UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ___________________

Commission file number: 001-39258

BTC Digital Ltd.

(Exact name of registrant as specified in its charter)

Cayman Islands		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3rd Floor, Tower A

Tagen Knowledge & Innovation Center

2nd Shenyun West Road, Nanshan District

Shenzhen, Guangdong Province 518000

People’s Republic of China

(Address of principal executive offices)

Telephone: +86 755 8294 5250

E-mail: ir@btct.us

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Trading Symbol(s):	Name of Each Exchange on Which Registered:
Ordinary Shares, par value $0.06 per share	BTCT	The Nasdaq Stock Market LLC
Warrants, each exercisable for 1/600 ordinary shares	BTCTW	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the shares of ordinary shares, par value $0.06 per share, held by non-affiliates of the registrant as of June 30, 2023, was approximately $90.915 million, based on the closing sale price per share of the registrant’s ordinary share as reported by the Nasdaq Capital Market on such date.

As of December 31, 2023, BTC Digital Ltd. had 2,097,535 shares of outstanding ordinary shares, par value $0.06 per share.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	38
Item 1C	Cybersecurity	38
Item 2.	Properties	39
Item 3.	Legal Proceedings	39
Item 4.	Mine Safety Disclosures	39

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
Item 6.	Reserved	41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	48
Item 9A.	Controls and Procedures	48
Item 9B.	Other Information	49
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	49

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	55
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	57
Item 13.	Certain Relationships and Related Transactions, and Director Independence	58
Item 14.	Principal Accounting Fees and Services	59

PART IV
Item 15.	Exhibits and Financial Statement Schedules	60
Item 16.	Form 10-K Summary	62

INTRODUCTION

In this annual report on Form 10-K, or this annual report, except where the context otherwise requires and for purposes of this annual report only, references to:

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“we,” “us,” “our Company,” “the Company” and “our” are to BTC Digital Ltd.;

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“China” or the “PRC” are to the People’s Republic of China, including the special administrative regions of Hong Kong and Macau and excluding for the purposes of this annual report only, Taiwan;

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“Code” are to the U.S. Internal Revenue Code of 1986, as amended;

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“former variable interest entities” or “former VIEs” are to Shenzhen Meten International Education Co., Ltd., or Shenzhen Meten, and Shenzhen Likeshuo Education Co., Ltd., or Shenzhen Likeshuo, and their respective direct and indirect subsidiaries, which are PRC companies in which Meten did not have equity interests but whose financial results had been consolidated by Meten in accordance with U.S. GAAP due to Meten being the primary beneficiary of these companies prior to the termination of the VIE agreements in November 2022;

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“gross billings” are to the total amount of cash received for the sales of our products and services during a specific period of time, net of the total amount of refunds for that period, which is not a measure under U.S. GAAP;

	●	“Met Chain” are to Met Chain investment holding company Ltd, a company formed under the laws of the British Virgin Islands;

	●	“Met Path” are to Meta Path investing holding company, a company formed under the laws of the Cayman Islands;

	●	“Meten Blockchain” are to “METEN BLOCK CHAIN LLC,” a company formed in the State of California;

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“ordinary shares” are to our ordinary shares, par value US$0.06 per share, carrying one vote per share;

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“the operating entities” are to the Company and the Company’s subsidiaries with operations, namely Meta Path investing holding company, Met Chain investment holding company Ltd, and METEN BLOCK CHAIN LLC;

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“tier one cities” are to Beijing, Shanghai, Guangzhou and Shenzhen;

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“tier two cities” are to provincial capitals, regional centers or economically developed cities in China, including, among others, Chengdu, Hangzhou, Chongqing, Wuhan and Tianjin;

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“tier three cities” and “tier four cities” are to small- to mid-sized cities in China that are strategically located or have relatively developed or large local economy;

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“dollars,” “US$” and “U.S. dollars” are to the legal currency of the United States;

	●	“U.S. GAAP” are to generally accepted accounting principles in the United States; and

	●	years are to the calendar year from January 1 to December 31 and references to our fiscal year or years are to the fiscal year or years ended December 31.

On August 10, 2023, we held a general meeting of shareholders to effect a share consolidation. At the Meeting, our shareholders approved the Share Consolidation by ordinary resolutions. As a result, our 500,000,000 issued and unissued ordinary shares of par value of US$0.003 each in the capital of us were consolidated into 25,000,000 ordinary shares of nominal or par value of US$0.06 each. The Share Consolidation became effective on August 23, 2023, and the ordinary shares began trading on a post-Share Consolidation basis on the Nasdaq Capital Market when the market opened on August 24, 2023 under the same symbol “BTCT” but under a new CUSIP number of G6055H 155. No fractional shares were issued in connection with the Share Consolidation. All fractional shares were rounded up to the whole number of shares.

From a Cayman Islands legal perspective, the Share Consolidation does not have any retroactive effect on our shares prior to the effective date on August 23, 2023. However, references to our ordinary shares in this annual report are stated as having been retroactively adjusted and restated to give effect to the Share Consolidation, as if the Share Consolidation had occurred by the relevant earlier date. As a result of the Share Consolidation, our issued and outstanding ordinary shares have been retroactively adjusted, where applicable, in this annual report to give effect to the Share Consolidation of our ordinary shares, as if it had occurred at the beginning of the earlier period presented.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the reasons described in our “Business,” “Risk Factors,” and “Management Discussion and Analysis of Financial Condition and Result of Operations” sections, as well as those discussed elsewhere in this Report. In some cases, you can identify these forward-looking statements by terms such as “anticipate,” “believe,” “continue,” “could,” “depends,” “estimate,” “expects,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms or other similar expressions, although not all forward-looking statements contain those words.

Our operations and business prospects are always subject to risks and uncertainties including, among others:

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Our ability to secure enterprise clients and deals in the face of growing competition;

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Assumptions relating to the size of the market for our products and services;

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Unanticipated regulations of cryptocurrencies that add barriers to adoption and have a negative effect on our business;

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Our ability to obtain and maintain intellectual property protection for our products; and

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Our estimates of expenses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing.

The forward-looking statements in this Report represent our views as of the date of this Report. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention to do so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Report.

Unless the context requires otherwise, references in this Report to “we,” “us,” “our,” “our company,” “the Company” or similar terminology refer to BTC Digital Ltd., including its consolidated subsidiaries.

MARKET DATA AND FORECASTS

This annual report also contains data related to global cryptocurrency market that include projections based on a number of assumptions. The global cryptocurrency market may not grow at the rates projected by market data, or at all. The failure of the global cryptocurrency market to grow at the projected rates may have a material adverse effect on our business prospects, results of operations and the market price of our ordinary shares. In addition, the relatively new and rapidly changing nature of the global cryptocurrency market subjects any projections or estimates relating to the growth prospects or future condition of these markets to significant uncertainties. If any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

iii

PART I

ITEM 1. Business

Overview and Recent Developments

Through the operating entities, we are a crypto asset technology company based in the U.S. with a focus on bitcoin mining. We also generate revenue through mining machines resale and rental business operations.

For the fiscal year ended December 31, 2023, we generated a substantial majority of our revenue from bitcoin mining. We store all of our bitcoins mined in hot wallets, or cryptocurrency wallets connected to the internet, and may from time to time exchange bitcoins mined for fiat currency to generate cash flow to fund our subsidiaries’ business operations. We attribute our growth since we launched our crypto asset business in 2022 to our competitive strengths in diversified revenue streams, dedicated team and efforts towards regulatory compliance, and our experienced and visionary management team.

As of December 31, 2023, our subsidiaries owned a total of 2,021 mining machines, of which 1,801, or 89.1% were under operation with a total hash rate of 213PH/S. Through our subsidiaries, we manage and operate our mining machines at the hosting facilities operated by a hosting facility owner in New Tazewell, Tennessee. For the fiscal year ended December 31, 2023, we mined a total of 99.7607 bitcoins, generating US$2.9 million in revenue.

Historically, the price of bitcoins has fluctuated significantly. The profitability of our bitcoin mining operations and our operation results have been and will continue to be directly impacted by the trading price of bitcoins. To mitigate these risks, we have launched a mining machines resale and rental business. We have maintained business relationship with a major machine manufacturer, AGM Technologies Ltd, from which we source mining machines on an order-by-order basis, often at prices lower than market prices. We will then resell mining machines when there is a shortage of machines available on the market and resale prices are higher. Additionally, from time to time, we rent out our mining machines to customers at a rate calculated based on the total bitcoins mined. We seek to rent out a greater percentage of our fleet at times when bitcoin prices are lower to generate cash flow.

