UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2023

OR

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

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report__________

For the transition period from _________to________

Commission file number 001-36896

Mercurity Fintech Holding Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

1330 Avenue of Americas, Fl 33,

New York, 10019, United States

(Address of principal executive offices)

Shi Qiu

Chief Executive Officer

Mercurity Fintech Holding Inc.

1330 Avenue of Americas, Fl 33,

New York, 10019, United States

Phone: +1(949)-678-9653

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

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

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2023, the registrant had 60,819,897 ordinary shares outstanding, which was the only class of its registered securities outstanding as of that date.

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

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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 which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

TABLE OF CONTENTS

INTRODUCTION

Conventions Used in this Annual Report

In this annual report, unless otherwise indicated or the context otherwise requires, references to:

Our reporting and functional currency is U.S. dollar. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. This annual report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of related assets and liabilities of Renminbi into U.S. dollars were made at the rate of RMB7.0999 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System in effect as of December 29, 2023, and all translations of related profit or loss and cash flow of Renminbi into U.S. dollars were made at the rate of RMB7.0809 to US$1.00, the exchange rate as set forth the annual average exchange rates for 2023 in the H.10 statistical release of the Board of Governors of the Federal Reserve System.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about us and our industry. In some cases, these forward-looking statements can be identified by words or phrases such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “going forward,” “intend,” “ought to,” “plan,” “project,” “potential,” “seek,” “may,” “might,” “can,” “could,” “will,” “would,” “shall,” “should,” “is likely to” and the negative form of these words and other similar expressions. The forward-looking statements included in this annual report relate to, among others:

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations could later be found to be incorrect. Our actual results could be materially different from our expectations. You should thoroughly read this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This annual report contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. Our industry might not grow at the rate projected by market data, or at all. Failure of our industry to grow at the projected rate may have a material adverse effect on our business and the market price of our shares. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results could differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

The following selected consolidated statements of operations data for the year ended December 31, 2021, 2022 and 2023, and selected consolidated balance sheet data as of December 31, 2022 and 2023, have been derived from our audited consolidated financial statements included elsewhere in this annual report. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods. You should read this selected financial data section together with our consolidated financial statements and the related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report.

Consolidated Statements of Operations

The following summary consolidated financial statements should be read in conjunction with our consolidated financial statements, the notes thereto and other information, included elsewhere in this report.

The following summary consolidated financial statements for the years ended 2023, 2022, and 2021 are derived from our audited consolidated financial statements included elsewhere in this report. Our consolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements and related notes and the information under “ITEM 5. Operating and Financial Review and Prospects” included elsewhere in this report.

Note:

As SAB 4C, changes to a stock dividend, stock split or reverse split in the capital structure must be given retroactive effect in the balance sheet. An appropriately cross-referenced note should disclose the retroactive treatment, explain the change made and state the date the change became effective. We have revised the number of ordinary shares amounts in the revised consolidated statements for the year ended December 31, 2022 and 2021, to retroactively present our 1-for-400 share consolidation in February 2023 back to the earliest period presented as stipulated in SAB 4C.

Consolidated Balance Sheet Data

The following table presents our key financial data extracted from the consolidated balance sheet as of December 31, 2023 and 2022.

Not applicable.

Not applicable.

Summary of Risk Factors

Risks Relating to Our Business and Industry

Risks Relating to Doing Business in the PRC

Risks Relating to Our Ordinary Shares

Risks Relating to Our Business and Industry

We have a limited operating history in the evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We disposed of our business of providing integrated B2B services to food service suppliers and customers in July 2019. We started to provide blockchain technical services in May 2019. Due to the extremely adverse regulatory measures taken by the Chinese government in 2021 in the field of digital currency production and transaction, we disposed of the Chinese companies of the blockchain technical services business controlled through VIE agreements in January 2022. We commenced cryptocurrency mining operations in 2021 and expanded this line of business in the U.S. in December 2022. We commenced business consultation services in August 2022.

The limited history of our current operations may make it difficult for you to evaluate our business, financial performance and prospects, and our historical growth rate might not be indicative of our future performance. We cannot assure you that our current business will grow as rapidly as we expect or achieve the critical mass needed for long-term success. Given the limited history of our business model and the rapid developments in the related industry, it may be difficult to predict if our expected business growth can be achieved in the future, and that the market might evolve in ways that are difficult to anticipate. You should consider our prospects considering risks and uncertainties that companies in a rapidly evolving market might encounter. These risks and difficulties include, but are not limited to:

We cannot be certain that our business strategy will be successful or that we will successfully address these risks. Failure to address any of the risks described above could have an adverse effect on our business, financial condition and results of operations.

We currently have a limited customer base for our business consultation services. If we were to lose any of our customers, or if the volume of business with such customers were to decrease, or if we are unable to offer services that attract new customers from existing customers, our business, financial condition and results of operations may be materially and adversely affected.

In July 2022, we added consultation services to our business, providing business consultation services to global corporate clients, especially those in the blockchain industry. Meanwhile, we conducted viability studies about the business models, license requirements and operational costs of online and traditional brokerage services and digital payment business and have been expanding our business into the online and traditional brokerage services, such as building up client base and acquiring the necessary licenses. However, due to resource restraints, we have ceased our development plans in digital payment business, including digital payment services and solution consulting, and applications for the required money transmit licenses since March 2024.

As of December 31, 2023, we only have two customers of our business consultation services, one based in China and the other based in the U.S. Due to our very limited customer base, any of the following events may cause a material decline in our revenue and have a material adverse effect on our results of operations:

We cannot assure you that our relationships with these customers will continue to develop or that these customers will continue to generate material revenue for us in the future, or we will acquire more new customers. We need to invest significant resources in selling and marketing efforts. We take targeted business development approaches to reach out to our potential customers and provide them with our company profile through various means, such as emails and social network media. We also attend offline marketing activities to promote our presence and brand recognition in the blockchain and digital asset industry. To continue to reach potential customers and grow our current business, we must identify and devote more of our marketing expenditures to new and evolving marketing channels, which may include mobile and virtual channels. The opportunities in and sophistication of newer marketing channels generally are relatively undeveloped and unproven, making it difficult to assess returns on investment associated with such channels, and there can be no assurance that we will be able to continue to appropriately manage and fine-tune our marketing efforts in response to these and other trends in the industry. Any failure to do so could have a material adverse effect on our business, reputation, results of operations and financial condition.

Certain crypto assets and cryptocurrencies have been identified as a “security” in certain jurisdictions, and we may be subject to regulatory scrutiny, inquiries, investigations, fines and other penalties, which may adversely affect our business, operating results and financial condition.

Cryptocurrency mining operations constitute a portion of our business and regulatory developments in the characterization of such crypto assets will have an impact on our business, financial condition and results of operations. The SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws.

Several other foreign jurisdictions have taken a broad-based approach to classifying crypto assets as “securities,” while other foreign jurisdictions, such as Switzerland, Malta and Singapore, have adopted a narrower approach. As a result, certain crypto assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations or directives that affect the characterization of crypto assets as “securities.”

The classification of a crypto asset as a security under applicable law has wide-ranging implications for businesses engaged in operations relating to crypto assets. For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an automated trading system (“ATS”) in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration and qualification requirements.

Further, if Bitcoin, Ethereum, stablecoins or any other crypto asset is deemed to be a security under any U.S. federal, state or foreign jurisdiction, or in a proceeding in a court of law or otherwise, it may have adverse consequences for such crypto asset. For instance, all transactions in such crypto asset would have to be registered with the SEC or other foreign authority, or conducted in accordance with an exemption from registration, which could severely limit its liquidity, usability and transactability. Moreover, the networks on which such crypto assets are utilized may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render the network impracticable for its existing purposes. Further, it could draw negative publicity and a decline in the general acceptance of the crypto asset. Also, it may make it difficult for such crypto asset to be traded, cleared and custodied as compared to other crypto assets that are not considered to be securities. As such, our holdings of cryptocurrencies from our mining operations, as well as our storage and trading of such cryptocurrencies on third party service provider platforms, may be adversely affected by any fall in value of cryptocurrencies and any increased restrictions on their trading and liquidity. Whether our activities require registration or the crypto assets we hold would be considered securities is a risk-based assessment, and not a legal standard binding on a regulatory body or court, and does not preclude legal or regulatory action. We may decide in the future to mine or transact in other types of cryptocurrencies, which may constitute securities under U.S. law, although we have not presently determined definitively the type of cryptocurrencies we may mine or transact in in the future. We will consult with our legal advisers and abide by all SEC guidance and court rulings in this regard and monitor our activities in securities transactions, but we currently do not have plans to mine any type of cryptocurrency that constitute “securities” under U.S. law. Nevertheless, any breach of applicable US law will have a material adverse effect on our business operations, financial performance and the value of our shares.

As we acquire, dispose of or restructure our businesses, product lines, and technologies, we may encounter unforeseen costs and difficulties that could impair our financial performance.

