BTCT 10-K & 10-Q changes, risk factors and insider trading

For the sixnine months ended JuneSeptember 30, 2024, we generated a substantial majority of our revenue from mining machines resale.resale For the six months ended June 30, 2024, we generated a substantial majority of our revenue fromand 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 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 JuneSeptember 30, 2024, we owned a total of 2021 2021 mining machines under operation with a total hash rate of 213PH/S. We manage and operate our mining machines at one hosting facility operated operated by a hosting facility owner in New Tazewell, Tennessee. For the sixnine months ended JuneSeptember 30, 2024, we mined a total of 16.45 18.26 bitcoins, generating US$0.94 US$1.05 million in revenue. As of now, all of the Company’s mining machines have been relocated to the newly acquired mining facility in Arkansas.

Three Months Ended JuneSeptember 30, 2024 Compared to Three Months Ended JuneSeptember 30, 2023

Our total revenue decreasedincreased by 63.5%202.84% from US$6.4 US$0.8 million in the three months ended of JuneSeptember 30, 2023 to US$2.3US$2.6 million in the three months ended of JuneSeptember 30, 2024. This decreaseincrease was primarily primarilydriven dueby to a dropgains in both bitcoinour mining machine resale and miner rental businesses, which contributed an additional US$2.1 million and US$0.4 million, respectively. However, revenue from Bitcoin mining machinesdeclined resaleby revenueUS$0.7 million this quarter compared to the same period last year.year, Thea declinedecrease of in mining86.9%, revenueprimarily wasdue partlyto becausethe following factors. First, the Group usedallocated more of its existing bitcoinBitcoin mining machines for rentals in the secondthird quarter, whileimpacting direct mining revenue. Second, the recent Bitcoin halving event led to a reduction in Bitcoin production. Lastly, a batch of newly purchasedacquired bitcoinT21 mining machines hadremains in customs clearance and has not yet been deployed.deployed, Additionally,further affecting our mining revenueoutput was also affected to some extent by the bitcoin halving event. The decrease in mining machines resale was mainly due tofor the bitcoin mining reward halving event, which temporarily reduced market demand for mining machines.quarter.

Gross ProfitLoss and Gross Profit Margin

As a result of the foregoing, our gross profit loss decreased by US$0.4US$280 million, thousand, from US$0.2US$541 millionthousand in the three months ended of JuneSeptember 30, 2023 to negativeUS$261 US$0.2 million in the three months ended of June 30, 2024. Our gross profit margin decreased from 3.7%thousand in the three months ended of JuneSeptember 30, 20232024. Our togross negativeloss 9.2% margin improved from 64% in the three months ended of JuneSeptember 30, 2023 to 10.2 % in the three months ended of September 30, 2024.

Our selling and marketing expenses decreasedincreased from US$70nil in the three months ended of September 30, 2023 to US$63 thousand in the three months ended of June 30, 2023 to US$61 thousand in the three months ended of JuneSeptember 30, 2024. ThisThe decreaseincrease in selling expenses this quarter was mainlyprimarily due to the decrease in the volumeaddition of our mining machine resalesresale during this period, which led to a corresponding reduction in sales expenses.business.

Our general and administrative expenses increased by 34.7%42.48% from US$0.3 millionUS$153 thousand in the three months ended of JuneSeptember 30, 2023 to US$0.4US$218 millionthousand in the three months ended of JuneSeptember 30, 2024. This This increase was primarily due to the increase in the number of employees and daily office expenses resulting from business development.

Our interest expenses decreasedwas from US$20US$11 thousand and US$2 thousand for the three months ended of JuneSeptember 30, 2023 to US$9 thousand for the three months ended of June 30,and 2024. This reduction is consistent with the decrease in short-term loans.

Our gain on equity method investments was US$1 US$5 thousand and US$10US$50 thousand for the three months ended of JuneSeptember 30, 2023 and 2024, respectively.

As a result of the foregoing, we had a loss before income tax of US$135 US$1,007 thousand for the three months ended of JuneSeptember 30, 2023, as compared to a loss before income tax of US$704US$571 thousand for the three months ended of JuneSeptember 30, 2024.

As a result of the foregoing, we had a net loss of US$135US$1,007 thousand for the three months ended of JuneSeptember 30, 2023, as compared to a net loss of US$704US$571 thousand for the three months ended of June September 30, 2024.

SixNine Months Ended JuneSeptember 30, 2024 Compared to SixNine Months Ended JuneSeptember 30, 2023

Our total cost of revenues decreased by 28.0%7.28% from US$8.8 million US$7.4in the nine months ended of September 30, 2023 to US$8.1 million in the sixnine months ended of June 30, 2023 to US$5.3 million in the six months ended of JuneSeptember 30, 2024. ThisOverall, the decrease isin cost of revenues was largely consistentin line with the decline in bitcoin mining and mining machines resale, as the reduction in operations of our owned bitcoin mining machines and resale business led to a corresponding decrease in operational costs.revenue.

Gross Loss and Gross Lossprofit Margin

As a result of the foregoing, our gross loss increased decreased by US$0.2US$48 million, thousand, from US$0.1US$651 millionthousand in the sixnine months ended of JuneSeptember 30, 2023 to US$0.3US$603 millionthousand in the sixnine months ended of June September 30, 2024. Our gross lossprofit margin increasedimproved from 1.5%-8.6% in the sixthree months ended of JuneSeptember 30, 2023 to 6.9%-8.0% in the sixthree months ended of JuneSeptember 30, 30, 2024.