We believe research and development capacities are key to our continued long-term growth and will afford us with the ability to mine bitcoins with greater hash rate and power efficiency and the opportunity to further expand our service or product offerings and diversify our revenue streams. Through the Affiliated Company (as defined below), we have participated in the design and development of equipment dedicated for mining machines and infrastructure, including high voltage power supply, liquid-cooling systems, and hash boards. In the near future, we plan to continue investing in research and development through our subsidiaries and the Affiliated Company and accumulate knowledge in the cryptocurrency industry. See “— Research and Development.”

Prior Business Operations

On October 20, 2022, pursuant to the terms of the VIE contractual arrangements, Zhuhai Meizhilian Education Technology Co., Ltd. (“Zhuhai Meten”) and Zhuhai Likeshuo Education Technology Co., Ltd. (“Zhuhai Likeshuo”) unilaterally terminated their respective contractual arrangements with 30-day advanced notices to their respective former VIEs, namely Shenzhen Meten International Education Co., Ltd. and Shenzhen Likeshuo Education Co., Ltd. (the “former VIEs”). The termination of the VIE contractual arrangements were effective on November 19, 2022. As the VIE structure has been unwound, the financial results of the VIEs and their subsidiaries are no longer consolidated into the Company’s financial statements after the effective date. As of the date of this report, we only operate cryptocurrency mining business in the U.S., and we no longer provide English language training (“ELT”) services, which services were provided by the former VIEs. The following are descriptions of the former VIEs’ business, and the operating results of which were consolidated into the Company’s financial statements for the first half of 2022.

Through the former VIEs, we were an ELT service provider in China. China’s ELT market is segmented into general ELT, test-oriented ELT and after-school language training sectors. The former VIEs offered a comprehensive ELT service portfolio comprising of general adult ELT, junior ELT, overseas training services, online ELT and other English language-related services to students from a wide range of age groups. The former VIEs conducted their business through offline-online business model designed to maximize compatibility within their business segments in order to scale up at relatively low costs.

Nasdaq Notification Letters

On September 16, 2022, we received a written notification from the Nasdaq Stock Market LLC (“Nasdaq”) notifying us that we were not in compliance with the minimum bid price requirement set forth in Nasdaq rules for continued listing on the Nasdaq, and we were provided 180 calendar days, or until March 15, 2023, to regain compliance. Our ordinary shares have not regained compliance with the minimum $1 bid price per share requirement. On March 15, 2023, we applied for an additional 180-day compliance period. On March 17, 2023, we received a written notification (the “Notification Letter”) from Nasdaq, notifying us that we were eligible for an additional 180 calendar day period, or until September 11, 2023, to regain compliance. On September 8, 2023, we received a written notification from the Staff of Nasdaq, noting that we had evidenced a closing bid price of our ordinary shares at or greater than the $1.00 per share minimum requirement for the preceding 10 consecutive business days, from August 24, 2023 through September 7, 2023, and informing us that we have regained compliance with the Bid Price Rule and the matter is closed.

Registration Statement

On April 10, 2023, we filed with the SEC a registration statement on Form S-8 (File No. 333-271205) to register under the Securities Act an aggregate of 730,806 ordinary shares, which represents the additional shares available for issuance in 2022 pursuant to Section 4(b) of the Plan and equal to 3.5% of the shares that were outstanding as of December 31, 2022. The Registration Statement has been prepared and filed pursuant to and in accordance with the requirements of General Instruction E of the General Instructions to Form S-8, General Instruction C of the General Instructions to Form S-8.

Resignation and Appointment of Director

On May 21, 2023, Mr. Jianlin Yu, an independent director of us and a member of the audit committee of our board of directors, notified us of his resignation as a director and a member of the audit committee of the board of directors, effective May 31, 2023. On May 26, 2023, our board of directors appointed Mr. Yuejun Jiang as a director and a member of the audit committee of the board of directors, effective May 31, 2023. The appointment intends to fill the vacancy created by Mr. Jianlin Yu’s departure. Mr. Yuejun Jiang does not have a family relationship with any of our director or executive officer and has not been involved in any transaction with us during the past two years that would require disclosure under Item 404(a) of Regulation S-K.

On December 30, 2023, Mr. Jishuang Zhao, the chairman of the board of directors of us and a member and the chairman of the compensation committee and the nominating and corporate governance committee of our board of directors, notified us of his resignation from the board of directors and from the compensation committee and the nominating and corporate governance committee, effective December 10, 2023. Mr. Jishuang Zhao’s resignation from our board of directors was due to personal reasons and not a result of any disagreement with us on any matter related to the operations, policies, or practices of us. On December 1, 2023, the board of directors appointed Mr. Xu Peng as a director, the chairman of the board of directors, and a member and chairman of the compensation committee and the nominating and corporate governance committee of the board of directors, effective December 11, 2023. The appointment intends to fill the vacancy created by Mr. Jishuang Zhao’s departure. Mr. Xu Peng does not have a family relationship with any of our director or executive officer and has not been involved in any transaction with us during the past two years that would require disclosure under Item 404(a) of Regulation S-K.

Entry into A Material Agreement

On June 7, 2023, Meten Holding Group Ltd., a company incorporated under the laws of the Cayman Islands (the “Company”), entered into an asset transfer agreement (the “Asset Transfer Agreement”) with two individuals, Jianyu Guo and Tianying Zheng, pursuant to which the Company intends to acquire 200 Bitcoin mining machines in total, or 100 from each of Jianyu Guo and Tianying Zheng (the “Sellers”), in consideration for an aggregate of such number of ordinary shares valued at $880,000 to be issued to the Sellers, with the number calculated by US$880,000 divided by the average closing price of the Company’s ordinary shares for twenty (20) trading days immediately before the closing date. The Company expects the closing of the transaction contemplated by the Asset Transfer Agreement to occur on or about June 22, 2023.

On July 10, 2023, the Company entered into Amendment No. 1 to the Asset Transfer Agreement with the Sellers, pursuant to which all parties agreed that the Company shall issue 2,274,548 ordinary shares to each of Jianyu Guo and Tianying Zheng, or 4,549,069 ordinary shares in total, in consideration for the mining machines acquired under the Asset Transfer Agreement. On July 10, 2023, the parties to the Asset Transfer Agreement closed the transactions contemplated by the agreement and issued a total of 4,549,069 ordinary shares of the Company to the Sellers. This transaction is presented on a retroactive basis in this annual report to reflect our 20-to-1 share consolidation.

Entry into Definitive Agreements

On August 1, 2023, we entered into subscription agreements (the “Subscription Agreements”) with two purchasers, each an unrelated third party to us (collectively, the “Purchasers”). Pursuant to the Subscription Agreements, the Purchasers agreed to subscribe for and purchase, and we agreed to issue and sell to the Purchasers, pursuant to an exemption from registration under the Securities Act of 1933, as amended, an aggregate of 4,000,000 ordinary shares, par value US$0.003 per share, at a purchase price of $0.25 per ordinary share and for an aggregate purchase price of $1.0 million. The entry into the Subscription Agreements and the transactions contemplated thereby have been approved by our board of directors.

We received gross proceeds of approximately $1.0 million from the issuance with the closing of the transactions contemplated by the Subscription Agreements on August 22, 2023. This transaction is presented on a retroactive basis in this annual report to reflect our 20-to-1 share consolidation.

On December 14, 2023, we entered into subscription agreements (the “Subscription Agreements II”) with three purchasers, each an unrelated third party to us (collectively, the “Purchasers II”). Pursuant to the Subscription Agreements II, the Purchasers II agreed to subscribe for and purchase, and we agreed to issue and sell to the Purchasers II, pursuant to Regulation S under the Securities Act of 1933, as amended, an aggregate of 303,497 ordinary shares, par value US$0.06 per share, at a purchase price of $3.342 per ordinary share, for an aggregate purchase price of $1,014,286. The entry into the Subscription Agreements II and the transactions contemplated thereby have been approved by the Company’s board of directors.

We received gross proceeds of approximately $1,014,286 from the issuance with the closing of the transactions contemplated by the Subscription Agreements II on January 5, 2024.

Annual General Meeting of Shareholders

On August 10, 2023, we held a general meeting of shareholders, during which our shareholders approved the Share Consolidation. As a result, our 500,000,000 issued and unissued ordinary shares of par value of US$0.003 each in the capital of us were consolidated into 25,000,000 ordinary shares of nominal or par value of US$0.06 each (“Share Consolidation”). The Share Consolidation became effective on August 23, 2023, and the ordinary shares began trading on a post-Share Consolidation basis on the Nasdaq Capital Market when the market opened on August 24, 2023 under the symbol “BTCT” but under a new CUSIP number of G6055 H155. No fractional shares were issued in connection with the Share Consolidation. All fractional shares were rounded up to the whole number of shares. Immediately following the Share Consolidation, authorized share capital of us shall be US$1,500,000, divided into 25,000,000 ordinary shares of a nominal or par value of US$0.06 each.