We actively explore acquisition prospects that would complement our existing services, augment our market coverage and distribution ability, or enhance our capabilities. As a result, we may seek to acquire certain companies, products, or technologies, or we may reduce or dispose of certain product lines or technologies that no longer fit our business strategies. For regulatory or other reasons, we may not be successful in our attempts to acquire or dispose of businesses, products, or technologies, resulting in significant financial costs, reduced or lost opportunities, and diversion of management’s attention. Managing an acquired business, disposing of product technologies, or reducing personnel entails numerous operational and financial risks, including, among other things:

There can be no assurance that we will be able to achieve and manage successfully any such integration of potential acquisitions, disposition of product lines or technologies, or reduction in personnel or that our management, personnel, or systems will be adequate to support continued operations. Any such inabilities or inadequacies could have a material adverse effect on our business, operating results, or financial condition.

We may be unable to competitively engage in further distributed storage and computing services, business consultation services, financial advisory services and securities brokerage services activities, if we cannot attract or retain employees and/or consultants who have expertise in these fields.

If we cannot attract or retain skilled employees and/or consultants in the distributed storage and computing services, business consultation services, financial advisory services and securities brokerage services activities, our business may suffer. Because our above businesses require expertise, our business may be materially and adversely affected if our current employees and consultants who have expertise in the business leave or if we cannot continue to attract employees and consultants with expertise in the field of distributed storage and computing services, Business consultation services, financial advisory services and securities brokerage services.

Any harm to our Mercurity brand or reputation may materially and adversely affect our business and results of operations.

We believe that the recognition and reputation of our Mercurity brand is critical to our business and competitiveness in the related industry. Many factors, some of which are beyond our control, are important to maintaining and enhancing our brand. These factors include our ability to:

A public perception that we do not provide reliable services, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brand, undermine the trust and credibility we have established and have a negative impact on our ability to attract new customers retain our current customers. If we are unable to maintain our reputation, enhance our brand recognition or increase positive awareness of our website, products and services, it may be difficult to maintain and grow our customer base, and our business and growth prospects may be materially and adversely affected.

We have a history of operating losses, and we may report additional operating losses in the future.

Since October 2021, cryptocurrency mining has become one of our major businesses, and we have recorded historical losses and negative cash flow from our operations of cryptocurrency mining business when the value of cryptocurrency we mine does not exceed our associated costs. Further, as part of our strategic growth plans, we have made capital investments in expanding and vertically integrating our mining operations, including the expansion of our mining machines and increased our employee base. However, future market prices of the cryptocurrency are difficult to predict, and we cannot guarantee that our future mining revenue will exceed our associated costs.

If we are unable to conduct adequate and cost-effective marketing activities, our results of operations and financial condition may be materially and adversely affected.

We have a limited operating history of our current business and may need to make significant investments in sales and marketing to promote our brand recognition. Our brand promotion and marketing activities may not be well received by customers and may not result in the levels of sales that we anticipate. The marketing of blockchain-based solutions services to customers is evolving. This further requires us to enhance our marketing approaches and experiment with new marketing methods to keep pace with customer preferences. Failure to refine our existing marketing approaches or to introduce new marketing approaches cost-effectively could reduce our market share, cause our Revenue to decline and negatively impact our profitability.

If our senior management is unable to work together effectively or efficiently or if we lose their services, our business may be severely disrupted.

Our success heavily depends upon the continued services of our management.

In early May 2022, the Company restructured its executive team after the absence and later resignation of Wei Zhu, the Company’s former co-chief executive officer and acting chief financial officer and the Company’s board of directors had a significant change in 2022. Currently, we rely on the expertise and experience of Mr. Shi Qiu, our chief executive officer, Ms. Qian Sun, our chief operating officer, and Mr. Yukuan Zhang, our chief financial officer, and our other executive team. If our senior management cannot work together effectively or efficiently, our business may be severely disrupted. If one or more of our senior management were unable or unwilling to continue in their present positions, we might not be able to replace them easily or at all, and our business, financial condition and results of operations may be materially and adversely affected. If any of our senior management joins a competitor or forms a competing business, we may lose customers, internal expertise and key professionals and staff members.

We have limited insurance coverage and could incur losses resulting from liability claims or business interruptions.

We currently do not have any product liability insurance or business interruption insurance. As we continue to expand our business, we could be increasingly exposed to various liability claims related to our products and services. Any liability claims, business disruption, or natural disaster could result in substantial costs and the diversion of resources, which would have an adverse effect on our business and results of operations.

We are subject to changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that may increase both our operating costs and the risk of non-compliance.

We are subject to rules and regulations by various governing bodies, including, among others, the U.S. Securities and Exchange Commission (the “SEC”), which is charged with the protection of investors and the oversight of companies whose securities are publicly traded, and the various regulatory authorities in the PRC, Hong Kong and the Cayman Islands, and subject to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalties and our business may be harmed.

We have failed to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our shares may be adversely impacted.

The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, adopted rules requiring most public companies to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, when a company meets the SEC’s criteria, an independent registered public accounting firm must report on the effectiveness of the company’s internal control over financial reporting.

Our management has concluded that our internal control over financial reporting as of December 31, 2023 was not effective. This could result in a loss of investor confidence in the reliability of our financial conditions which in turn could negatively impact the trading price of our shares and result in lawsuits being filed against us by our shareholders or otherwise harm our reputation. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

The enactment of legislation imposing moratoriums on issuing permits for certain cryptocurrency mining operations that use carbon-based power sources and similar laws could adversely impact our business, operating results and financial condition.

In the 2021-2022 Legislative Session, the New York State Senate introduced Bill S6486D, which establishes a two-year moratorium on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions. Such restrictions and moratoriums will materially limit the scope of our business operations if we choose to carry out cryptocurrency mining operations in such jurisdictions where they are prohibited. Our cryptocurrency mining facilities are located in New Jersey, and at present we remain unaffected by the potential passage of Bill S6486D. Nonetheless, if a law similar to Bill S6486D were passed and comes into effect in New Jersey or other jurisdictions in which we may carry out cryptocurrency mining operations in the future, this might force us to relocate our cryptocurrency mining operations, which will incur time and resources, and may have other material effects on our business. The passage of any other crypto legislation or regulation which may be directly or indirectly related to our business model may also material effects on your business, financial condition and results of operations.

Blockchain mining activities are energy-intensive, which may restrict the geographic locations of miners and have a negative environmental impact.

Blockchain mining activities are inherently energy-intensive and electricity costs account for a significant portion of the overall mining costs. The availability and cost of electricity will restrict the geographic locations of mining activities. Any shortage of electricity supply or increase in electricity cost in a jurisdiction may negatively impact the viability and the expected economic return for blockchain mining activities in that jurisdiction, which may in turn negatively impact our business, financial condition and results of operations.

In addition, the significant consumption of electricity may have a negative environmental impact, including contribution to climate change, which may give rise to public opinion against allowing the use of electricity for blockchain mining activities or government measures restricting or prohibiting the use of electricity for such mining activities, and may also invite adverse media coverage or public opinion against our brand. Regulators may also impose regulatory restrictions on blockchain mining activities. Any such development in the jurisdictions where we carry out our cryptocurrency mining could have a material and adverse effect on our business, financial condition and results of operations.

Environmental concerns associated with cryptocurrencies mining could have adverse impacts on our business, financial condition, and results of operations.

Engaging in cryptocurrency mining may result in certain environmental harms and transition risks related to climate change that may affect our business, financial condition and results of operations, as mining operations consume a substantial amount of power, which may contribute to increased carbon emissions. Moreover, recent policy and regulatory changes relating to limiting carbon emissions could impose additional operational and compliance burdens on our cryptocurrency mining operations, such as more stringent reporting requirements or higher compliance fees. Such regulations may lead to increased credit risks, which may lead financiers and lender to be less willing to enter into business relationships with us, as well as increased litigation risks related to climate change in the jurisdictions in which we carry out mining operations. Further, some businesses as well as some investors may have ceased accepting cryptocurrencies for certain types of purchases, and stopped investing in businesses involved in cryptocurrencies businesses due to environmental concerns associated with cryptocurrencies mining. Such developments could have a material and adverse effect on our business, financial condition and results of operations.

We are subject to an extensive, highly evolving and uncertain regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results and financial condition.

Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services and banking, securities, broker-dealers, crypto asset exchange and transfer, cross-border and domestic money and crypto asset transmission, privacy, data governance, data protection, cybersecurity, fraud detection, payment services (including payment processing and settlement services), anti-money laundering and counter-terrorist financing. Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, crypto assets and related technologies. As a result, some applicable laws and regulations do not contemplate or address unique issues associated with the cryptoeconomy, are subject to significant uncertainty, and vary widely across U.S. federal, state and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules and regulations thereunder, evolve frequently and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the cryptoeconomy requires us to exercise our judgment as to whether certain laws, rules and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied with such laws, rules and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results and financial condition.

Our operating results may fluctuate and continue to fluctuate, including due to the highly volatile nature of crypto.

Our business operations include cryptocurrency mining and the provision of consultation services, and thus our operating results are dependent on crypto assets and the broader cryptoeconomy. Due to the highly volatile nature of the cryptoeconomy and the prices of crypto assets, which have experienced and continue to experience significant volatility, our operating results have, and may continue to, fluctuate significantly in accordance with market sentiments and movements in the broader cryptoeconomy. Our operating results will continue to fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control, including:

As a result of these factors, it is difficult for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate, particularly in the short term.

