NASDAQ: BTCT

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.

1

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.

2

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.

3

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.

4

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:

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

● providing simplified and direct
access to financial services;

● encrypted and secure digital
asset;

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

● 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.

5

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.

6

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.

7

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.

8

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 100TH/S
1,749

2
Bitmain Antminer S19 XP 140TH/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;

● 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.

9

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.

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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.

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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.

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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 “