The shareholders also approved to change our name from “Meten Holding Group Ltd.” to “BTC Digital Ltd.,” which became effective on August 18, 2023.

SEC Staff Action

On November 28, 2023, we received a notification from the SEC regarding our registration statement filed under Section 6(a) of the Securities Act of 1933 with the SEC on December 15, 2022. Because the registration statement has been on file for more than nine months and has not yet become effective, and we did not respond to notice under Rule 479, that registration statement be declared abandoned on November 28, 2023.

Corporate History and Corporate Structure

We were formed to serve as a holding company after consummation of the Mergers (defined below) contemplated by the Merger Agreement (defined below). We were formed as a Cayman Islands exempted company on September 27, 2019. Prior to the Mergers, we owned no material assets and did not operate any business. Our principal executive office is located at 3rd Floor, Tower A, Tagen Knowledge & Innovation Center, 2nd Shenyun West Road, Nanshan District, Shenzhen, Guangdong Province 518000, The People’s Republic of China and our telephone number is +86 755 8294 5250.

On December 12, 2019, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) by and among the Company, EdtechX Holdings Acquisition Corp., a Delaware corporation (“EdtechX”), Meten Education Inc., a Delaware corporation and wholly owned subsidiary of the Company (“EdtechX Merger Sub”), Meten Education Group Ltd., a Cayman Islands exempted company and wholly owned subsidiary of the Company (“Meten Merger Sub”, and together with EdtechX Merger Sub, the “Merger Subs”), and Meten International Education Group, a Cayman Islands exempted company (“Meten”) which, among other things, provided for (i) Meten Merger Sub to merge with and into the Company, with the Company being the surviving entity of such merger (the “Meten Merger”) and becoming a wholly-owned subsidiary of the Company (“Surviving Cayman Islands Company”) and (ii) EdtechX Merger Sub to merge with and into EdtechX, with EdtechX being the surviving entity of the merger (the “EdtechX Merger” and together with the Meten Merger, the “Mergers”) and becoming a wholly-owned subsidiary of the Company.

On March 30, 2020, the parties to the Merger Agreement consummated the Mergers. Immediately prior to the Mergers, Azimut Enterprises Holdings S.r.l. (the “Azimut Investor”) invested US$20 million in EdtechX to purchase 2,000,000 units of EdtechX (with each unit consisting of one ordinary share and one warrant to purchase one ordinary share of EdtechX at a price of US$11.50 per share), which units converted into the same number of our units upon closing of the Mergers. Concurrently with the closing of the Mergers, our PIPE financing with two unaffiliated third-party investors, one of which is ITG Education, in an aggregate investment of US$12 million was completed on March 30, 2020.

On March 30, 2020, our ordinary shares were listed on the Nasdaq Capital Market under the symbol “METX.” Our warrants have been trading on the Nasdaq Capital Market under the symbol “METXW” since May 27, 2020.

On August 11, 2021, we changed our name from “Meten EdtechX Education Group Ltd.” to “Meten Holding Group Ltd.”

On October 20, 2022, pursuant to the terms of the VIE contractual arrangements, Zhuhai Meizhilian Education Technology Co., Ltd. (“Zhuhai Meten”) and Zhuhai Likeshuo Education Technology Co., Ltd. (“Zhuhai Likeshuo”) unilaterally terminated their respective contractual arrangements with 30-day advanced notices to their respective former VIEs. The termination of the VIE contractual arrangements were effective on November 19, 2022. As the VIE structure has been unwound, the financial results of the VIEs and their subsidiaries are no longer consolidated into the Company’s financial statements after the effective date. As of the date of this annual report, the operating entities only operate cryptocurrency mining business in the U.S., and we no longer provide ELT services, which services were provided by the former VIEs.

Our shareholders approved to change our name from “Meten Holding Group Ltd.” to “BTC Digital Ltd.,” which became effective on August 18, 2023 in the annual general meeting of shareholders. Below is a illustration of our latest corporate structure.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.

Blockchain and Cryptocurrency Mining Overview

Blockchain is the ledger technology that underlies bitcoin and other cryptocurrencies. The concept was first introduced in 2008 in the form of an anonymous whitepaper that laid out the purpose and the technology behind bitcoin. The first bitcoin was created in 2009.

A blockchain is a decentralized, distributed and encrypted digital public ledger that stores information in a secure, verifiable and permanent way. An advantage of blockchain over other database technologies is that it is completely decentralized, meaning that no entity or computer owns and stores the full database, and blockchain guarantees the security of a record of data and generates trust without the need for a trusted third party. Instead, the blockchain ledger is partially distributed across computers that act as nodes in a peer-to-peer network, which requires every transfer or storage of information in the public ledger to be approved by the majority of nodes in the network.

A cryptocurrency is a type of decentralized, encrypted digital asset that acts as a medium of exchange and/or store of value. Cryptocurrencies are a popular application of blockchain technology, enabling transactions on the network to be settled, confirmed and stored in a distributed public ledger through a process called mining. Cryptocurrencies are not backed by a central bank or governmental entity, have no physical form and are usually not tied to a value index. Additionally, the supply of a cryptocurrency may be fixed. Bitcoin, for example, has a maximum supply of 21 million bitcoin, which is expected to be reached in 2140 and after which no additional bitcoin will be minted.

Cryptocurrencies have recently gained extensive mainstream attention as the cryptocurrency market value and adoption rates, both by retail and institutional investors, have experienced accelerated growth. We believe bitcoin specifically continues to gain more trust from investors and financial institutions as it demonstrates its fundamental role in the crypto economy, leading to many companies adopting bitcoin as an alternative to cash on their balance sheets.

We believe blockchain and cryptocurrencies serve multiple purposes and can make a significant impact across multiple business sectors. We believe cryptocurrencies have numerous advantages over fiat currencies, although there are potential risk factors that are not present with fiat currencies. Cryptocurrencies’ advantages include:

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decentralized store of value, supply of which may not be influenced by the monetary policy of governmental authorities or financial institutions;

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providing simplified and direct access to financial services;

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encrypted and secure digital asset;

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immediate settlement of transactions without relying on an intermediary financial institution; and

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cryptocurrency can be converted to fiat currencies at prevailing market prices for the relevant cryptocurrency.

Cryptocurrency mining and miners

Cryptocurrency mining is the process of using specialized and high-powered miners to solve advanced cryptographic math computations, verifying the authenticity of such cryptocurrency transactions for the blockchain transaction public ledger. These solved math problems or authenticated transactions are then combined into blocks, with these blocks having specific requirements in terms of size and proof-of-work, and later published to the blockchain. A miner that verifies and solves a new block is awarded a portion of newly generated digital coins, which can then be sold on the market to generate transaction fees and profits for the mining company or retained by the miner for future use.

The bitcoin network goes through “halving events” during which the number of bitcoin that miners are awarded for processing a block are reduced by 50%. On the bitcoin network, these events occur every 210,000 blocks (roughly every four years). There have been three halving events to date on the bitcoin network. The initial award on the bitcoin network was 50 bitcoins per block. The current award is 6.25 bitcoin per block. The most recent halving event occurred on May 11, 2020 and the next halving event will likely occur in 2024. The halving mechanism results in an ever-decreasing issuance rate of bitcoin.

Mining pools

An individual miner’s daily expected rewards in mining a type of cryptocurrency are proportionate to its contribution to such cryptocurrency’s aggregate hash rate on its network. However, given the nature of how mining process works, the chance of successfully mining blocks is probabilistically determined by the law of large numbers and there is significant variance involved in mining, especially for individual miners. To address this issue, miners have recently explored methods to increase their probability of being awarded coins by pooling their processing resources into a “mining pool.” A mining pool is a platform where miners contribute their computing power to jointly mine cryptocurrencies and share mining rewards in proportion to the amount of hashing power contributed by each participant. By participating in a mining pool, a miner is more likely to receive a smaller, yet steady, stream of mining rewards. The mining pool operator and the pool software arranges the pool in terms of miners’ hashing capacity, work conducted and rewards earned.

Mining machines

Bitcoin is mined on specialized computers that utilize an algorithm to guarantee the integrity of blocks in the blockchain using a specific hash function to solve the algorithm. The hash function can be efficiently computed on a special mining device called ASIC using the SHA-256 cryptography algorithm, which is the block hashing algorithm used by the bitcoin network to hash new blocks on the blockchain. SHA stands for Secret Hash Algorithm, and it converts any input into a 32-byte output, creating output data hashes that always have 256 digits. The main suppliers of bitcoin mining rigs are Bitmain and MicroBT, each of which control a significant amount of the market of mining machines, with other major suppliers including Ebang and Canaan.

