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BTC.com(BTCM) - 2023 Q4 - Annual Report
BTCMBTC.com(BTCM)2024-05-15 20:11

Financial Performance and Revenue - BIT Mining Limited's operations in Hong Kong generated approximately 1.5%, 5.3%, and nil of total revenue from continuing and discontinued operations in 2021, 2022, and 2023 respectively[10]. - The company transferred cash to its subsidiaries of approximately US66.8million,US66.8 million, US37.0 million, and US2.5millionin2021,2022,and2023respectively[18].−BITMiningLimitedtransferredassetsvaluedatUS2.5 million in 2021, 2022, and 2023 respectively[18]. - BIT Mining Limited transferred assets valued at US2.2 million, US9.2million,andUS9.2 million, and US6.3 million to its subsidiaries in 2021, 2022, and 2023 respectively[18]. - BIT Mining Limited's subsidiaries transferred assets valued at US2.4million,US2.4 million, US9.0 million, and US9.3milliontothecompanyin2021,2022,and2023respectively[19].−Thecompany′squarterlyrevenuesandoperatingresultshavehistoricallyfluctuated,makingfutureperformancedifficulttopredict[103].−Theaveragetotalmarketcapitalizationofthecompanywaslessthan9.3 million to the company in 2021, 2022, and 2023 respectively[19]. - The company's quarterly revenues and operating results have historically fluctuated, making future performance difficult to predict[103]. - The average total market capitalization of the company was less than 50 million over a consecutive 30 trading-day period, leading to non-compliance with NYSE listing standards[47]. Regulatory and Compliance Risks - Regulatory risks in China may impact BIT Mining Limited's ability to conduct operations, as adverse actions could force the company to cease administrative support and IT services from China[13]. - The company has migrated its cryptocurrency operations to international markets due to regulatory and policy developments in China[22]. - The company is subject to various legal and operational risks associated with having non revenue-generating subsidiaries and personnel located in China[13]. - The company has accrued 10millionforcombinedpenaltyamountsrelatedtoongoinginvestigationsbytheDOJandSEC,whichmaysignificantlyimpactliquidityandraisedoubtsaboutitsabilitytocontinueasagoingconcern[45].−ThecompanyissubjecttoquarterlymonitoringforcompliancewithitsbusinessplansubmittedtotheNYSE,whichmaybeimpactedbythepaymentofpenalties[46].−ThecompanymayfacerisksofdelistingundertheHoldingForeignCompaniesAccountableActifitsauditorcannotbeinspectedbythePCAOB[75].−TheSECmayissueastopordertoprohibittradingofthecompany′sADSsiftherearethreeconsecutivenon−inspectionyears,whichhasbeenreducedtotwoundertheAHFCAAct[78].−RecentregulatorydevelopmentsinChinamayrestrictthecompany′sabilitytoraisecapitaloutsideofChina,potentiallyleadingtoasignificantdeclineinthevalueofitssecurities[64].−ThecompanyhasadjusteditscorporatestructureandbusinessoperationstocomplywithPRClaws,includingtheterminationofitspreviousVIEstructures[71].−Thecompanyhasadoptedrisk−basedpoliciestoanalyzewhetherthedigitalassetsitminescouldbedeemedsecuritiesunderapplicablelaws,whichcouldlimitdistributionsandtransfers[36].−RegulatorychangescouldrequirethecompanytoregisterundertheSecuritiesActandInvestmentCompanyAct,leadingtoextraordinaryexpensesandpotentialoperationaldisruptions[122].OperationalandStrategicDevelopments−ThecompanyhasfocusedonexpandingitscryptocurrencyminingoperationsintheUnitedStates,particularlyataminingsiteinAkon,Ohio,withaccesstopowercapacityofupto82.5megawatts[23].−ThecompanyisexpandingitscryptocurrencyoperationsintotheUnitedStates,includingthecompletionoftheOhioMiningSite,whichmayrequirecompliancewithadditionalfederalandstateregulations[51].−Thecompanyhasshifteditsfocustointernationalmarketsforcryptocurrencyminingoperations,terminatingdatacenteroperationsinChinaduetoregulatorychanges[81].−ThecompanyhasdevelopedacryptocurrencyminingdatacenterinOhiowithapowercapacityof82.5megawatts[85].−Thecompanyhasenteredthecryptocurrencyindustry,acquiringa7−nanometerminingmachinemanufactureranddevelopingaminingdatacenterwithapowercapacityof82.5megawatts[115].−Thecompanyisactivelyconsideringstrategicopportunitiesinblockchainandcryptocurrency,butthereisnoassurancethatanyacquisitionsorpartnershipswillbesuccessful[117].−Futureacquisitionscouldleadtotheissuanceofordinarysharesorincurrenceofdebt,negativelyimpactingcashflowsandfinancialcondition[119].−Thecompanyfaceschallengesinmanaginggrowtheffectively,whichcouldlimititsgrowthandnegativelyaffectoperatingresults[115].−Theevolvingnatureofthecryptocurrencyindustryrequiresthecompanytocontinuouslyadaptitsbusinessmodeltostaycompetitive[115].MarketandCompetitiveEnvironment−Thecompanyfacescompetitionfromlargeroperatorsinthecryptocurrencyindustry,whichmayhinderitsabilitytoexpandandsecurenecessarypartnerships[121].