Fluctuations in Filecoin value might impact our operating results and add to our regulatory compliance obligations under applicable law and regulation, including the Investment Company Act of 1940.

Our strategic initiative to achieve an effective storage capacity of 64PiB for Filecoin’s mining business by the end of June 2024, and utilize the remaining available storage capacity of the Web3 decentralized storage infrastructure to expand our Filecoin mining business, or engage in other cryptocurrency mining businesses, or provide cloud storage services to other distributed application product operators, could expose us to financial risks, particularly due to the volatile nature of Filecoin’s value. Although currently the market value of the Filecoins held by us constitutes a minor fraction of our total assets, its influence on our revenue is considerably more pronounced. This disparity means that our operational results are susceptible to swings in Filecoin’s market value. If the value of Filecoin was to escalate significantly (e.g., $50 per Filecoin), the proportionate value of our holdings could become a dominant aspect of our asset base. This appreciation might inadvertently categorize us as an investment company under the Investment Company Act of 1940, introducing additional regulatory and compliance implications, which could disrupt our business model and impact our fiscal health. See also “Risk Factors—If we were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.”

Our revenue forecasts are inherently speculative, which are predicated on Filecoin’s price projections and our operational performance. Given the historical volatility associated with digital currencies, there is uncertainty surrounding these estimates. Factors beyond our control, including market trends, investor attitudes, regulatory developments and alterations in the Filecoin network, affect Filecoin’s valuation, potentially leading to revenue and financial results that diverge substantially from our projections. Should the Filecoin price fail to meet our estimates, our revenues might outperform or fall below our expectations.

We are aware of the varying perceptions of risk tied to our Filecoin ventures among potential investors. Despite our risk management strategies (e.g., diversifying income streams, refining our mining processes, etc.), there is no certainty that these measures will fully mitigate the intrinsic volatility of the Filecoin market.

Our revenue is partially dependent on the prices of crypto assets. If such price or volume declines, our business, operating results and financial condition would be adversely affected.

We generate a portion of our total revenue from our cryptocurrency mining operations. Declines in the price of crypto assets may result in lower total revenue to us, cause us to recognize losses and affect the price of our shares.

The price of crypto assets and associated demand for buying, selling and trading crypto assets have historically been subject to significant volatility. For instance, in 2017, the value of certain crypto assets, including Bitcoin, experienced steep increases in value, and our customer base expanded worldwide. The increases in value of certain crypto assets, including Bitcoin, from 2016 to 2017, and then again in 2021, were followed by a steep decline in 2018 and again in 2022, which has adversely affected our net revenue and operating results. If the value of crypto assets and transaction volume do not recover or further decline, our ability to generate revenue may suffer and customer demand for our products and services may decline, which could adversely affect our business, operating results and financial condition. The price and trading volume of any crypto asset is subject to significant uncertainty and volatility, depending on a number of factors, including:

There is no assurance that any crypto asset in which we conduct mining or related operations will maintain its value or that there will be meaningful levels of trading activities and liquidity. In the event that the price of crypto assets decline, our business, operating results and financial condition, as well as our share price, would be adversely affected, and we may have to recognize losses or impairments in our investments or other crypto assets due to disruptions in the crypto asset markets.

The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results and financial condition could be adversely affected.

Crypto assets built on blockchain technology were only introduced in 2008 and remain in the early stages of development. In addition, different crypto assets are designed for different purposes. Bitcoin, for instance, was designed to serve as a peer-to-peer electronic cash system, while Ethereum was designed to be a smart contract and decentralized application platform. Many other crypto networks-ranging from cloud computing to tokenized securities networks-have only recently been established. The further growth and development of any crypto assets and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer and usage of crypto assets represent a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate, including:

Various other technical issues have also been uncovered from time to time that resulted in disabled functionalities, exposure of certain users’ personal information, theft of users’ assets and other negative consequences, and which required resolution with the attention and efforts of their global miner, user and development communities. If any such risks or other risks materialize, and in particular if they are not resolved, the development and growth of crypto may be significantly affected and, as a result, our business, operating results, and financial condition could be adversely affected.

Any failure to safeguard and manage our crypto assets could adversely impact our business, operating results and financial condition.

We believe we have developed and maintained administrative, technical and physical safeguards and safeguard our crypto assets and which are designed to comply with applicable legal requirements and industry standards. However, it is nevertheless possible that hackers, employees or service providers acting contrary to our policies, or others could circumvent these safeguards to improperly access our systems or documents, or the systems or documents of our business partners, agents or service providers, and improperly access, obtain, misuse crypto assets and funds. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time. Any loss of cash or crypto assets could result in a substantial business disruption, adverse reputational impact, inability to compete with our competitors and regulatory investigations, inquiries or actions. Any security incident resulting in a compromise of crypto assets could result in substantial costs to us, expose us to regulatory enforcement actions, limit our ability to provide services, subject us to litigation, significant financial losses, damage our reputation and adversely affect our business, operating results, financial condition, and cash flows.

The theft, loss or destruction of private keys required to access any crypto assets held in custody for our own account may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any crypto assets, it could cause regulatory scrutiny, reputational harm and other losses.

Crypto assets are generally controllable only by the possessor of the unique private key relating to the digital wallet in which the crypto assets are held. While blockchain protocols typically require public addresses to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the crypto assets held in such a wallet. To the extent that any of the private keys relating to our wallets containing crypto assets is lost, destroyed, or otherwise compromised or unavailable, and no backup of the private key is accessible, we will be unable to access the crypto assets held in the related wallet. Further, we cannot provide assurance that our wallet will not be hacked or compromised. Crypto assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking or other malicious activities. Any loss of private keys relating to, or hack or other compromise of, digital wallets used to store our crypto assets could adversely affect our ability to access or sell crypto assets, and subject us to significant financial losses in addition to hurting our brand and reputation, result in significant losses and adversely impact our business.

Any gaps in our risk management processes and policies in respect of crypto asset could adversely impact our business, operating results, and financial condition.

In late February 2022, Wei Zhu, our former acting Chief Financial Officer, former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, and Minghao Li, a former member of the Board, were suspected of certain criminal offenses unrelated to our Company’s operations and were detained by the Economic Crime Investigation Detachment of Sheyang County Public Security Bureau, Yancheng City, Jiangsu Province, People’s Republic of China. At the same time, Sheyang Public Security Bureau wrongly seized the digital assets hardware cold wallet belonging to the Company, along with the cryptocurrencies stored in the hardware cold wallet. Our Company has since undergone major management personnel changes. As of the date of this annual report, our board and management have taken steps to remedy the gaps in our risk management processes and policies in relation to our business model and any crypto assets that we hold. Nonetheless, if any future gaps in our risk management processes and policies were to arise, such deficiencies could adversely impact our business, operating results and financial condition. In turn, such deficiencies would require our Board and management to make appropriate changes to our risk management processes and policies.

Crypto assets deposited with third party custodians are subject to risks attendant with such custody arrangements. If such custodians were to become insolvent, or suffer from hacking or cybersecurity or other technical failures, or if our assets were to be misused or lost, we may lose ownership or control of our crypto assets, and we may not be able to recover our losses through legal or other channels.

We store a portion of our crypto assets with Coinbase, a third-party platform. Such custody arrangements increase ease of transaction and allow us to access the public markets and liquidate such assets at the prevailing prices more rapidly. However, this arrangement necessitates the relinquishment of control over our crypto assets. To access such assets, we rely on the technical platform provided by such third-party platforms and we are also subject to their terms of use.

Recent high profile criminal investigations and bankruptcy cases in the U.S., such as those involving FTX and Celsius, highlight the risks of holding crypto assets on third party platforms. In such cases, it is anticipated that account holders of such platforms will be unlikely to recover the crypto assets they deposited, and are likely to recover only a fraction of the monetary value of their deposited assets through the bankruptcy and legal framework, if at all. Even if such platform operators maintain insurance policies to compensate account holders for their losses, certain claims and payouts may be barred by the terms of the insurance policies, especially in the event of fraud, and any insurance policy payout may not make losses whole and could take substantial periods of time to materialize, if at all. In particular, the insurance maintained by Coinbase with which we store our cryptocurrency is shared among all of Coinbase’s customers, is not specific to our Company and may not be available or sufficient to protect our Company from all possible losses or sources of losses. We may be forced to share such insurance proceeds with other clients or customers of Coinbase, which could reduce the amount of such proceeds that are available to us.

If the custodians we rely on to store our crypto assets were to become insolvent, or suffer from hacking or cybersecurity or other technical failures, or if our assets were to be misused by the platform operator or were to become lost, we may lose ownership or control of our crypto assets, and we may not be able to recover our losses through legal or other channels. Any such incidents would likely have a material and adverse effect on our business, operating results, financial condition, and the price of our shares.

The assertion of jurisdiction by U.S. and foreign regulators and other government entities over crypto assets and crypto asset markets could adversely impact our business, operating results and financial condition.