Mining machines are rewarded in bitcoin and transaction fees in proportion to their processing contribution to the network. Mining machines are relatively energy intensive and produce a high amount of heat. To operate mining machines efficiently at a low cost, mining companies endeavor to procure low-cost energy sources and implement efficient cooling methods.

Performance metrics

Network hash rate

Mining hardware conducts complex computations to verify transactions in the blockchain and is measured in “hash rate” or “hashes per second.” “Hash rate” is defined as the speed at which a computer can take any set of information and turn it into letters and numbers of a certain length, known as a “hash.” A “hash” is the computation run by mining hardware in support of the blockchain; therefore, a miner’s “hash rate” refers to the rate at which it is capable of solving such computations. The total hash rate is a measure of the computing power of the network. A participant in a blockchain network’s mining function has a hash rate total of mining hardware deployed by such participant seeking to mine a specific digital asset and, network-wide, there is a total hash rate of all miners seeking to mine each specific type of digital asset. If a mining participant has a higher total hash rate than the blockchain network’s total hash rate, this participant generally sees a higher success rate in digital asset rewards over time as compared to other mining participants with relatively lower total hash rates.

Mining Difficulty

Mining difficulty refers to the level of process power, or hash rate, required for solving and authenticating a complex cryptographic block. Mining difficulty automatically adjusts by increasing or decreasing the computing requirement for verifying a block when there is a corresponding increase or decrease in the total hash rate of a network. The higher the number of mining machines in the network effectively results in a higher mining difficulty. As more processing power is added to the network, the difficulty increases.

The process of solving a block in the bitcoin network is tied to ten-minute increments. As miners are added or removed from the network and hash rate increases or decreases, difficulty must adjust periodically to maintain the ten-minute process. This periodic adjustment occurs every 2,016 blocks, which occurs approximately every two weeks.

Our Competitive Strengths

We believe that the following strengths differentiate us from our competitors:

Diversified Revenue Streams Allowing us to Mitigate Bitcoin Price Fluctuations

Through our subsidiaries, we started generating revenue through mining bitcoins and conducting a mining machines resale and rental business in the fiscal year ended December 31, 2023. For the fiscal year ended December 31, 2023, 31.8%, 60.5% and 7.7% of our total revenue was generated from bitcoin mining, mining machines resale, and other mining-related business , respectively.

We started our cryptocurrency business with bitcoin mining. As of the date of this annual report, our subsidiaries own a total of 2,021 mining machines, of which 1,801, or 89.1% are currently under operation and placed in the three hosting facilities managed by third-party services providers with whom we entered into hosting agreements, located at New Tazewell, Tennessee.

Historically, the price of bitcoins has fluctuated significantly. For example, Bitcoin’s aggregate market value exceeded $1 trillion in October 2021 compared to $250 billion in October 2020, and fell back to $326 billion in January 2023, based on Bitcoin prices quoted on major exchanges. The profitability of our bitcoin mining operations and our operation results have been and will continue to be directly impacted by the trading price of bitcoins. To mitigate the risk of significant fluctuations in Bitcoin, we have launched a mining machines resale and rental business.

We have maintained business relationship with a major machine manufacturer, AGM Technologies Ltd, from which we source mining machines on an order-by-order basis, often at prices lower than market prices. We will then resell mining machines when there is a shortage of machines available in the market and resale prices are higher. Additionally, from time to time, we rent out our mining machines to customers at a rate calculated based on the total bitcoins mined. We seek to rent out a greater percentage of our fleet at times when bitcoin prices are lower to generate cash flow.

We believe that by diversifying our revenue streams, we will be able to mitigate the risks we experience as a result of bitcoin price fluctuations and grow our business in the long run.

Dedicated Team and Efforts Towards Compliance with Cryptocurrency Laws and Regulations

Over the past few years, countries and regulatory bodies worldwide have implemented an increasing number of laws and regulations on cryptocurrencies. As a new entrant into the cryptocurrency industry, we have dedicated efforts to ensure compliance with cryptocurrency laws and regulations. Towards this goal, we have set up a compliance team, led by our chief executive officer, Mr. Siguang Peng, and comprised of experienced industry professionals and experts and external consultants. The compliance team has the right to veto any operational decision of the Company if it suspects that such decision materially runs the risk of violating cryptocurrency laws and regulations. The compliance team also reviews and analyzes newly implemented regulatory policies, hold internal discussion and research sessions, and consults with industry experts on a regular basis to better its understanding of regulatory policies and implement compliance plans. We believe that our strong emphasis and dedication towards regulatory compliance will help us grow and succeed in the industry in the long run.

Experienced and Visionary Management Team and Partners of the Affiliated Company with Proven Track Records

Our management team is led by our co-founders Mr. Siguang Peng, Mr. Xu Peng and Mr. Yupeng Guo, each of whom has more than 16 years of senior management experience. Additionally, we formed a company (the “Affiliated Company”) focusing on cryptocurrency business, Met Chain Co., Ltd., in which we hold a total of 24.3% equity interests as of the date of this annual report, with Mr. Zhijun Liu, Ms. Yunning Li, Mr. Manning Liao, who have rich experience in the cryptocurrency and blockchain industries. For example, Mr. Zhijun Liu, who serves as a vice president of Hummer Miner, a technology company with a focus on the development and manufacturing of cryptocurrency machines, has extensive experience and expertise in the development of mining machines. Ms. Yunning Li, the former chief marketing officer of ChainPlus, has extensive experience in the cryptocurrency industry.

With their clear vision and long-term commitment to our business strategies, we have achieved success with our current business focus on mining small-cap cryptocurrencies and significant revenue growth in the past few years. We believe that in the future we will continue to benefit from our senior management team’s industry knowledge, diverse background and skills, and clear version for our ongoing development.

Our Strategies

Through our subsidiaries, we plan to implement the following growth strategies:

Growing Our Current Business Lines

We believe that the cryptocurrency industry still has significant growth potentials, and we expect to continue growing our current cryptocurrency business lines through increasing the number of mining machines in our fleet in the future. Benefiting from higher combined hash rate, owning a large number of mining machines would allow us to increase our profitability derived from bitcoin mining when bitcoin prices are high, and gain more bargaining power in mining machines resale and rental operations. Growing our current business lines can also benefit us by further contributing to the diversification of our revenue streams and our continued growth and success.

Increasing Research and Development Efforts

The global cryptocurrency industry is characterized by rapid technological development and continual introduction of new models of mining machines. We believe that our future success depends largely on our ability to mine cryptocurrencies at faster pace and with greater computing power, lower energy costs, and lower environmental impact than our competitors.

Through the Affiliated Company, we have participated in the design and development of equipment dedicated for mining machines and infrastructure, including high voltage power supply, liquid-cooling systems, and hash boards. In the near future, we plan to continue investing in research and development through our subsidiaries and the Affiliated Company and accumulate knowledge in the cryptocurrency industry. Specifically, we intend to design and develop a proprietary model of ASIC mining machines dedicated to bitcoin mining. For details, see “— Research and Development.”

To empower our subsidiaries’ research and development capabilities, we plan to start expanding our subsidiaries’ research and development team and upgrade their facilities for research and development in 2024. As of December 31, 2023, our subsidiaries had five members in their research and development team. Our subsidiaries will aim to attract talented persons specialized in algorithm optimization, software development, and mining machine design, and provide incentives to them for innovation, and continue building a strong research and development team.

Offering Crypto Asset Management Services

As the cryptocurrency industry continues to grow, we expect the market demand for crypto asset management services to increase as investors are seeking to manage and grow the crypto assets they own. We launched Bitcoin miner management and technical services in 2023, and we plan to gradually launch more crypto asset management services to clients, such as crypto wallets, custody solutions, and trust services, in 2024 and 2025. We believe these services will be able to meet the needs to investor clients, as well as add to our services value chain.

Competition

Mining is a constantly evolving business with a wide range of competition. Broadly, we compete with other companies that focus on mining bitcoin at a large scale. We face competition based on securing low-cost, reliable and renewable power, purchasing mining machines and other essential technology, buying or leasing sites to host our mining machines and ultimately producing hash rate. We also face competition in the ability to raise capital and hire qualified personnel.

Our competitors vary from solo enthusiasts to large corporations with significant scale of operations, including their own data centers. We compete with respect to hash rate, access to low-cost renewable power, operational efficiency, technological innovation and return on investment. We believe the recent increase in market prices for bitcoin and other digital assets has allowed new competition to enter the market and allowed existing competitors to access the requisite capital required to quickly scale their operations through large power contracts and additional miners. We expect this trend to continue as bitcoin and other digital assets continue to appreciate in value.