−Thecryptocurrencymarket′sgrowthisuncertain,influencedbyfactorssuchasgovernmentregulation,consumerpreferences,andeconomicconditions[127].−Geopoliticaleventsmayleadtorapidpricefluctuationsincryptocurrencies,impactingthecompany′sinventoryvalue[139].−Theacceptanceofcryptocurrenciesinretailandcommercialmarketsremainslimited,contributingtopricevolatility[141].−Transactionfeesmayincrease,potentiallydecreasingdemandforbitcoinandhinderingitsacceptanceasapaymentmethod[144].−Thedecentralizednatureofcryptocurrencygovernancemayleadtoslowresponsestocrises,negativelyaffectingthecompany′soperations[146].−Thecompanyfacesrisksfromalackofliquidmarketsandpotentialmanipulationofblockchain−basedassets,whichmayadverselyaffectitsoperationsandthevalueofcryptocurrenciesheld[148].−Competitionfromothercryptocurrencyinvestmentmethodsmaynegativelyimpactthecompany′smarketshareandprofitability[149].−Theemergenceofalternativefinancialvehiclesandscrutinyfromregulatorscouldlimitthecompany′sabilitytomaintainapublicmarketforitssecurities[150].CybersecurityandOperationalRisks−Cybersecuritythreats,includinghackingandmalware,posesignificantriskstothecompany′scryptocurrencyholdingsandoperations[155].−ThecompanyexperiencedacyberattackinDecember2022,resultinginthetheftofapproximately10 million for combined penalty amounts related to ongoing investigations by the DOJ and SEC, which may significantly impact liquidity and raise doubts about its ability to continue as a going concern[45]. - The company is subject to quarterly monitoring for compliance with its business plan submitted to the NYSE, which may be impacted by the payment of penalties[46]. - The company may face risks of delisting under the Holding Foreign Companies Accountable Act if its auditor cannot be inspected by the PCAOB[75]. - The SEC may issue a stop order to prohibit trading of the company's ADSs if there are three consecutive non-inspection years, which has been reduced to two under the AHFCA Act[78]. - Recent regulatory developments in China may restrict the company's ability to raise capital outside of China, potentially leading to a significant decline in the value of its securities[64]. - The company has adjusted its corporate structure and business operations to comply with PRC laws, including the termination of its previous VIE structures[71]. - The company has adopted risk-based policies to analyze whether the digital assets it mines could be deemed securities under applicable laws, which could limit distributions and transfers[36]. - Regulatory changes could require the company to register under the Securities Act and Investment Company Act, leading to extraordinary expenses and potential operational disruptions[122]. Operational and Strategic Developments - The company has focused on expanding its cryptocurrency mining operations in the United States, particularly at a mining site in Akon, Ohio, with access to power capacity of up to 82.5 megawatts[23]. - The company is expanding its cryptocurrency operations into the United States, including the completion of the Ohio Mining Site, which may require compliance with additional federal and state regulations[51]. - The company has shifted its focus to international markets for cryptocurrency mining operations, terminating data center operations in China due to regulatory changes[81]. - The company has developed a cryptocurrency mining data center in Ohio with a power capacity of 82.5 megawatts[85]. - The company has entered the cryptocurrency industry, acquiring a 7-nanometer mining machine manufacturer and developing a mining data center with a power capacity of 82.5 megawatts[115]. - The company is actively considering strategic opportunities in blockchain and cryptocurrency, but there is no assurance that any acquisitions or partnerships will be successful[117]. - Future acquisitions could lead to the issuance of ordinary shares or incurrence of debt, negatively impacting cash flows and financial condition[119]. - The company faces challenges in managing growth effectively, which could limit its growth and negatively affect operating results[115]. - The evolving nature of the cryptocurrency industry requires the company to continuously adapt its business model to stay competitive[115]. Market and Competitive Environment - The company faces competition from larger operators in the cryptocurrency industry, which may hinder its ability to expand and secure necessary partnerships[121]. - The cryptocurrency market's growth is uncertain, influenced by factors such as government regulation, consumer preferences, and economic conditions[127]. - Geopolitical events may lead to rapid price fluctuations in cryptocurrencies, impacting the company's inventory value[139]. - The acceptance of cryptocurrencies in retail and commercial markets remains limited, contributing to price