We operate our business in a number of jurisdictions, including the U.S. and China. In the case that U.S. and foreign regulators or other government entities assert jurisdiction over a business in the crypto asset markets, this could lead to conflicting laws or directives which, in turn, could impede our business operations. Moreover, such conflicting laws or directives will make it difficult to determine which laws, rules and regulations apply to our business. Additionally, U.S. and foreign regulators as well as other government entities may disagree with our determination as to which laws, rules and regulations apply to our business. This could lead to additional compliance cost burdens, as well as increasing our risks of running afoul of laws and regulations from certain jurisdictions in which we operate our business.

If we were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

We have not been and do not intend to become registered as an “investment company” under the Investment Company Act of 1940, or the 1940 Act. We intend to conduct our business so as not to become regulated as an investment company under the 1940 Act.

Generally, a company will be determined to be an “investment company” if, absent an exclusion or exemption, it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or owns or proposes to acquire investment securities having a value exceeding 40 percent of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We refer to this investment company definition test as the “40 percent test.”

We do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities and believe that we are not engaged primarily in the business of investing, reinvesting or trading in securities.

To ensure that we are not obligated to register as an investment company, we must not exceed the thresholds provided by the 40 percent test. For purposes of the 40 percent test, the term “investment securities” includes all securities but does not include U.S. government securities or securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on Section 3(c)(1) or Section 3(c)(7) of the 1940 Act. Therefore, the assets that we and our subsidiaries hold and acquire are limited by the provisions of the 1940 Act and the rules and regulations promulgated thereunder.

Most crypto assets are regarded as “securities” under U.S. law, and hence, if our holding of cryptocurrencies exceed 40 percent of the value of our total assets, we may become regarded as an “investment company” under the 1940 Act. We intend to monitor our holdings of crypto assets and other securities to ensure that we do not become regarded as an “investment company.” If our holding of cryptocurrencies were to exceed such threshold, we will be required to comply with the provisions of the 1940 Act, which will result in additional compliance costs and regulatory burdens and may materially and adversely affect our business, financial conditions and results.

A portion of our business is conducted in the mining, holding and trading of cryptocurrencies. Such holdings may increase in the future. We may also decide in the future to mine or transact in other types of cryptocurrencies, which may constitute securities under U.S. law, although we have not presently determined definitively the type of cryptocurrencies we may mine or transact in in the future. We will consult with our legal advisers and abide by all SEC guidance and court rulings in this regard and monitor our activities in securities transactions, but we currently do not have plans to mine any type of cryptocurrency that constitute “securities” under U.S. law. We have been carrying out the Filecoin mining business since December 2022. As of the date of this annual report, our two nodes on the Filecoin blockchain have exceeded storage capacity of 64PiB.

We intend to monitor our status in relation to the 40 percent test by implementing procedures to review, on a semi-annual basis, specifically on June 30 and December 31, the composition of our assets to ensure that our holdings of Filecoin and other investment securities, if any, do not breach the thresholds specified by the 1940 Act. While we believe that we currently conduct our business in a manner that does not result in classification as an investment company, there is no assurance that we will be able to maintain that status. There is a possibility that changes in the value of our Filecoin holdings or in our business model could potentially cause us to exceed the 40% threshold. In the event that we exceed the 40% threshold, the potential consequences of falling within this classification and not being registered as a 1940 Act company are as follows: (i) restrictions on business operations; (ii) potential lawsuits involving voidable contracts entered into by an unregistered investment company; (iii) SEC enforcement, including penalties, injunctions or other sanctions, and additional regulatory and compliance costs; and (iv) management restrictions and additional reporting obligations.

Risks Relating to Doing Business in the PRC

We conduct a portion of our business operations in China and are subject to the attendant risks of operating in China, including regulatory risks resulting from political and regulatory changes which may be swift and unexpected.

MFH Cayman is not a Chinese operating company but a Cayman Islands holding company with a portion of our operations conducted by our subsidiaries based in China. Prior to 2022, the majority of our operations were based in mainland China. During 2022, we divested our software development business in mainland China, established a new management team, and relocated our headquarters to the United States with the newly established Hong Kong office as the operational hub for our business in the Asia Pacific region. As a result of the recent operational reorganization, the majority of our operations are currently based in the U.S. while part of our technical and back-office team in mainland China.

Investors in our securities are purchasing equity interest in MFH Cayman, a holding company incorporated in the Cayman Islands with business operations in China and the U.S. and therefore, investors may never hold equity interests in any of our Chinese operating entities. This operating structure may involve unique risks to investors. There are significant legal and operational risks associated with being based in or having a portion of business operations in China. Any of such risks and uncertainties could result in material changes in our operations and/or the value of our ordinary shares or could significantly limit or completely hinder our ability to offer or continue to offer ordinary shares and/or other securities to investors and cause the value of such securities to significantly decline or be worthless. The PRC government has significant authority to exert influence on the ability of a company with operations in China to conduct business. The PRC government has initiated a series of regulatory actions and has made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement and data privacy protection. As of the date of this annual report, as advised by our PRC legal adviser, we do not believe that we are subject to: (i) the cybersecurity review with the Cyberspace Administration of China, or CAC, as our products and services are not offered to individual users but to our institutional customers, we do not possess a large amount of personal information in our business operations, and our business does not involve the collection of data that affects or may affect national security, implicates cybersecurity, or involves any type of restricted industry; or (ii) merger control review by China’s anti-monopoly enforcement agency due to the fact that we do not engage in monopolistic behaviors that are subject to these statements or regulatory actions. However, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, and, if any, the potential impact such modified or new laws and regulations will have on our daily business operation, ability to accept foreign investments and listing of our securities on a U.S. or other foreign exchange. In addition, changes in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or Chinese or U.S. regulations may materially and adversely affect our business, financial condition and results of operations. Any such changes could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors, and could cause the value of our securities to significantly decline or become worthless. The PRC government has significant oversight and discretion over the conduct of our business and may intervene with or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against us or our management based on Hong Kong laws.

We currently have one subsidiary in Hong Kong, being Ucon Capital (HK) Limited, and one of our directors, Hui Cheng, is ordinarily resident in Hong Kong. You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against us or our management, as judgments entered in the U.S. can be enforced in Hong Kong only at common law. If you want to enforce a judgment of the U.S. in Hong Kong, it must be a final judgment conclusive upon the merits of the claim, for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts.

Furthermore, foreign judgments of the U.S. courts will not be directly enforced in Hong Kong as there are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the U.S. However, the common law permits an action to be brought upon a foreign judgment. That is to say, a foreign judgment itself may form the basis of a cause of action since the judgment may be regarded as creating a debt between the parties to it. In a common law action for enforcement of a foreign judgment in Hong Kong, the enforcement is subject to various conditions, including but not limited to, that the foreign judgment is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in civil matter and not in respect of taxes, fines, penalties or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts. The defenses that are available to a defendant in a common law action brought on the basis of a foreign judgment include lack of jurisdiction, breach of natural justice, fraud and contrary to public policy. However, a separate legal action for debt must be commenced in Hong Kong in order to recover such debt from the judgment debtor. As a result, subject to the conditions with regard to enforcement of judgments of United States courts being met, including but not limited to the above, a foreign judgment of United States of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the U.S. could be enforceable in Hong Kong.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management based on foreign laws.

We have one subsidiary in the PRC, being Lianji Future Technology Limited, and many of our managements and directors are PRC nationals. In particular, three of our directors and officers, Qian Sun, Yukuan Zhang and Cong Huang are ordinarily resident in Mainland China, one of our directors, Hui Cheng, is ordinarily resident in Hong Kong, and the remaining three of our directors, Shi Qiu, Alan Curtis and Daniel Kelly Kennedy, are ordinarily resident in the United States. As a result, it may be difficult for you to effect service of process upon us or our management named herein inside mainland China. It may also be difficult for you to enforce in U.S. courts of the judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as only a portion of them, Shi Qiu, Alan Curtis and Daniel Kelly Kennedy, currently resides in the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

As advised by our PRC legal adviser, the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law and other applicable laws, regulations and interpretations based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. Furthermore, class action lawsuits, which are available in the United States for investors to seek remedies, are generally uncommon in China.

We may rely on dividends and other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC and Hong Kong subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are a Cayman Islands holding company and we may in the future rely on dividends and other distributions on equity from our PRC and Hong Kong subsidiaries for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders for services of any debt we may incur. If our PRC and Hong Kong subsidiaries incur debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our PRC subsidiaries which are foreign-owned enterprises may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-owned enterprise, according to the PRC companies law, is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Such reserve funds cannot be distributed to us as dividends.

Our PRC subsidiaries generate essentially all of their revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiary to use their Renminbi revenues to pay dividends to us.

The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiary to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

Regulation and censorship of information disseminated over the internet in the PRC could adversely affect our business in China, and we could be liable for information displayed on, retrieved from or linked to our website.