We believe that we have several competitive advantages that will be maintained and extended through execution of our strategy, including growing technology capacities, strong marketing team, and a leading management team. However, some of our competitors may have more resources than we do, and may be able to devote greater resources than we can to expand their business. With respect to our mining machines rental business and services offerings we expect to launch in the future, including crypto asset management services, we intend to offer competitive prices to attract more customers and enhance competitiveness.

Proof-of-stake networks also serve as competition to the bitcoin blockchain. As proof-of-stake algorithms create new blocks in a blockchain without resource intensive calculations to validate transactions, companies with significant advantages in terms of scale or low-cost power may be less competitive on a proof-of-stake network.

Bitcoin Mining Operations

Mining Machines

As of the date of this annual report, our subsidiaries own a total of 2,021 mining machines, which our subsidiaries rely upon for their day-to-day business activities. Among all mining machines owned, a total of 2,021 miming machines are currently under operation, hosted at one site managed by a facility operator.

Set forth below is a summary of each model of bitcoin mining machines our subsidiaries own as of the date of this annual report:

	Model	Total Mining Machines Hosted and Under Operation
1	Bitmain Antminer S19j Pro 100^TH/S		1,749
2	Bitmain Antminer S19 XP 140^TH/S		272
	Total:		2,021

With their mining machines, our subsidiaries mined cryptocurrencies of an aggregate value of nil, US$2.4 million, and US$2.9 million for the fiscal years ended December 31, 2021, 2022 and 2023, respectively. As of December 31, 2023, our network hash rate for all mining machines operated was 213PH/S.

Hosting Facilities

A hosting facility functions as a storage facility where mining machines mine cryptocurrencies. Hosting facilities are owned and operated by third parties, with whom we enter into agreements for the hosting of our subsidiaries’ mining machines. We select sites for hosting facilities to place and operate our subsidiaries’ mining machines based on criteria including but not limited to:

●

favorable local laws and regulations on cryptocurrency mining activities;

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low land and electricity costs to reduce mining expense for our subsidiaries’ mining activities;

●

political stability of surrounding area; and

●

local tax policies on income generated from mining activities.

Through our subsidiaries, we currently manage and operate our mining machines at one hosting facility operated by a hosting facility owner in New Tazewell, Tennessee. The third-party facility operator also equips these mining farms and facilities with supporting staff to trouble shoot basic everyday technical difficulties. As of December 31, 2023, among all the machines owned by our subsidiaries, 1,801, or approximately 89.1% of the total 2,021 mining machines, were under operation.

The following chart sets forth the details of the hosting facilities with the location of our subsidiaries’ mining machines as of December 31, 2023:

Location	Total Mining Machines Hosted		Machines Under Operation		Machines Not Under Operation
3785 Tennessee 33, New Tazewell, TN, 37825		2,021		1,801		220
Total:		2,021		1,801		220

Mining Pools

A mining pool is a platform where miners contribute their computing power to jointly mine cryptocurrencies and share mining rewards in proportion to the amount of hashing power contributed by each participant. In a mining pool, the mining process is repeated a large number of times by all of its participants. By aggregating every participant’s hash power, it is more likely for the mining pool to successfully mine any particular block. Mining pools can therefore mutualize the risk of mining and participants can share mining rewards on a pro rata basis depending on each miner’s contribution to computing power to the pool.

Through our subsidiaries, we mine bitcoins exclusively through participating in mining pools. We currently participate in two mining pools, BTC.com pool, and F2Pool, for bitcoin mining. For the fiscal year ended December 31, 2021, we did not participate in any mining pools. For the fiscal year ended December 31, 2022, we mined 77.3922 bitcoins from participating in BTC.com pool, and 7.5716 bitcoins from participating in F2Pool. For the same year, we paid 0.5% of total bitcoins mined, or 0.3870 bitcoins, to BTC.com pool as pool fees, and 0.5% of total bitcoins mined, or 0.0379 bitcoins, to F2Pool as pool fees. For the fiscal year ended December 31, 2023, we mined 99.7607 bitcoins from participating in F2Pool. For the same year, we paid 0.5% of total bitcoins mined, or 0.4988 bitcoins, to F2Pool as pool fees.

Mining Results

We operate our bitcoin mining operations through our subsidiaries. In one respect, we measure the success of our operations by the value of the bitcoins our subsidiaries earn from their mining activities. We believe in the long term growth potential of bitcoins, and we tend to hold most of the bitcoins our subsidiaries mine. Nevertheless, as our subsidiaries continue to produce bitcoins, our subsidiaries may from time to time exchange bitcoins for fiat currency such as U.S. dollars to generate cash flow to fund our business operations, subject to a combination of market and operational conditions. As of the date of this annual report, we do not have a policy in place regarding when and how we will exchange our mined bitcoins for fiat currency and through what exchange. Currently, we do not maintain agreements with any third-party exchange on which we exchange cryptocurrencies into fiat currency.

As of the date of this annual report, we store all of our bitcoins in hot wallets. A hot wallet refers to any cryptocurrency wallet that is connected to the internet. Generally, hot wallets are easier to set up and access as compared to wallets in cold storage, but they are also more susceptible to hackers and other technical vulnerabilities. Cold storage is generally more secure than hot storage, but is not ideal for quick or regular transactions. In the near future, we intend to switch a portion of our bitcoin storage to cold wallets and use a combination of hot wallets and cold wallets for bitcoin storage in the future. We take a series of precaution measures to protect our bitcoins, including opening accounts on reputable and reliable exchanges, setting up complex passwords and changing passwords on a frequent basis, adopting two-factor authentication for log-in, avoid using public Wi-Fi for account access, and staying informed of latest cybersecurity threats.

In the fiscal year ended December 31, 2021, we did not mine any bitcoin. In the fiscal year ended December 31, 2022, we mined a total of 84.9638 bitcoins, generating revenue in the amount of US$2.4 million. In the same fiscal year, we exchanged a total of 86.5039 bitcoins for fiat currency, with an average selling price of US$25,295 per bitcoin. As of December 31, 2022, our network hash rate for all mining machines operated was 140PH/S. In the fiscal year ended December 31, 2023, we mined a total of 99.7607 bitcoins, generating revenue in the amount of US$2.9 million. In the same fiscal year, we exchanged a total of 94.9062 bitcoins for fiat currency, with an average selling price of US$27,078 per bitcoin, and our electricity costs per bitcoin mined was US$ 22,339 million in 2023. As of December 31, 2023, our network hash rate for all mining machines operated was 213PH/S.

Mining Machines Resale

In addition to bitcoin mining, we also resell mining machines to generate revenue and cash flows and diversify our income streams. We have maintained business relationship with a major mining machine manufacturer, AGM Technologies Ltd, from which we source mining machines on an order-by-order basis, often at prices lower than market prices. We will then resell mining machines when there is a shortage of machines available in the market and resale prices are higher.

In the fiscal year ended December 31, 2021, we did not engage in mining machines resale operations. In the fiscal year ended December 31, 2022, we sold 944 bitcoin mining machines in total, with models including Antminer S19XP, Antminer L7 9050 and Antminer L7 8800, to customers, generating revenue in the amount of US$8.82 million, or 74.5% of our total revenue for the fiscal year ended December 31, 2022, representing gross margin of 39.3%. In the fiscal year ended December 31, 2023, we sold 815 bitcoin mining machines in total, with models including Antminer L7 9050 and Antminer L7 8800, to customers, generating revenue in the amount of US$5.5 million, or 60.5% of our total revenue for the fiscal year ended December 31, 2023, representing gross margin of 16.7%.

For the fiscal year ended December 31, 2021, we did not source any machines for our mining machines resale operations. For the fiscal year ended December 31, 2022, Skyline II Acquisition Corporation and Bitmain Technologies Ltd were our main suppliers for our mining machines resale operations, representing purchase from us in the amount of $3.4 million and $1.8 million, or 64.6% and 35.4%, respectively, out of the total mining machines sold. For the fiscal year ended December 31, 2023, Skyline II Acquisition Corporation and Bitmain Technologies Ltd were our main suppliers for our mining machines resale operations, representing purchase from us in the amount of $4.6 million and $0.5 million, or 89.6% and 10.4%, respectively, out of the total mining machines sold.

