SAI.TECH Global Corporation (Nasdaq: SAI, SAITW) — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; filed April 19, 2023. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars. The company completed its business combination on April 29, 2022 and began Nasdaq trading in May 2022.
Business context and financial performance
SAI.TECH sells digital-asset mining machines and provides hosting and mining-pool services. It is also developing liquid-cooling and waste-heat recovery products intended to reuse mining heat for heating applications. The company began developing self-mining operations in 2022.
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $10.638 million | $17.038 million |
| Gross profit | $1.140 million; about 10.7% margin | $1.264 million; about 7.4% margin |
| Operating loss | $7.465 million | $16.452 million |
| Net loss | $8.845 million | $16.704 million |
| Operating cash flow | $(4.962) million | $(0.983) million |
| Investing cash flow | $(6.424) million | $(3.970) million |
| Financing cash flow | $18.533 million | $8.191 million |
Revenue fell 38%. Product sales rose 24% to $8.626 million, while hosting revenue fell 50% to $1.303 million and mining-pool revenue fell 91% to $0.676 million. Self-mining contributed $0.033 million. Management attributed the hosting decline to Kazakhstan-related interruptions and the mining-pool decline to customers switching providers.
Gross profit declined about 10%, but gross margin improved to approximately 10.7% from 7.4%, reflecting the change in revenue mix. The net loss narrowed by $7.859 million, in part because sales and marketing expense fell sharply after a $14.457 million share-based award to a consultant in 2021. General and administrative expense increased to $6.080 million from $2.383 million.
Liquidity, assets and obligations
- Cash and cash equivalents were $11.215 million at year-end, versus $4.477 million a year earlier. Current assets were $18.691 million and current liabilities $0.555 million; management reported net current assets of $18.14 million.
- Management stated that cash on hand was sufficient for at least 12 months from issuance of the financial statements, while also expecting negative operating cash flows to continue and noting plans to seek additional capital, including debt financing. No material borrowings are reported in the supplied filing text.
- Year-end total assets were $21.100 million and total liabilities $0.786 million. Operating lease liabilities totaled $0.419 million, including $0.188 million current and $0.231 million non-current.
- Stablecoin assets were $4.612 million at year-end; cryptocurrency assets were $0.050 million. Investing cash outflow included a $4.612 million stablecoin purchase and $1.872 million of property and equipment purchases.
Material changes, outlook and risks
- Operations and geography: Kazakhstan unrest and power disruptions affected operations. In August 2022, the company terminated agreements for a planned 90 MW Phase II project; the parties waived liabilities and continued the 15 MW Phase I operation. The company emphasized North American expansion.
- Post-year-end developments: In February 2023, the company bought 420 Whatsminer M30s++ machines for $633,360. By the report date, it disclosed 900 machines at a Mexico data center: 520 for self-mining and 380 for customers. These are subsequent developments, not FY2022 results.
- Business prospects: Management aims to expand self-mining, hosting and commercial deployment of heat-recovery products. It reported a planned Ohio data-center project with designed capacity up to 15 MW. The filing provides no quantified revenue, earnings or production guidance. Commercial-scale heat resale and related technology revenue remain prospective.
- Unusual items: FY2022 other expense included approximately $0.9 million of compensation to vendors following cancellation of machine purchase agreements and $0.718 million loss on disposal of property and equipment. The company recorded $0.951 million of long-lived asset impairment, including $0.590 million related to mining equipment, and $0.064 million of cryptocurrency impairment.
- Principal risks: Bitcoin-price and mining-economics volatility, electricity cost and availability, regulatory uncertainty, equipment supply constraints, Kazakhstan and other geopolitical exposure, and dependence on a small number of customers. Four customers represented 88% of FY2022 revenue; one customer represented 96% of year-end accounts receivable.
- Controls and governance: Management concluded disclosure controls were ineffective at December 31, 2022, citing material weaknesses including lack of an internal audit function and weak financial-close and review controls. Remediation was underway, with completion targeted by year-end 2023; no assurance was given that remediation would be timely. The financial-statement auditor issued an unqualified opinion but did not audit or opine on internal control effectiveness.
- Other investor considerations: The founder beneficially owned all 9.63 million Class B shares, representing 87.9% of voting power. The company stated it had no material pending legal proceedings and no significant capital commitments or guarantees at year-end. It does not expect to pay cash dividends in the foreseeable future.
Important facts for investors to verify
- Reconcile reported revenue and margins to audited statements and assess whether product-sale growth can offset continued weakness in hosting and mining-pool revenue.
- Verify the amount, issuer, redemption terms, custody and risk exposure of the $4.612 million stablecoin balance.
- Assess customer credit quality and collections, especially the customer representing 96% of year-end receivables.
- Confirm current status, utilization, power costs and economics of Kazakhstan Phase I, Mexico operations and the planned Ohio project; distinguish post-year-end capacity from FY2022 operating results.
- Track internal-control remediation and review future filings for evidence that the disclosed material weaknesses have been addressed.