.889 million provision. The company attributed the 2023 write-off to poor performance of equipment imported from China relative to its power consumption.
- Cash flow from operations was reported as positive $1.756 million, while the cash-flow statement labels this line “net cash used in operating activities.” Investing activities used $3.357 million, and cash declined by $1.621 million during the year. The company said it sold 32.82 bitcoins to supplement operating cash.
- No long-term debt is reported; year-end liabilities are presented as current payables and accruals. Cash alone was below those liabilities. The filing reports no outstanding long-term debt.
Changes versus the prior period
- Revenue increased from $164,428 to $1.682 million as the Tennessee mining facility commenced operations late in 2023. The short operating period makes year-over-year comparisons less representative of a full year at operating scale.
- Loss before tax narrowed by approximately 42%, to $12.585 million, but the company remained substantially loss-making. Operating loss improved as operating overhead and miner impairment charges declined from FY2022.
- Cash, digital assets, total assets and equity fell materially. The company cited bitcoin sales to fund cash needs; the balance sheet also reflects depreciation, impairment and substantial investment in mining assets.
- The company changed its name from Moxian (BVI) Inc. to Abits Group Inc. in November 2023 and its Nasdaq ticker from MOXC to ABTS.
Outlook, risks and unusual items
- Outlook: No quantified revenue, earnings, production or capital-spending guidance is provided. Management said miner profitability after the April 2024 bitcoin reward halving is uncertain and will depend substantially on bitcoin prices. It cited the January 2024 approval of U.S. spot bitcoin exchange-traded products as a potentially favorable source of institutional demand.
- Operations and liquidity: The company relies on one self-owned mining site in Duff, Tennessee, and says its cash balance declined to about $884,000. It may need additional capital, which may not be available on acceptable terms.
- Bitcoin and mining exposure: Results are sensitive to bitcoin prices, network difficulty, reward halvings, electricity costs, equipment obsolescence and mining-pool performance. The company relies primarily on one miner model and third-party mining pools.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end. Identified material weaknesses included inadequate understanding of Nasdaq requirements and deficient mining records. Remediation plans include management training and controls to document and reconcile mining revenue.
- Accounting and audit: The auditor issued an unqualified opinion on the financial statements and noted retrospective accounting changes for digital assets. The company early adopted ASU 2023-08, which requires fair-value measurement of qualifying crypto assets with changes recognized in income.
- Contingencies and other risks: The company reported no material legal or administrative proceedings. It has divested its former PRC operating businesses but notes potential residual risks relating to historical China operations. Other risks include cybersecurity, power availability, Nasdaq listing compliance and thin trading. No cash dividends are expected in the foreseeable future.
Important facts for investors to verify
- Reconcile the cash-flow statement’s positive $1.756 million operating cash flow with its “net cash used” caption, and assess the company’s near-term cash needs and funding options.
- Review the $7.365 million miner impairment, equipment performance and the expected capital required to sustain or expand mining operations.
- Confirm the reported digital-asset balances, sales and fair-value accounting, including the relationship between the income-statement change in digital-asset value and the digital-asset note.
- Resolve filing inconsistencies: the selected-data table gives FY2022 revenue as $161,428, while the audited statements report $164,428; the share-rights discussion says preferred shares carry three votes each, while another section says six votes each.
- Track remediation of the disclosed material weaknesses and verify that future mining production, pool records and revenue reconciliations are supported by effective controls.