The9(US:NCTY)2024-04-15 20:31Cryptocurrency Mining Operations - The company has mined a total of 1,958 Bitcoins, holding 231 Bitcoins as of the report date[401]. - The company has deployed around 13,018 mining machines, including Antminer S19 series with an average hash rate of 90 TH[403]. - The company has acquired a total of 26,007 Bitcoin mining machines with a hash rate of approximately 549PH/S, representing about 0.36% of the global Bitcoin hash rate[404]. - In March 2021, the company signed agreements to purchase an additional 18,741 Bitcoin mining machines, increasing its total hash rate by approximately 348PH/S[405][406]. - The company entered into a purchase agreement for 24,000 Antminer S19j machines for a total consideration of $82.8 million, with all payments completed as of the report date[407]. - As of December 31, 2023, the company has deployed 9,007 machines in Kyrgyzstan, contributing approximately 675PH/S hash power, with a rental fee of $100 per month[412]. - The company has deployed 6,142 Antminer S19 miners in Texas, achieving a total hash rate of 552,780 TH[413]. - The company has a memorandum of understanding with Binance to connect 50% of its miners' hash rate to Binance's Bitcoin mining pool, with 16% of miners currently participating in local pools in Kazakhstan[415]. - The company has shifted its business operations primarily to cryptocurrency mining since 2021, with a focus on expanding its market presence in blockchain technology[534]. Financial Performance - In 2023, the company generated total revenues of RMB 179.0 million (US$ 25.2 million), with cryptocurrency mining revenue accounting for RMB 173.3 million (96.8% of total revenues) and other revenues at RMB 5.7 million (3.2%) [535]. - The company's cryptocurrency mining revenues increased from RMB 134.1 million in 2021 to RMB 173.3 million in 2023, representing a growth of 29.2% [535]. - Total net revenues for 2023 reached RMB 179,049,077 (approximately US$ 25,218,535), representing a 65.7% increase from RMB 108,055,569 in 2022[557]. - Cryptocurrency mining revenue accounted for RMB 173,328,089 (approximately US$ 24,412,751), which is 96.8% of total revenues in 2023[557]. - The cost of cryptocurrency mining was RMB 190,647,226, leading to a gross loss of RMB 32,848,963 in 2023[557]. - Operating expenses totaled RMB 284,903,904, with significant impairments on cryptocurrency and equipment amounting to RMB 50,887,472 and RMB 161,001,821 respectively[557]. - The net loss attributable to shareholders of ordinary shares was RMB 411,234,755 in 2023, compared to RMB 974,859,050 in 2022[557]. - The company reported a realized gain on exchange of digital assets of RMB 42,835,930, contributing to overall financial performance[557]. NFT Business Operations - The company sold NFTSTAR Singapore Pte. Ltd. and its subsidiaries in 2023, ceasing its NFT business operations[389]. - The company reported that its NFT business generated less than $100,000 in revenue in 2023, leading to the cessation of operations[427]. - The company has recognized $1.7 million in revenue from the sale of NFTs, earning 755 Ethereum between 2021 and early 2023[430]. - As of December 31, 2023, the total sum paid under license agreements for NFT development was US$17.7 million, with no further payment commitments[434]. - Secondary sales royalties from previously issued NFTs amounted to RMB26 thousand (US$3.7 thousand) in 2023, indicating minimal revenue from this source[431]. - NFTSTAR sold 200 NFT products of Figo, 5,630 NFT products of Son (with 966 repurchased), and 1,498 NFT products of Neymar, with outstanding amounts in the secondary market being 200, 4,664, and 1,498 respectively[440]. - The company transitioned to a decentralized web 3.0 model in May 2022, ceasing the requirement for consumers to create centrally-managed accounts for NFT purchases[439]. - The NFTs were created on Polygon and Ethereum blockchains, with no capability for fractionalization[449][450]. - The company terminated operations related to NFTSTAR and MetaGoal in 2023, ceasing all NFT minting and services[456]. Regulatory Compliance and Risks - The company received a notification from Nasdaq regarding non-compliance with the minimum stockholders' equity requirement of $2,500,000[399]. - The company is closely monitoring regulatory developments regarding cryptocurrencies, particularly the implications of Ethereum's transition to a proof-of-stake mechanism[454]. - The company acknowledges that the designation of cryptocurrencies as securities could significantly impact its operations and market strategies[455]. - The online gaming industry is subject to strict regulations, requiring licenses and approvals for operations, which may change over time[480]. - The company holds the necessary licenses to distribute electronic publications and prepaid cards for its games, ensuring compliance with local regulations[483]. - The company is subject to legal liabilities, including fines and potential criminal charges, for unauthorized disclosure of personal information[500]. - The company must ensure compliance with the Cyber Security Law, which requires strict confidentiality and security measures for personal information collected from users[499]. - The company is required to implement measures to protect children's personal information, including obtaining consent from guardians before data collection[502]. Strategic Investments and Business Focus - The company made a strategic investment of $3 million in Nano Labs Ltd, acquiring 260,642 ADSs[390]. - The company transitioned its business focus from online games and NFT to cryptocurrency mining since February 2021[400]. - The company has entered into various strategic alliances, including a joint venture for electric vehicles, although some did not proceed as anticipated[391]. - The company signed a term sheet in February 2024 to purchase 19% of Zhejiang Fazhidao Information Technology Co., Ltd. for a cash consideration of $1 million and Class A ordinary shares valued at $14.2 million[462]. - In March 2024, the company signed a term sheet to acquire 51% of Shenma Limited for $1 million in cash and Class A ordinary shares valued at $14.3 million[463]. - The company plans to purchase an additional 21.7% of WM Therapeutic Co., Ltd. for $1.5 million in cash and 251,290,500 Class A ordinary shares, increasing its ownership to 30%[464]. Share Structure and Ownership - The company has a dual-class share structure, with Class B shares having 100 votes per share, controlled by Mr. Jun Zhu[394]. - The company is considered the primary beneficiary of Shanghai IT for accounting purposes, consolidating its financial results in accordance with U.S. GAAP[527]. - The regulations governing foreign investment enterprises in China stipulate that dividends can only be paid out of accumulated profits determined by PRC accounting standards[512]. - Foreign investment enterprises must allocate at least 10% of their profits each year to reserve funds until the total reaches 50% of registered capital[512].