China has enacted laws and regulations governing internet access and the distribution of products, services, news, information and other content through the internet. In the past, the PRC government has prohibited the distribution of information through the internet that it deems to violate PRC laws and regulations. If any of our internet content was deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could adversely affect the business, financial condition and results of operations of our China subsidiaries. We could also be subject to potential liability for any unlawful actions of users of our website or for the content we distribute that is deemed inappropriate. It could be difficult to determine the type of content that could result in liability to us, and if we are found to be liable, we could be prevented from operating our website in China.

A failure by our shareholders or beneficial owners who are PRC citizens or residents in the PRC to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities or subject us to liability under PRC laws, which could adversely affect our business and financial condition.

The State Administration of Foreign Exchange, or SAFE, issued the Circular Relating to Foreign Exchange Administration of Offshore Investment, Financing and Return Investment by Domestic Residents Utilizing Special Purpose Vehicles, or SAFE Circular 37, that was promulgated and become effective on July 14, 2014. It requires a PRC natural person or a PRC company, or a PRC Resident, to file a “Registration Form of Overseas Investments Contributed by PRC Resident” and register with the local SAFE branch before it contributes assets or equity interests in an overseas special purpose vehicle, or SPV, that is directly established and controlled by PRC Resident to conduct investment or financing. Following the initial registration, the PRC resident is also required to register with the local SAFE branch timely for any major change in respect of SPV, including, among other things, any major change of SPV’s PRC Resident shareholder, name of the SPV, term of operation or any increase or reduction of the SPV’s registered capital, share transfer or swap, and merger or division. Failure to comply with the registration procedures of Circular 37 could result in the penalties including the imposition of restrictions on the ability of SPV’s PRC subsidiaries to dividends to its overseas parent company.

It remains unclear how this regulation and any future related legislation will be interpreted, amended and implemented by the relevant PRC government authorities. As of December 31, 2023, to the best of our knowledge, most of our PRC Resident shareholders with offshore investments had not registered their offshore investments with SAFE according to the predecessor regulation of Circular 37, namely the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75, which was replaced by the SAFE Circular 37 but still effective when the relevant PRC shareholders made their investments. If the PRC government determined that our PRC Resident shareholders are required to make the registration regarding their offshore investment under Circular 37, both they and us may be subject to fines by the PRC government.

We are committed to complying, and to ensuring that our shareholders and beneficial owners who are PRC citizens or residents comply with SAFE Circular 37 requirements. The rest of our PRC citizen or resident beneficial owners are also applying for registrations under SAFE Circular 37 with the relevant local counterpart of SAFE. However, we might not be fully informed of the identities of all our beneficial owners who are PRC citizens or residents, and we cannot compel our beneficial owners to comply with SAFE Circular 37 requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC citizens or residents have complied with, or will in the future make or obtain the necessary any applicable registrations or approvals as required by, SAFE Circular 37 or other related regulations. Failure by such shareholders or beneficial owners to comply with SAFE Circular 37, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects. Failure by us to amend the foreign exchange registrations in compliance with SAFE Circular 37 could subject us to fines or legal sanctions restrict our overseas or cross-border ownership structure, which could adversely affect our business and prospects.

A failure to comply with PRC regulations regarding the registration of shares and share options held by our employees who are PRC citizens could subject such employees or us to fines and legal or administrative sanctions.

Pursuant to the Implementation Rules of the Administrative Measures on Individual Foreign Exchange, or the Individual Foreign Exchange Rules, promulgated by SAFE on January 5, 2007 and amended on May 2016, a relevant guidance issued by SAFE in March 2007 and Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, or the Stock Option Rules, on February 15, 2012 that replaces the guidance issued in March 2007, PRC citizens who are granted shares or share options by an overseas-listed company according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas-listed company or other qualified PRC agents selected by such PRC subsidiary, to register with SAFE and complete certain other procedures related to the share option or other share incentive plan. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. For participants who had already participated in an employee share option or share incentive plan before the date of the guidance, the guidance requires their PRC employers or PRC agents to complete the relevant formalities within three months of the date of the guidance. We and our PRC citizen employees who have been granted share options, or PRC option holders, are subject to these rules. If we or our PRC option holders fail to comply with these rules, we or our PRC option holders could be subject to fines and legal or administrative sanctions.

It may be difficult for overseas regulators to conduct investigations or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020 (“Article 177”), no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. In addition, entities or individuals are prohibited from providing documents and information in connection with any securities business activities to any organizations and/or persons aboard without the prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council. Article 26 of the Trial Measures, or the Article 26, which was issued by the CSRC on February 17, 2023 and came into effect on March 31, 2023, sets out that where an overseas securities regulatory agency intends to conduct investigation and evidence collection regarding overseas offering and listing activities by a domestic company, and request assistance of the CSRC under relevant cross-border securities regulatory cooperation mechanisms, the CSRC may provide necessary assistance in accordance with law. Any domestic entity or individual providing documents and materials requested by an overseas securities regulatory agency out of investigative or evidence collection purposes shall not provide such information without prior approval from the CSRC and competent authorities under the State Council. In addition, Article 11 of the Provisions on Strengthening Confidentiality and Archives Administration in Respect of Overseas Issuance and Listing of Securities by Domestic Enterprises, or the Article 11, which was jointly issued by the CSRC, the Ministry of Finance, the State Secrecy Administration and the State Archives Bureau on February 24, 2023 and came into effect on March 31, 2023, specifies that, (a) where the overseas securities regulator and the relevant competent authorities request to conduct inspections or investigations to collect evidence from a domestic enterprise and the domestic securities firms and securities service agencies providing corresponding services regarding the overseas offering and listing activities of the domestic enterprise, the inspection or investigation shall be carried out under the cross-border regulatory cooperation mechanism, and the CSRC or the relevant authorities shall provide the requisite assistance pursuant to the bilateral and multilateral cooperation mechanism, and (b) relevant domestic companies, securities firms and securities service agencies shall obtain the consent of the CSRC or the relevant administrative authorities prior to cooperating in the inspection or investigation carried out by the overseas securities regulator or relevant administrative authorities or providing documents and materials for cooperating in the inspection or investigation. While detailed interpretation of or implementation rules under Article 177, the Article 26 and the Article 11 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

It may be difficult for overseas shareholders and/or regulators to conduct investigations or collect evidence within Hong Kong.

The Securities and Futures Commission of Hong Kong (“SFC”) is a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding (“MMOU”), which provides for mutual investigatory and other assistance and exchange of information between securities regulators around the world, including the SEC. This is also reflected in section 186 of the Securities and Futures Ordinance (“SFO”) which empowers the SFC to exercise its investigatory powers to obtain information and documents requested by non-Hong Kong regulators, and section 378 of the SFO which allows the SFC to share confidential information and documents in its possession with such regulators. However, there is no assurance that such cooperation will materialize, or if it does, whether it will adequately address any efforts to investigate or collect evidence to the extent that may be sought by the U.S. regulators.

Risks Relating to Our Ordinary Shares

The trading price of our shares could be volatile, which would result in substantial losses to investors.

The trading price of our ordinary shares could be volatile and could fluctuate widely in response to factors relating to our business as well as external factors beyond our control. Factors such as variations in our financial results, announcements of new business initiatives by us or by our competitors, recruitment or departure of key personnel, changes in the estimates of our financial results or changes in the recommendations of any securities analysts electing to follow our securities or the securities of our competitors could cause the market price for our shares to change substantially. At the same time, securities markets could from time-to-time experience significant price and volume fluctuations that are not related to the operating performance of particular companies.

The performance and fluctuation of the market prices of other companies with business operations located mainly in the PRC that have listed their securities in the United States could affect the volatility in the price of and trading volumes for our shares. In recent years, several PRC companies have listed their securities, or are in the process of preparing for listing their securities, on U.S. stock markets. Some of these companies have experienced significant volatility, including significant price declines in connection with their initial public offerings. The trading performances of these PRC companies’ securities at the time of or after their offerings could affect the overall investor sentiment towards PRC companies listed in the United States and consequently could affect the trading performance of our shares. These broad market and industry factors could significantly affect the market price and volatility of our shares, regardless of our actual operating performance. Any of these factors could result in large and sudden changes in the trading volume and price for our shares.

Substantial future sales of our shares in the public market, or the perception that these sales could occur, could cause our ordinary share price to decline.

Additional sales of our ordinary shares in the public market, or the perception that these sales could occur, could cause the market price of our shares to decline. As of February 28, 2023, we completed the share consolidation to the authorized share capital (the “Share Consolidation”) at a ratio of four hundred (400)-for-one (1) with the par value of each ordinary share changed to US$0.004 per ordinary share, suspended our ADRs program and commenced trading our ordinary shares. As of April 12, 2024, we had 60,819,897 ordinary shares issued and outstanding. If part or all of these shares are sold in the public market or if any other existing shareholders sell a substantial amount of their shares, the prevailing market price for our shares could be adversely affected. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

If we fail to maintain the Nasdaq minimum market value of publicly held shares, minimum bid requirements or minimum stockholder equity standard, our shares could face the risk of being delisted.