Our selling and marketing expenses decreased from US$198 thousand in the sixnine months ended of JuneSeptember 30, 2023 to US$96US$159 thousand in the sixnine months ended of JuneSeptember 30, 2024.2024, This decrease wasprimarily mainly due to a 40% reduction in the volumeGroup’s strengthened control over selling expenses and optimization of mining machine resales during this period, which led to a corresponding reduction in sales expenses.expenditures.

Our general and administrative expenses increased by 59.1%56.46% from US$0.8US$1.0 million in the sixnine months ended of JuneSeptember 30, 2023 to US$1.3US$1.5 million in the sixnine months ended of June September 30, 2024. This increase was primarily due to the rise in expenses related to the Employee Stock Option Plan, which amounted to US$0.57 million.

Our interest expenses decreased from US$50US$61 thousand for the sixnine months ended of JuneSeptember 30, 2023 to US$15US$17 thousand for the sixnine months ended of JuneSeptember 30, 2024. This reduction is consistent with with the decrease in short-term loans.

Our gain on equity method investments was US$1US$6 thousand and US$25US$75 thousand for the sixnine months ended of JuneSeptember 30, 2023 and 2024, respectively.

As a result of the foregoing, we had a loss before income tax of US$1,115US$2,122 thousand for the sixnine months ended of JuneSeptember 30, 2023, as compared to a loss before income tax of US$1,435US$2,006 thousand for the sixnine months ended of JuneSeptember 30, 2024.

As a result of the foregoing, we had a net loss of US$1,115US$2,122 thousand for the sixnine months ended of JuneSeptember 30, 2023, as compared to a net loss of US$1,435US$2,006 thousand for the sixnine months ended ended of JuneSeptember 30, 2024.

Our two wholly-owned subsidiaries in Hong Kong, Meten Education (Hong Kong) Limited and Likeshuo Education (Hong Kong) Limited, are subject to an income tax rate of 16.5% for taxable income earned in Hong Kong. No Hong Kong profit tax has been levied in our consolidated financial statements as Meten Education (Hong Kong) Limited and Likeshuo Education (Hong Kong) Limited had no assessable income for the years ended December 31, 2023 and for the three months ended of JuneSeptember 30, 2024.

Our two wholly-owned subsidiaries in Hong Kong, Meten Education (Hong Kong) Limited and Likeshuo Education (Hong Kong) Limited, are subject to an income tax rate of 16.5% for taxable income earned in Hong Kong. No Hong Kong profit tax has been levied in our consolidated financial statements as Meten Education (Hong Kong) Limited and Likeshuo Education (Hong Kong) Limited had no assessable income for the years ended December 31, 2023 and for the sixnine months ended of JuneSeptember 30, 2024.

Our principal sources of liquidity have been from cash generated from operating activities. As of December 31, 2023 and JuneSeptember 30, 2024, we had US$43,000 and US$287,000,US$27,000, respectively, in in cash and cash equivalents. Cash and cash equivalents consist of cash on hand placed with banks or other financial institutions and highly highly liquid investment which are unrestricted as to withdrawal and use and have original maturities of three months or less when purchased.

Net cash generated from operating activities amounted to US$2.4US$2.0 million for the sixnine months ended JuneSeptember 30, 2023. The difference between our net loss of US$1.1US$2.1 million and the net cash used used in operating activities was primarily due to (i) depreciation of US$1.7US$2.3 million; (ii) share-basednet compensationloss expenseson disposal of US$0.1property and equipment of US$0.3 million; (iii) increase in accounts receivable of US$3.4 million; and (iv) decrease in prepayments and other current assets of US$1.5US$1.1 million; partially offset by (i) decrease in accounts payable of US$3.3US$3.2 million.

Net cash generated from operating activities amounted to US$3.7US$3.4 million for the sixnine months ended of JuneSeptember 30, 2024. The difference between our net loss of US$1.4US$2.0 million and the net cash used used in operating activities was primarily due to (i) depreciation and amortization of US$1.8US$2.7 million; (ii) decrease in accounts receivable of US$5.0US$3.8 million, primarily due to the collection of receivables from mining machines resale; and (iii) increase in prepayments and other current assets of US$2.3US$1.2 million, mainly due to an increase in advance payments for purchases.

Net cash used in investing activities amounted to US$4.3US$3.1 million for the sixnine months ended of JuneSeptember 30, 2024.2023. This was primarily attributable to the purchases of property and equipment of US$4.0US$1.8 million, repayment of advances to related parties of US$0.6 million and advances from related parties of US$0.4US$1.3 million.

Net cash flow generated from financing activities amounted amounted to US$857,000US$1.4 million for the sixnine months ended of JuneSeptember 30, 2024.2023. This was primarily attributable to (i) the proceeds from issuance of ordinary ordinary shares for private placement of US$0.5US$1.9 million, (ii) proceeds from short term loans of US$0.7US$0.6 million; partially offset by (i) repayment repayment of short term loans of US$0.3US$0.01 million.

Our capital expenditures amounted to US$0.5nil million and US$3.4 US$0.1 million in for the three months ended of JuneSeptember 30, 2023 and 2024, respectively. Our capital expenditures amounted to US$1.8 million million and US$4.0US$4.1 million in for the sixnine months ended of JuneSeptember 30, 2023 and 2024, respectively. We will continue to make capital expenditures to meet the expected growth of our business and expect that cash generated from our operating activities and financing activities will meet our capital expenditure needs in the foreseeable future.