volatility[141]. - Transaction fees may increase, potentially decreasing demand for bitcoin and hindering its acceptance as a payment method[144]. - The decentralized nature of cryptocurrency governance may lead to slow responses to crises, negatively affecting the company's operations[146]. - The company faces risks from a lack of liquid markets and potential manipulation of blockchain-based assets, which may adversely affect its operations and the value of cryptocurrencies held[148]. - Competition from other cryptocurrency investment methods may negatively impact the company's market share and profitability[149]. - The emergence of alternative financial vehicles and scrutiny from regulators could limit the company's ability to maintain a public market for its securities[150]. Cybersecurity and Operational Risks - Cybersecurity threats, including hacking and malware, pose significant risks to the company's cryptocurrency holdings and operations[155]. - The company experienced a cyberattack in December 2022, resulting in the theft of approximately 2.4 million in assets[191]. - The company is dependent on the performance and reliability of its mining machines, which are susceptible to failure and could disrupt operations[170]. - The operation of mining requires significant electrical power, and any increase in electricity costs could reduce profit margins[194]. - The company does not maintain insurance for its digital assets, exposing it and its shareholders to potential losses that are not covered by insurance[59]. - The company does not have business interruption insurance, which could lead to substantial costs in the event of a disruption[97]. - The company relies on third-party services for key operations, and any failure in these services could materially affect its business[91]. - The company is dependent on external service providers for payment and settlement processing, and any failures in their services could lead to financial losses and reputational damage[101]. Bitcoin Mining Specific Risks - The primary cryptocurrency mined by the company, bitcoin, is subject to halving events, which will reduce mining rewards and may not be compensated by an increase in bitcoin value[171]. - The mining reward for Bitcoin has halved three times: from 50 BTC to 25 BTC in 2012, 25 BTC to 12.5 BTC in 2016, and 12.5 BTC to 6.25 BTC in 2020, with the next halving expected around 2140[172]. - The company's revenues from Bitcoin mining are influenced by the number of Bitcoin rewards mined and the market value of Bitcoin, which has historically been volatile[174]. - A significant decline in Bitcoin's value could adversely affect the company's operating results and its ability to continue as a going concern[174]. - The profit margins of Bitcoin mining operations are critical; low margins may lead to immediate selling of mined Bitcoin, increasing market pressure and potentially lowering prices[186]. - The company is focused primarily on Bitcoin mining, utilizing ASIC machines that are specialized for Bitcoin and Bitcoin Cash, limiting diversification into other cryptocurrencies[174]. - If a malicious actor gains control of over 50% of the processing power on a cryptocurrency network, it could manipulate transactions and adversely affect the company's operations[188]. - The company may face challenges in realizing the economic benefits of forks in cryptocurrency networks, which could impact its investment value[180]. - The fixed reward for solving a new block on the bitcoin blockchain is currently 6.25 bitcoin, down from 12.5 bitcoin in May 2020, with an expected halving in 2024[197]. Internal Control and Audit Issues - As of December 31, 2023, the company concluded that its internal control over financial reporting was effective, but identified a material weakness as of December 31, 2022[61]. - The company has incurred and anticipates continuing to incur considerable costs related to maintaining compliance with the Sarbanes-Oxley Act[61]. - The PCAOB has identified numerous deficiencies in audit firms in China, which could impact investor confidence if inspections are not consistently available[205]. - The company's financial statements for the year ended December 31, 2023, were audited by MaloneBailey, LLP, which is not subject to PCAOB's inspection issues[76]. - The PCAOB completed inspections of registered public accounting firms in Hong Kong and determined it had complete access to inspect firms in mainland China and Hong Kong[77]. Investor Sentiment and Market Volatility - The trading price of the company's ADSs may be volatile, influenced by financial results, new business initiatives, and external market factors[207]. - Recent volatility in the trading performance of other PRC companies listed in the U.S. may affect investor sentiment towards the company's ADSs[209].