On May 13, 2022, we received a deficiency notice from Nasdaq that stated the Company did not comply with Nasdaq’s Listing Rule 5250(c)(1) due to its failure to file its annual report on Form 20-F for the period ended December 31, 2021 (the “Filing”). Nasdaq informed the Company that it had a period of 14 days until May 27, 2022 to submit a plan (the “Plan”) to Nasdaq detailing how the Company planned to regain compliance with Nasdaq’s continued listing requirements. On June 22, 2022, we received a determination letter from Nasdaq that we had regained compliance under Listing Rule 5250(c)(1) based on the filing of our annual report on Form 20-F on June 15, 2022 for the period ended December 31, 2021.

If we fail to maintain compliance with Nasdaq’s listing rules, we could be subject to suspension and delisting proceedings. If the Company’s shares lose their listing status on The Nasdaq Capital Market, they would likely trade in the over-the-counter market, and selling such securities could be more difficult because smaller quantities of securities would likely be bought and sold, transactions could be delayed, and security analysts’ coverage may be reduced. In addition, in the event our securities are delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our securities, further limiting the liquidity of such securities. A determination that our shares are “penny stocks” will require brokers trading in our shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stock. These factors could result in lower prices and larger spreads in the bid and ask prices for our securities. Any delisting from The Nasdaq Capital Market and continued or further declines in our share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing, and could significantly increase the ownership dilution to stockholders caused by our issuing equity in financing or other transactions.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

As a foreign private issuer, we are permitted to, and we plan to, rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. This might afford less protection to holders of our ordinary shares.

Section 5605(b)(1) of the Nasdaq Listing Rules requires listed companies to have, among other things, a majority of its board members to be independent, and Section 5605(d) and 5605(e) require listed companies to have independent director oversight of executive compensation and nomination of directors. As a foreign private issuer, however, we are permitted to, and we plan to follow the home country practice in lieu of the above requirements. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors or the implementation of a nominating and corporate governance committee. We have informed Nasdaq that we will follow home country practice in place of all of the requirements of Rule 5600 other than those rules which we are required to follow pursuant to the provisions of Rule 5615(a)(3).

Anti-takeover provisions in our charter documents could discourage a third-party from acquiring us, which could limit our shareholders’ opportunities to sell their shares at a premium.

Our fifth amended and restated memorandum and articles of association include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions. For example, our board of directors will have the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix the designations, powers, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any, including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption privileges, voting powers, full or limited or no voting powers, and liquidation preferences, any or all of which could be greater than the rights associated with our ordinary shares. Preferred shares could thus be issued quickly with terms calculated to delay or prevent a change in control or make removal of management more difficult. In addition, if our board of directors issues preferred shares, the market price of our ordinary shares could fall and the voting and other rights of the holders of our ordinary shares could be adversely affected. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction.

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you could have less protection of your shareholder rights than you would under U.S. law.

Our corporate affairs are governed by our fifth amended and restated memorandum and articles of association, the Cayman Islands Companies Act (As Revised), as amended, and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by noncontrolling shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States and provides significantly less protection to investors. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

There is uncertainty concerning Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination on judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Our Cayman Islands counsel has advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States, a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment:

You should also read “Item 10. Additional Information—B. Memorandum and Articles of Association—Differences in Corporate Law” for some of the differences between the corporate and securities laws in the Cayman Islands and the United States.

You will have limited ability to bring an action against us or against our directors and officers, or to enforce a judgment against us or them, because we are incorporated in the Cayman Islands, because we conduct parts of our operations in the PRC and Hong Kong and because some of our directors and officers reside outside the United States.

We are incorporated in the Cayman Islands and conduct our operations in the United States, the PRC and Hong Kong. A significant part of our assets are located outside the United States. Some of our officers and directors reside outside the United States and a substantial portion of the assets of those persons are located outside of the United States. As a result, it could be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in the PRC or in Hong Kong in the event that you believe that your rights have been infringed under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, of China and of Hong Kong could render you unable to enforce a judgment against our assets or the assets of our directors and officers. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC or Hong Kong would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state, and it is uncertain whether such Cayman Islands or PRC or Hong Kong courts would be competent to hear original actions brought in the Cayman Islands or China or Hong Kong against us or such persons predicated upon the securities laws of the United States or any state.

Shareholders of Cayman Islands exempted companies such as ourselves have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders of these companies (apart from our memorandum and articles of association, special resolutions of our shareholders and the register of mortgages and charges). Our directors have discretion under Cayman Islands law to determine whether or not, and under what conditions, our corporate records could be inspected by our shareholders, but are not obliged to make them available to our shareholders. This could make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, public shareholders might have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

Compliance with rules and requirements applicable to public companies could cause us to incur increased costs, which could negatively affect our results of operations.

As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We ceased to be an “emerging growth company” on December 31, 2020, and are no longer eligible for reduced disclosure requirements and exemptions applicable to emerging growth companies. We expect that our loss of emerging growth company status will require additional attention from management and will result in increased costs to us, which could include higher legal fees, accounting fees and fees associated with investor relations activities, among others. We have also incurred and will continue to incur costs associated with corporate governance requirements, including requirements of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and Nasdaq Capital Market, has requirements in corporate governance practices of public companies. We expect these rules and regulations to continue to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. Complying with these rules and requirements could be especially difficult and costly for us because we might have difficulty locating sufficient personnel in China with experience and expertise relating to U.S. GAAP and U.S. public company reporting requirements, and such personnel could command higher salaries relative to what similarly experienced personnel would command in the United States. If we cannot employ sufficient personnel to ensure compliance with these rules and regulations, we might need to rely more on outside legal, accounting and financial experts, which could be very costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are evaluating and monitoring developments to these rules, and we cannot predict or estimate the amount of additional costs we might incur or the timing of such costs.

ITEM 4. INFORMATION ON THE COMPANY

We were originally a group buying and B2C e-commerce platform in China under the name of “Beijing Wowo Tuan Information Technology Co., Ltd.” To facilitate investment in our company, we incorporated Wowo Limited in Cayman Islands as a holding company in July 2011.

In April 2015, Wowo Limited completed the initial public offering and listed our ADSs on the Nasdaq Stock Market under the symbol “WOWO.” We raised approximately $37.3 million in net proceeds from our initial public offering after deducting underwriting commissions and the offering expenses payable by us.

In June 2015, we acquired Join Me Group (HK) Investment Company Limited to establish our food services industry B2B business. We issued 741,422,780 ordinary shares and paid $30.0 million as consideration for the acquisition.

In September 2015, we divested our group buying and B2C e-commerce businesses to focus our efforts on our food services industry B2B business.

In September 2015, we raised $15.0 million in a private placement transaction with Mr. Maodong Xu.

In June 2016, we changed the trading symbol for our ADSs listed on the Nasdaq Global Market to “JMU.” In December 2016, we also changed our company name to JMU Limited.

In August 2016, TANSH Global Food Group Co., Ltd, which was formerly known as Xiao Nan Guo Restaurants Holdings Limited, a Hong Kong Stock Exchange listed company (Stock Code: 3666), through its wholly-owned subsidiary, acquired a 9.82% stake in our company via secondary transfers for a total consideration of HK$368 million (approximately $47.5 million).

In July 2018, we changed the ratio of our ADSs to ordinary shares from one ADS representing 18 ordinary shares to one ADS representing 180 ordinary shares.

In May 2019, we acquired Mercurity Limited (previously known as Unicorn Investment Limited) to establish our blockchain-based digital asset infrastructure solutions business. We issued 632,660,858 new ordinary shares as consideration for the acquisition.

In July 2019, we divested our B2B services to food-industry suppliers and customers by selling all the issued and outstanding shares of New Admiral Limited, or New Admiral, our former wholly-owned subsidiary, to Marvel Billion Development Limited, or Marvel Billion, in exchange for $1.0 million in cash. In addition, the buyer and the divested entities agreed to waive all the rights and claims with respect to the liabilities owed by us to the divested entities.

In January 2020, we transferred the listing of our ADSs from the Nasdaq Global Market to the Nasdaq Capital Market.

In February 2020, we changed the trading symbol for our ADSs listed on the Nasdaq Capital Market to “MFH.”

In March 2020, we acquired the entire ownership of NBpay Investment Limited, or NBpay, to further strengthen our capabilities in the blockchain-enabled payment solutions. We issued 761,789,601 new ordinary shares to Mr. Kaiming Hu, our principal shareholder and the sole shareholder of Kuali Yitong, as consideration for the acquisition.

In April 2020, we changed our company name to “Mercurity Fintech Holding Inc.” to align the company name with our new blockchain-based digital asset infrastructure solutions business.

In May 2020, we changed the ratio of our ADSs to ordinary shares from one ADS representing 180 ordinary shares to one ADS representing 360 ordinary shares.

In August 2021, we added cryptocurrency mining as one of our main businesses going forward. We had entered into cryptocurrency mining pools by executing a business contract with a collective mining service provider on October 22, 2021 to provide computing power to the mining pool and derived USD$664,307 related revenue in 2021 and USD$783,089 related revenue in the first half of 2022.

On January 15, 2022, we disposed both of the VIEs, both of which were under the control by Lianji Future, a wholly foreign owned subsidiary of the Company.