We enter into sales orders with mining machine purchasers. For the fiscal year ended December 31, 2021, we did not sell any mining machines. For the fiscal year ended December 31, 2022, we sold mining machines to a total of three customers, and purchase from DGC Gaming Advisory Limited, New Digital Trading Company Limited, and Morgogo Company Limited constituted 47.1%, 31.4%and 21.5% of our total sales, respectively. For the fiscal year ended December 31, 2023, we sold mining machines to a total of two customers, and purchase from New Digital Trading Company Limited, and Morgogo Company Limited constituted 57.0% and 43.0% of our total sales, respectively.

Mining Machines Rental

From time to time, we seek to rent out a greater percentage of our fleet at times when bitcoin prices are lower to generate cash flow. Given the fluctuating nature of bitcoins, we seek to rent out our machines for a short period of time and under a few months. We enter into a rental agreement with customers for rental fees calculated based on the total bitcoins mined and the customers will bear the costs of electricity used in such machines’ mining activities. The mining machines rented out will not be physically transferred to the customers’ premises and will still be operated at our hosting facilities.

In October and November 2022, 1,200 mining machines, representing 68.4% of our total mining machines, was rented out to customers. For the fiscal year ended December 31, 2022, we generated US$0.62 million in revenue from mining machines rental business, representing 5.3% of our total revenue for the fiscal year ended December 31, 2022. In the same fiscal year, we generated rental fees in the amount of US$0.62 million from one customer, Lobo Group Limited, representing 100% of total rental fees generated.

For the fiscal year ended December 31, 2023, we generated US$0.3 million in revenue from mining machines rental business, representing 2.8% of our total revenue for the fiscal year ended December 31, 2023. In the same fiscal year, we generated rental fees in the amount of US$0.3 million from one customer, DDACE LTD, representing 100% of total rental fees generated.

Suppliers

Our subsidiaries value the quality and computing power of their mining machines and, as such, our subsidiaries carefully evaluate the potential suppliers. In particular, our subsidiaries take into account factors including, but not limited to, a potential supplier’s operating history, operational scale, industry reputation, product quality, quality control effectiveness, technological expertise, pricing, reliability, and customer services. Our subsidiaries do not maintain strategic framework agreement or long-term procurement agreement with any of the suppliers, and our subsidiaries purchase raw materials from the suppliers on an order-by-order basis. Despite that, during the fiscal years ended December 31, 2021, 2022 and 2023, our subsidiaries did not experience any significant difficulties in procuring mining machines.

For the fiscal year ended December 31, 2021, AGM Technologies Ltd and Bitmain Technologies Ltd were our main suppliers for the mining machines used in our bitcoin mining operations, representing our purchase in the amount of $6.9 million and $2.6 million, or 63.1% and 24.0%, out of the total mining machines purchased for use in our bitcoin mining operations, respectively. For the fiscal year ended December 31, 2022, AGM Technologies Ltd and Bitmain Technologies Ltd were our main suppliers for the mining machines used in our bitcoin mining operations, representing our purchase in the amount of $7.9 million and $1.7 million, or 81.9% and 18.1% out of the total mining machines purchased for use in our bitcoin mining operations, respectively. For the fiscal year ended December 31, 2023, Bitmain Technologies Ltd were our main suppliers for the mining machines used in our bitcoin mining operations, representing our purchase in the amount of $5.32 million, or 100% out of the total mining machines purchased for use in our bitcoin mining operations.

Marketing and Sales, Distribution and Logistics

We rely primarily on word-of-mouth referrals as a marketing tool for our business. For the fiscal year ended December 31, 2023, all of the operating entities’ clients have come through referrals from existing clients. As of the date of this annual report, we have three members in our marketing and branding team. Our marketing team also connects with potential customers through organizing and participating in cryptocurrency events and conferences, and maintains relationship with existing customers through visits and social events.

Research and Development (“R&D”)

Research and development is key to our future innovation and business growth, and we intend to devote significant resources in the research and development of products and services complementary to our bitcoin mining operations.

We also place a strong emphasis on building our subsidiaries’ research and development team. As of December 31, 2023, the operating entities employed a total of five full-time PRC individuals in their research and development team. Many members of the operating entities’ research and development team have prior work experience in blockchain and cryptocurrency and information technology.

Intellectual Property

We do not currently own any intellectual properties in connection with our existing technologies. However, we may in the future rely upon patents, trade secrets, trademarks, service marks, trade names, copyrights or other intellectual property rights. In addition, we expect to continue developing our technologies to enhance our operational efficiency.

Employees

We had 1,229, 16, and 20 full-time employees as of December 31, 2021, 2022 and 2023, respectively. The number of full-time employees as of December 31, 2021 also includes the employees of the former VIEs. The following table sets forth the number of our employees by function as of December 31, 2023:

Function	Total
Management		4
General and administration		16
Total		20

All of our 20 employees reside in the PRC. Our officers, including our chief executive officer, Siguang Peng, and our acting chief financial officer, Yupeng Guo, reside in the PRC.

We believe that our success and continued growth depend on our ability to attract, retain, and motivate qualified employees. Through our subsidiaries, we offer our employees competitive salaries, comprehensive training, and other fringe benefits and incentives. We believe that through our subsidiaries, we maintain a good working relationship with our employees, and we have not experienced any material labor disputes or work stoppages. None of our employees or PRC individuals are represented by labor unions, and no collective bargaining agreement has been put in place.

Through our subsidiaries, we enter into standard employment agreements, non-compete agreements, and confidentiality agreements with our employees. Our employees are not covered by any collective bargaining agreement. We believe that we maintain a good working relationship with our employees, and we have not experienced any significant labor disputes as of the date of this annual report.

Environmental Initiatives

For the fiscal years ended December 31, 2021, 2022 and 2023, the total electricity fees we paid in connection with bitcoin mining operations were nil, US$2.9 million, and US$2.2 million, respectively, and the costs per kilowatt hour for the respective period was nil, US$0.08, and US$0.08 per kWh.

We are aware of the amount of energy the operating entities use in their business activities and we intend to expand our energy-saving efforts in the future. Specifically, we intend to develop products complementary to our operations that are able to provide greater energy efficiency. Furthermore, accessibility and availability of renewable energy has always been and will continue to be a significant factor in our evaluation process for selecting the sites of operations. We believe that growing with sustainability is important for our success in the long run.

Insurance

We and our subsidiaries do not currently maintain any commercial insurance. As such, we are susceptible to losses including property damage, accidents, or liabilities. In the event that such damages are substantial, we may experience materially negative impact on our business operations, financial condition, and results of operations. See “Item 1A. Risk Factors — Risks Related to Our Business and Industry — The operating entities’ mining operations, including the sites in which their mining machines are operated or that are currently under construction, may experience damages, including damages that are not covered by insurance.”

Material Contracts

On January 2, 2024 the Company has entered into an asset purchase agreement with BITMAIN TECHNOLOGIES DELAWARE LIMITED to acquire 2,000 units of T21 Miners for $5,320,000. The machines are expected to be delivered and put into operation by the Company in the first half of 2024.

Government Regulation

Government regulation of blockchain and cryptocurrency is being actively considered by the United States federal government via a number of agencies and regulatory bodies, as well as similar entities in other countries. State government regulations also may apply to our activities and other activities in which we participate or may participate in the future. Other regulatory bodies are governmental or semi-governmental and have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency business. We anticipate that Bitcoin mining will be a focus for potential increased regulation in the near and long term, and we cannot predict how future regulations may affect our business or operations.

Businesses that are engaged in the transmission and custody of bitcoin and other cryptocurrencies, including brokers and custodians, can be subject to U.S. Treasury Department regulations as money services businesses as well as state money transmitter licensing requirements. Bitcoin and other cryptocurrencies are subject to anti-fraud regulations under federal and state commodity laws, and cryptocurrency derivative instruments are substantively regulated by the Commodity Futures Trading Commission. Certain jurisdictions, including, among others, New York and a number of countries outside the United States, have developed regulatory requirements specifically for cryptocurrency and companies that transact in them.

Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our businesses, or when they will be effective. As the regulatory and legal environment evolves, we may become subject to new laws, further regulation by the SEC and other agencies, which may affect our mining and other activities. For instance, various bills have also been proposed in Congress related to our business, which may be adopted and have an impact on us.

State regulation of Bitcoin mining is an important consideration with respect to where we conduct our mining operations. Our Rockdale Facility and our Corsicana Facility are both located in the State of Texas. To the extent that there is any state regulation of Bitcoin mining, we believe Texas is likely to remain one of the most favorable regulatory environments for Bitcoin miners.

In March 2022, the SEC issued proposed climate-related disclosure requirements for registrants and received thousands of comments on the proposal. We continue to await the release of any potential finalized rules requiring such disclosures following the analysis of the comments.