On February16, 2022, the former acting Chief Financial Officer Wei Zhu, who was also the Company’s former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, was taken away from the Company’s office in Shenzhen, China for personal reasons to cooperate with the investigation from Sheyang County Public Security Bureau, Yancheng City, Jiangsu Province, People’s Republic of China. At the same time, Sheyang County Public Security Bureau forcibly removed the safe belonging to the Company that stored the digital asset hardware cold wallet, and forcibly destroyed the safe and seized the crypto asset hardware cold wallet and all crypto assets stored in it, and we verified that 95.23843 Bitcoins and 2005537.5 USD Coins stored in the out-of-control wallet had been transferred to another unknown wallet. PRC law firm Deheng Law Office (“Deheng”) has been representing the Company in our efforts to recover the wrongfully seized cold wallet and cryptocurrencies from the Public Security Bureau.

Due to the dismantling of the VIEs and the cessation of all business related to the digital asset transaction platforms, the temporary difficulties caused by the impoundment of our cryptocurrencies and substantial changes of our original technical team in China in 2022, our blockchain technical services business did not generate any revenue in 2022.

In July 2022, we added consultation services to our business, providing business consultation services to international corporate clients, especially those in the blockchain industry. Meanwhile, we conducted viability studies about the business models, license requirements and operational costs of online and traditional brokerage services and digital payment business. However, due to resource restraints, we have ceased our development plans in digital payment business, including digital payment services and solution consulting, and applications for the required money transmit licenses since March 2024.

On July 15, 2022, we incorporated Mercurity Fintech Technology Holding Inc. (“MFH Tech”) to develop distributed computing and storage services (including cryptocurrency mining and providing cloud storage services for distributed application product operators) and consultation services.

On December 15, 2022, we entered into an asset purchase agreement with Huangtong International Co., Ltd., providing for the acquisition and purchase of Web3 decentralized storage infrastructure, including cryptocurrency mining servers, cables, and other electronic devices, for an aggregate consideration of USD$5,980,000, payable in our ordinary shares. The investment was made with an aim to own mining machines capable of gathering, processing, and storing vast amounts of data, to advance the cryptocurrency mining business, and to further solidify us as a pioneer in the creation of the Web3 framework. On December 20, 2022, the assets began to be used for Filecoin (“FIL”) mining operations and derived USD$348 related revenue in 2022. In January 2023, we transferred all of the Web3 decentralized storage infrastructure to our US subsidiary MFH Tech, which serves as the operating entity for our business of Filecoin mining and cloud storage services for distributed application product operators.

On December 29, 2022, the Company’s Board of Directors approved to proceed with: 1) the share consolidation and simultaneous change of the ADR ratio; 2) the transfer of the register of members of the Company; and 3) the termination of the deposit agreement. The Board approved the proposal on the share consolidation to the authorized share capital (the “Share Consolidation”) at a ratio of four hundred (400)-for-one (1) with the par value of each ordinary share changed to US$0.004 per ordinary share. Further, as approved by the Board, the Company will effect a simultaneous change of the American Depositary Receipts (“ADRs”) to ordinary share ratio from 1-to-360 to 1-to-1 (the “ADR Ratio Change”). The Board approved to terminate the Deposit Agreement, as amended (the “Deposit Agreement”) effective on February 28, 2023, by and among the Company, Citibank, N.A., and the holders and beneficial owners of American Depositary Shares outstanding under the terms of the Deposit Agreement dated as of April 13, 2015 and as amended.

On January 10, 2023, we entered into an asset purchase agreement with Jinhe Capital Limited, providing for the purchase of 5,000 Antminer S19 PRO Bitcoin mining machines, for an aggregate consideration of USD$9,000,000. On March 10, 2024, the Company and Jinhe entered into a Cancellation Agreement to cancel such purchase in its entirety. Going forward, we currently have no plans to resume Bitcoin mining business.

On January 28, 2023, we decided to write off NBpay Investment Limited and its subsidiaries, which had no meaningful assets or business nor employees.

On February 28, 2023, when the Share Consolidation was effective, the Company’s outstanding ordinary shares changed from 18,614,900,104 shares with a par value of $0.00001 per share to 46,538,116 shares with a par value of $0.004 per share.

On April 12, 2023, we completed the incorporation of another U.S. subsidiary, Chaince Securities, which plans to develop financial advisory services, online and traditional brokerage services independently in the future. On May 3, 2023, Chaince Securities entered into a Purchase and Sale Agreement for the acquisition of all assets and liabilities of J.V. Delaney & Associates, an investment advisory firm and FINRA licensed broker dealer. The FINRA review process for such acquisition is currently ongoing.

From April to June 2023, our management reassessed the potential adverse effects of changes in the Company’s business environment, and readjusted the Company’s business structure and the future development plan. Considering the increasing difficulty of crypto mining and the general losses by top crypto mining enterprises, we have decided to reduce the scale of procurement of Bitcoin miners and reduce the Company’s investment in the crypto mining field. As such, the Company and Jinhe Capital Limited entered into an amendment (the “Amendment”) to the S19 Pro Purchase Agreement, pursuant to which the parties agreed to reduce the purchase order to no more than 2,000 Bitcoin miners for a total amount of no more than $3.6 million.

Also considering the enormous uncertainty brought by the cryptocurrency market turmoil in the past two years to the blockchain industry, as well as the regulatory uncertainties, despite our ability to quickly reorganize the blockchain technical service team, we have decided not to continue conducting blockchain technology service business related to the asset trading platform, asset digitalization platform and decentralized finance (DeFi) platform.

On October 2, 2023, the Company’s Annual General Meeting approved to increase the authorized share capital of the Company from US$250,000 divided into 62,500,000 ordinary shares with a par value of US$0.004 each, to US$4,000,000 divided into 1,000,000,000 ordinary shares of a par value of US$0.004 each, by the creation of an additional 937,500,000 ordinary shares with a par value of US$0.004 each.

On March 7, 2024, considering the uncertainties in the digital payment industry, the Company decided to suspend its development plan related to its digital payment solutions and digital payment services, as well as its application for an MSB (Money Service Business) license. In particular, the Company has obtained the approval of its board of directors on March 7, 2024 to terminate its “digital payment solutions” and “digital payment services” businesses, which did not generate any meaningful revenue in the past.

After the adjustment of our business strategies, the focus of our operating subsidiaries are as follows: (i) MFH Tech acting as the operating entity of distributed storage and computing services and business consultation services business in North America; (ii) after completing the acquisition of all assets and liabilities of J.V. Delaney & Associates and only after obtaining FINRA approval, Chaince Securities to operate our financial advisory services and online and traditional brokerage services in North America; and (iii) Ucon and Lianji Future acting as the operating entities of the business consultation services in the Asia-Pacific region.

Our principal executive offices are located at 1330 Avenue of Americas, Fl 33, New York, 10019, United States. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our investor relationship website https://mercurityfintech.com/. The information on our website should not be deemed a part of this annual report.

Our Principal Business

In August 2021, we added cryptocurrency mining as one of our main businesses. We entered into cryptocurrency mining pools by executing a business contract with a collective mining service provider on October 22, 2021 to provide computing power to the mining pool and derived USD$664,307 related revenue in 2021 and USD$783,089 related revenue in the first half of 2022.

In July 2022, we added consultation services to our business, providing business consultation services to global corporate clients, especially those in the blockchain industry. Meanwhile, we conducted viability studies about the business models, license requirements and operational costs of online and traditional brokerage services and digital payment business. However, due to resource restraints, we have ceased our development plans in digital payment business, including digital payment services and solution consulting, and applications for the required money transmit licenses since March 2024.

On July 15, 2022, we incorporated Mercurity Fintech Technology Holding Inc. (“MFH Tech”) to develop distributed computing and storage services (including cryptocurrency mining and providing cloud storage services for distributed application product operators) and consultation services.

On August 23, 2022, MFH Tech signed a Consulting Agreement with a Chinese media company, pursuant to which MFH Tech will serve as a business consultant in order to facilitate the client to establish the entity in the United States and make financing strategy, and the agreed amount of the immutable consideration portion of the agreement is $160,000. We recognized consultation services revenue of $80,000 for the year ended December 31, 2022 based on the percentage-of-completion.

On December 15, 2022, we entered into an asset purchase agreement with Huangtong International Co., Ltd., providing for the acquisition and purchase of Web3 decentralized storage infrastructure, including cryptocurrency mining servers, cables, and other electronic devices, for an aggregate consideration of USD$5,980,000, payable in our ordinary shares. The investment was made with the aim to own mining machines capable of gathering, processing, and storing vast amounts of data, to advance the cryptocurrency mining business, and to advance the Web3 framework. We started using some of the storage capacity of these devices for Filecoin mining business from December 20, 2022. In January 2023, we transferred all of the Web3 decentralized storage infrastructure to our US subsidiary MFH Tech, which serves as the operating entity for our business of Filecoin mining and cloud storage services for decentralized platform operators. For the year ended December 31, 2022 and 2023, we earned $348 and $285,928 respectively in Filecoin mining revenue from physical mining operations, and did not receive any revenue from providing cloud storage services to decentralized platform operators.