In January 2023, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), Office of the Comptroller of the Currency, and FDIC issued a joint statement regarding perceived risks to banks with clients in crypto-asset industries. In January 2023, the Federal Reserve also issued a policy statement broadening its regulatory authority to limit the activities of state-chartered banks. Several leaders in the U.S. Congress sent oversight letters to the prudential regulators pushing back on any efforts to place limits on banking activity for digital asset industries. Riot has also diversified banking relationships to mitigate any potential regulatory risk with respect to financial services.

Additionally, in January 2023, the U.S. House of Representatives announced its first ever Financial Services Subcommittee on Digital Assets and its intention to develop a regulatory framework for the digital asset industry. Bipartisan leadership of the Senate Banking Committee announced that goal as well. Over the course of 2023, the House Financial Services Committee passed various bills, including a bill to provide a market structure for digital assets, but no such legislation has received a vote on the floor of the full House.

In January 2024, a decade after initial applications were filed, the SEC approved a series of spot Bitcoin exchange-traded funds, which have received billions of dollars of in-flows.

Also in January 2024, the U.S. Energy Information Administration initiated a provisional survey of electricity consumption information from cryptocurrency mining companies operating in the United States. The survey was authorized by the Office of Management and Budget as an emergency data request. This action is purely a survey, and it remains unclear whether or how the information will be used in future regulatory efforts.

Leaders on both the U.S. House Financial Services Committee and U.S. Senate Banking Committee have expressed interest in passing legislation to provide additional regulatory authority to address risks related to the use of digital assets in illicit financial activity. The U.S. Treasury Department has also requested additional authorities to address such risks. However, we have not seen sufficient support emerge in favor of any particular proposal to anticipate any specific changes at this time.

We are unable to predict the impact that any new standards, legislation, or regulations may have on our business at the time of filing this Annual Report. However, we continue to monitor and proactively engage in dialogue on regulatory and legislative matters related to our industry. As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our Bitcoin Mining and other activities.

Available Information

Our website is located at located at https://btct.investorroom.com/. Access to copies of our SEC filings, corporate governance information, and other items that may be material or of interest to our investors is available via our investor relations website. The contents of our websites are not incorporated by reference into this Report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

ITEM 1A. Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Report, before deciding to invest in our securities. If any of the following risks materialize, our business, financial condition, results of operation and prospects will likely be materially and adversely affected. In that event, the market price of our ordinary shares could decline, and you could lose all or part of your investment.

An investment in our ordinary shares involves a high degree of risks. You should carefully consider all of the information in this Report, including the risks and uncertainties described below, before making an investment in our ordinary shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ordinary shares could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

Risks and uncertainties related to our cryptocurrency business and industry include, but are not limited to, the following:

●

We have recently launched our blockchain and cryptocurrency business and have a limited operating history.

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As the operating entities develop their blockchain and cryptocurrency business, our total revenue and cash flow will become materially dependent on the market value of digital assets and the volume of digital assets received from their mining efforts. If such market value or volume declines, our business, operating results and financial condition would be adversely affected.

	●	The cost of acquiring new mining machines has historically been capital intensive, and is likely to continue to be very capital intensive, which may have a material and adverse effect on our business and results of operations.

	●	The price of new mining machines may be linked to the market price of bitcoin and other cryptocurrencies, and our costs of obtaining new and replacement mining machines may increase along with the market price of bitcoin and other cryptocurrencies, which may have a material and adverse effect on our financial condition and results of operations.

●

Because the only type of cryptocurrency we currently mine is bitcoin, our future success will depend in large part upon the value of bitcoin, and any sustained decline in its value could adversely affect our business and results of operations.

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To the extent that the profit margins of bitcoin mining operations are not high, operators of bitcoin mining operations are more likely to immediately sell bitcoin rewards earned by mining in the market, thereby constraining growth of the price of bitcoin, which could adversely impact us.

	●	We are subject to risks associated with our need for significant electrical power.

	●	The cryptocurrencies stored by the operating entities may be subject to accidental or unauthorized loss or theft or otherwise may be access restricted.

Risks Related to Bitcoin

Risks and uncertainties related to bitcoin include, but are not limited to, the following:

	●	The trading price of bitcoin, which may be subject to pricing risks, including volatility related risks, has historically been subject to wide swings. A material decrease in the price of bitcoin could have a materially adverse effect on our business and results of operations.

	●	The markets for bitcoin may be underregulated. As a result, the market price of bitcoin may be extremely volatile. Rapid decreases in the price of bitcoin could have a materially adverse effect on our business and results of operations.

	●	Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related activities.

	●	We have an evolving business model subject to various uncertainties.

	●	It may be illegal now, or in the future, to acquire, own, hold, sell or use bitcoin, or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which would adversely affect us.

	●	The development and acceptance of competing blockchain platforms or technologies may cause demand for bitcoin to decrease.

Risks Related to Governmental Regulation and Enforcement

	●	If bitcoins are determined to be investment securities, and we hold a significant portion of our assets in bitcoins, investment securities or non-controlling equity interests of other entities, we may inadvertently violate the Investment Company Act of 1940 (the “Investment Company Act”). We could incur large losses to modify our operations to avoid the need to register as an investment company or could incur significant expenses to register as an investment company or could terminate operations altogether.

	●	We may be required to register as an investment company under the Investment Company Act. In such event, we may be deemed as operating as an unregistered investment company in violation of the Investment Company Act and required to register as an investment company or to adjust our strategies.

	●	We cannot be certain as to how future regulatory developments will impact our business and any such additional regulatory requirements, or changes in how existing requirements are interpreted and applied, may cause us to cease all or certain of our operations or change our business model.

	●	If U.S. and/or foreign regulators and other government entities assert jurisdictions over cryptocurrencies and cryptocurrency markets, we may be subject to additional regulations imposed by these regulators and government entities and may be required to alter our business operations to gain compliance with these regulations, as a result of which we may experience increased compliance costs and our business operations, financial position and results of operations may be materially and adversely affected.

	●	If regulatory changes or interpretations of our activities require us to register under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act, or otherwise under state laws, we may incur significant compliance costs, which may have a material negative effect on our business and the results of its operations.

Risks Related to Our Ordinary Shares and the Trading Market

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Our share price has recently declined substantially, and our ordinary shares could be delisted from the Nasdaq or trading could be suspended.

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We may issue additional ordinary shares or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of our ordinary shares.

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We are not expected to pay dividends on our ordinary shares in the foreseeable future.

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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we were formed under Cayman Islands law.

Risks Related to Our Business and Industry

We have launched our blockchain and cryptocurrency business in early 2022 and have a limited operating history.

Since early 2022, we have started to transition the business focus to blockchain and cryptocurrency business through the operating entities. Accordingly, we have a limited operating history, which makes an evaluation of our future prospects difficult. Our operating results will likely fluctuate moving forward as we focus on increasing our capacity and as the market price of bitcoin fluctuates. We may need to make business decisions that could adversely affect our operating results, such as modifications to our business structure, or operations. Additionally, as we have limited experience in the blockchain and cryptocurrency business, our efforts in developing such business may not succeed and we may not be able to generate sufficient revenue to cover our investment and become profitable. In the fiscal year ended December 31, 2023, we generated revenue in the amount of $9.1 million from our cryptocurrency business, and generated net loss of $2.8 million from our cryptocurrency business. We may not continue to generate substantial revenue or net income from our blockchain and cryptocurrency business, if at all. If we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures or take advantage of market opportunities and our business, financial condition, and results of operations could be materially harmed.

As the operating entities develop their blockchain and cryptocurrency business, our total revenue and cash flow will become materially dependent on the market value of digital assets and the volume of digital assets received from our mining efforts. If such market value or volume declines, our business, operating results and financial condition would be adversely affected.

As we develop our blockchain and cryptocurrency business, the operating cash flow will be materially dependent on our ability to sell cryptocurrency for fiat currency as needed. As such, any declines in the number of cryptocurrencies that we successfully mine, the price of such cryptocurrencies or market liquidity for cryptocurrencies and digital assets generally would adversely affect our revenue and ability to fund the operations.

The price of cryptocurrencies and digital assets and associated demand for buying, selling, and trading cryptocurrencies and digital assets have historically been subject to significant volatility. For example, Bitcoin’s aggregate market value was $250 billion in October 2021, surpassed $1 trillion in October 2021, decreased to $0.37 trillion in October 2022, and rose to over $1.4 trillion in March 2024., based on Bitcoin prices quoted on major exchanges. The price and trading volume of any digital asset is subject to significant uncertainty and volatility, depending on a number of factors, including:

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market conditions across the broader blockchain ecosystem;

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trading activities on digital asset platforms worldwide, many of which may be unregulated, and may include manipulative activities;

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investment and trading activities of highly active retail and institutional users, speculators, mining machines and investors;

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the speed and rate at which digital assets are able to gain worldwide adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument or other financial assets, if at all;

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changes in user and investor confidence in digital assets and digital asset platforms;

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publicity and events relating to the blockchain ecosystem, including public perception of the impact of the blockchain ecosystem on the environment;

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unpredictable social media coverage or “trending” of digital assets;

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the functionality and utility of digital assets and their associated ecosystems and networks, including digital assets designed for use in various applications;

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consumer preferences and perceived value of digital assets;

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increased competition from other payment services or other digital assets that exhibit better speed, security, scalability or other characteristics;

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the correlation between the prices of digital assets, including the potential that a crash in one digital asset or widespread defaults on one digital asset exchange or trading venue may cause a crash in the price of other digital assets, or a series of defaults by counterparties on digital asset exchanges or trading venues;

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regulatory or legislative changes and updates affecting the blockchain ecosystem;

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the characterization of digital assets under the laws of various jurisdictions around the world;

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the maintenance, troubleshooting and development of the blockchain networks underlying digital assets, including by mining machines, validators and developers worldwide;

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the ability for digital asset networks to attract and retain mining machines or validators to secure and confirm transactions accurately and efficiently;

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ongoing technological viability and security of digital assets and their associated protocols, smart contracts, applications and networks, including vulnerabilities against hacks and scalability;

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fees and speed associated with processing digital asset transactions, including on the underlying blockchain networks and on digital asset platforms;

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financial strength of market participants;

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interruptions in service from, or failures of, major digital asset trading platforms;

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availability of an active derivatives market for various digital assets;

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availability of banking and payment services to support digital asset-related projects;

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level of interest rates and inflation; and

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monetary policies of governments, trade restrictions and fiat currency devaluations.

There is no assurance that any digital asset, including Bitcoin, will maintain its value or that there will be meaningful levels of trading activities to support markets in any digital asset. A decline in the market value of digital assets or in the demand for trading digital assets could lead to a corresponding decline in the value of our cryptocurrency assets, their returns on investments in mining machines, and could adversely affect their business, operating results and financial condition.

Digital assets may be subject to momentum pricing due to speculation regarding future appreciation or depreciation in value, leading to greater volatility. Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for future changes in value. It is possible that momentum pricing of digital assets has resulted, and may continue to result, in speculation regarding future changes in the value of digital assets, making digital assets’ prices more volatile. As a result, digital assets may be more likely to fluctuate in value due to changing investor confidence, which could impact future appreciation or depreciation in digital asset prices. As a result, our business, operating results and financial condition could be adversely affected.

The cost of acquiring new mining machines has historically been capital intensive and is likely to continue to be very capital intensive, which may have a material and adverse effect on our business and results of operations.

The success and profitability of our mining operations conducted depends largely on the costs, including costs of mining machines and electricity, associated with our mining activities. We can be profitable only if such costs are lower than the prices of the cryptocurrencies we mine when we sell them. Our mining machines experience ordinary wear and tear from operation and may also face more significant malfunctions caused by factors which may be beyond our control. Over time, we will replace those mining machines which are no longer functional with new mining machines we manufacture. Additionally, as technology evolves, we are required to continue investing in research and development to invent newer models of mining machines to remain competitive in the market.

All of the mining machines deployed by us will degrade due to ordinary wear and tear from usage. Additionally, all of these machines will eventually become obsolete, and may also be lost or damaged due to factors outside of our control. Once such event happens, these mining machines will need to be repaired or replaced along with other equipment from time to time for us to stay competitive. This upgrading process requires substantial capital investment, and we may face challenges in doing so on a timely and cost-effective basis based on our ability to develop new mining machines with greater processing power and our access to adequate capital resources. If we are unable to obtain adequate numbers of new and replacement mining machines at scale, we may be unable to remain competitive in our highly competitive and evolving industry. If this happens, we may not be able to mine cryptocurrencies through our subsidiaries as efficiently or in similar amounts as our competitors and, as a result, our business and financial results could suffer. This could, in turn, materially and adversely affect the trading price of our securities and our investors could lose part or all of their investment.

The price of new mining machines may be linked to the market price of bitcoin and other cryptocurrencies, and our costs of obtaining new and replacement mining machines may increase along with the market price of bitcoin and other cryptocurrencies, which may have a material and adverse effect on our financial condition and results of operations.

Our financial condition and results of operations are dependent on our ability to sell the bitcoin the operating entities mine at a price greater than our costs to produce that bitcoin. We incur significant up-front capital costs each time we acquire new mining machines, and, if future prices of bitcoin are not sufficiently high, we may not realize the benefit of these capital expenditures. As the price for new mining machines we buy increases, our cost to mine a single bitcoin also increases, therefore requiring a corresponding increase in the price of bitcoin for us to maintain our results of operations, to the extent we sell the bitcoin shortly after mining it.

We have observed significant fluctuations in market prices for bitcoin, to the extent that we are unable to reasonably predict future prices for the bitcoin the operating entities mine. The market price of bitcoin could decrease during this time to the point at which it no longer becomes profitable for the operating entities to use such equipment to mine bitcoin and, as a result, our business and financial results could suffer. This could, in turn, materially and adversely affect the trading price of our securities and our investors could lose part or all of their investment.

Reports have been released that the prices of new mining machines are adjusted according to the price of bitcoin. As a result, the cost of new machines can be unpredictable, and could also be significantly higher than our historical cost for new mining machines. As a result, at times, the operating entities may obtain mining machines and other hardware from third parties at higher prices, to the extent they are available. While we cannot know definitively if these two phenomena are linked, we have seen a measurable increase in the prices for new mining machines offered by third party manufacturers during periods of increased market prices for bitcoin, and such prices may continue to track the volatility in the market price of bitcoin.

The global supply chain for mining machines is presently constrained due to unprecedented demand coupled with a global semiconductor (including microchip) shortage, with a significant portion of available mining machines being acquired by companies with substantial resources. Semiconductors are utilized in various devices and products and are a crucial component of manning machines. Supply chain constraints coupled with increasing demand has led to increased pricing and limited availability for semiconductors. Prices for both new and older models of mining machines have been on the rise and these supply constraints are expected to continue for the foreseeable future. China, a major supplier of miners, has seen a production slowdown as a result of COVID-19. Should similar outbreaks or other disruptions to the China-based global supply chain for mining hardware occur, the operating entities may not be able to obtain adequate replacement parts for their existing mining machines or to obtain additional mining machines on a timely basis, if at all, or the operating entities may only be able to acquire mining machines at premium prices. Such events could have a material adverse effect on our ability to pursue our strategy, which could have a material adverse effect on our business and the value of our securities.

Because the mining machines owned by the operating entities are designed specifically to mine bitcoin, our future success will depend in large part upon the value of bitcoin, and any sustained decline in its value could adversely affect our business and results of operations.

Our operating results will depend upon the value of bitcoin because it is the only cryptocurrency the operating entities currently mine. Specifically, our revenues from our bitcoin mining operations are based upon two factors: (1) the number of bitcoin rewards the operating entities successfully mine and (2) the value of bitcoin. In addition, our operating results are directly impacted by changes in the value of bitcoin because under the value measurement model, both realized and unrealized changes will be reflected in our statement of operations. This means that our operating results will be subject to changes based upon increases or decreases in the value of bitcoin. The introduction of alternative cryptocurrencies, such as those backed by central banks known as Central Bank Digital Currencies, could significantly reduce the demand for bitcoin. This would reduce both our ability to earn mining rewards and transaction fees, and would also impair our ability to monetize the bitcoin we earn.

Our reliance primarily on a limited assortment of miner models from a single manufacturer may subject our operations to increased risk of failure.

The performance and reliability of the operating entities’ mining machines and our technology is critical to our reputation and operations. Because the operating entities currently use a limited assortment of mining machines in their fleet, if there are issues with those machines, such as a design flaw in the ASIC chips they employ, our entire system could be affected. The operating entities currently use a few different models of mining machines, but if there are issues with such machines, we may have to rely on a single model of mining machine. Any system error or failure may significantly delay response times or even cause our system to fail. Any disruption in our ability to continue mining could result in lower yields and harm our reputation and business. Any exploitable weakness, flaw, or error common to the type of mining machines we use affects all such mining machines; therefore, if a defect or other flaw exists and is exploited, all or a substantial portion of our mining operations could go offline simultaneously. Any interruption, delay or system failure could result in financial losses, a decrease in the trading price of shares of our ordinary shares and damage to our reputation.

SEC Form 10-K filed by BTC Digital Ltd.