On April 12, 2023, we completed the incorporation of another U.S. subsidiary, Chaince Securities, Inc. (“Chaince Securities”), which plans to develop financial advisory services, online and traditional brokerage services independently in the future. On May 3, 2023, Chaince Securities entered into a Purchase and Sale Agreement for the acquisition of all assets and liabilities of J.V. Delaney & Associates, an investment advisory firm and FINRA licensed broker dealer. The FINRA review process for such acquisition is currently ongoing.

As of June 30, 2023, all the agreed services under the consulting agreement with the Chinese media signed on August 23, 2022 had been completed, and the Company recognized consultation services revenue of $80,000 for the first half of 2023 based on the percentage-of-completion.

On August 1, 2023, the Company signed a supplementary comprehensive service agreement with the Chinese media company. The Company will continue to assist the client in providing management consulting services and introducing professional service agency resources. The Company expects to receive no less than $150,000 in revenue from this new agreement within the next year.

On November 1, 2023, the Company signed a financial consulting agreement with an American logistics company. The Company will serve as a business consultant in order to facilitate introductions between the Company’s clients and esteemed third-party audit firms, legal representatives, and underwriting entities that are crucial for the clients’ fundraising endeavors within the U.S. capital market. The Company expects to receive $50,000 in revenue from this agreement within the next year.

On December 5, 2023, the Company signed an Origin Storage Filecoin Mining Service Contract with Origin Storage PTE. LTD. (“Origin Storage”). The Company has used the Origin Storage’s technology to re-package the Web3 decentralized storage infrastructure and conduct Filecoin mining business through Origin Storage’s network platform. The Filecoin mining services provided by Origin Storage included, but not limited to, storage server services, computing encapsulation server services, and technical services. As of April 15, 2024, by adopting the new technology provided by Origin Storage, we had opened two new nodes (replacing the two old nodes we opened in 2023) with an effective storage capacity of 70 PiB, taking up only 7 PiB original storage capacity (the “Raw Byte Power”) of our Web3 decentralized storage infrastructure, which means that using the new technology provided by Origin Storage to occupy the same original storage capacity can achieve 10 times the effective storage capacity, and the Company is expected to achieve greater productivity of the cryptocurrency mining business in the future.

On March 7, 2024, considering the many uncertainties in the relevant industry, the Company decided to temporarily abandon its development plan related to digital payment solutions, as well as the application for the MSB (Money Service Business) license.

After the adjustment of our business strategies, the focuses of our respective operating subsidiaries are as follows: (i) MFH Tech acting as the operating entity of distributed storage and computing services and business consultation services in North America; (ii) after completing the acquisition of all assets and liabilities of J.V. Delaney & Associates and after obtaining FINRA approval, Chaince Securities to operate our financial advisory services, online and traditional brokerage services in North America; and (iii) Ucon and Lianji Future acting as the operating entities of the business consultation services in the Asia-Pacific region.

Business Segment 1 – Business consultation services

We provide comprehensive business consultation services and industry resource support to global corporate clients based on the resource advantages we have accumulated over the years. We also assist corporate clients in the Asia Pacific region in developing business in the United States, such as helping the clients improve operations and compliance, achieving market entry and expansion, introducing and coordinating professional service institutions.

For example, on August 23, 2022, we signed a Consulting Agreement with a Chinese media company, pursuant to which we served as a business consultant in order to: a) assist the client in establishing an operating entity in the United States and assist its operations; b) introduce American entertainment media industry related resources; c) introduce capital market related resources, including auditors, lawyers and investment banks, to assist the client in developing financing strategies and plans in the US capital markets. On August 1, 2023, the Company signed a supplementary comprehensive service agreement with the same Chinese media company, pursuant to which the Company continued to assist the client in providing management consulting services and introducing professional service agency resources. The Company expects to receive no less than $150,000 in revenue from this new agreement within the year 2024.

As of June 30, 2023, all the agreed services under the consulting agreement with the Chinese media company signed on August 23, 2022 had been completed, and the Company recognized consultation services revenue of $80,000 for the first half of 2023 based on the percentage-of-completion.

On November 1, 2023, the Company signed a consulting agreement with an American logistics company. The Company will serve as a business consultant in order to facilitate introductions between the Company’s clients and third-party audit firms, legal representatives, and underwriting entities that are crucial for the clients’ fundraising endeavors within the U.S. capital market. The Company expects to receive $50,000 in revenue from this agreement within the year 2024.

We are establishing our Asia Business consultation services team in Hong Kong and Shenzhen, and we seek to acquire more new clients in the Asia Pacific region and provide better services to these clients. Presently, we are in advance negotiations with several Asian clients to provide them with comprehensive business consulting to enter the US market. It is expected that we will reach agreements and sign contracts with one or two clients in the first half of 2024.

Business Segment 2 – Financial advisory services and Brokerage services

On May 3, 2023, Chaince Securities entered into a Purchase and Sale Agreement (the “JV and Chaince Transaction”) for the acquisition of all assets and liabilities of J.V. Delaney & Associates, an investment advisory firm and FINRA licensed broker dealer. We commenced the application process for continued membership application of the Financial Industry Regulatory Authority (FINRA) in August 2023. Based on the status of the FINRA review, the Company expects to receive FINRA approval on the JV and Chaince Transaction in the first half of 2024, although the Company cannot assure that its FINRA application will be approved within such timeframe or at all. With the FINRA licenses, we will be able to provide more comprehensive professional services to corporate clients that want to become publicly traded in the United States, including financial advisory services and brokerage services.

Pending the FINRA approval, we are building a professional team of 7-8 persons in New York to carry out financial advisory services and brokerage services, and we are also building a market promotion and customer service team of 3-4 persons in Hong Kong and Shenzhen to attract more potential clients.

1) Financial advisory services

Our financial advisory services will focus on providing comprehensive financial services to corporate clients in emerging countries and regions planning to enter the US capital markets, such as providing capital operation plans, private equity financing services, investment consulting services, and mergers and acquisitions services to the clients.

Our financial advisory services will be based in our offices in Shenzhen, Hong Kong and New York, covering Greater China, Southeast Asia and North America, respectively. We already have a financial advisory service team in New York, and we are establishing our Asian financial advisory service teams in Hong Kong and Shenzhen to seek more new clients in the Asia Pacific region and provide better services for these clients in the future.

2) Brokerage services

In addition to our financial advisory business, we may make securities underwriting an important part of our brokerage services business, in order to provide more comprehensive financial services for our corporate clients. We will decide whether to carry out other brokerage services, such as securities brokerage and asset management based on the Company’s future business development.

Our brokerage services will mainly be located in our New York office, serving clients in Greater China, Southeast Asia, and North America. We will also promote our brokerage services to clients through our offices in Hong Kong and Shenzhen.

It should be emphasized that our financial advisory services and brokerage services (securities underwriting and other brokerage services) can only be carried out after we have completed the acquisition of J.V. Delaney & Associates and obtained the financial license and FINRA approval required for brokerage services business.

Business Segment 3 – Distributed computing and storage services

Our distributed storage and computing services business includes cryptocurrency mining and cloud storage services for other distributed application product operators.

In August 2021, we added cryptocurrency mining as one of our main businesses. Cryptocurrency mining is part of our distributed computing and storage services business.

From October 2021 to April 2022, we obtained the usage rights of a certain number and specific models of Bitcoin mining machines and specific business premises by executing contracts with the sharing mining service provider, and registered as users on the mining pool website, complying with the general terms and conditions required to join the mining pool published on the mining pool website, to increase computing power to the mining pool. In exchange for providing computing power, we are entitled to a fractional share of the fixed digital asset awards the mining pool operator receives, for successfully adding blocks to the blockchain. Our fractional share is relative to the proportion of computing power we contribute to the mining pool operator toward the total computing power contributed by all mining pool participants in solving the current algorithm. Providing computing power in digital asset transaction verification services is an output of our ordinary activities. The provision of such computing power is the only performance obligation in the general terms of the mining pool website. The transaction consideration we receive, if any, is noncash consideration, which we measure at fair value on the date received, which is not materially different than the fair value at contract inception or the time we have earned the award from the pools. These considerations are all variable. Since significant reversals of cumulative revenue are possible given the nature of the assets, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and we receive confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component related to these transactions. Fair value of the digital assets award received is determined using the quoted price of the related digital assets at the time of receipt. The Company earned $783,090 in Bitcoin mining revenue from shared mining operations for the year ended December 31, 2022, and $664,307 for the year ended December 31, 2021. We have not operated any Bitcoin mining business since May 2022 and there were no related revenues in the year ended December 31, 2023.

On December 15, 2022, we entered into an asset purchase agreement with Huangtong International Co., Ltd., providing for the acquisition and purchase of Web3 decentralized storage infrastructure, including cryptocurrency mining servers, cables, and other electronic devices, for an aggregate consideration of USD$5.98 million, payable in our ordinary shares. Starting on December 20, 2022, we used some of the storage capacity of these devices for Filecoin mining business, and other storage capacity will be used to provide cloud storage services to distributed application product operators. We have rented the Filecoin mining operating premises located in New Jersey, United States from Cologix US, Inc. and we have entered into the Filecoin mainnet as a miner by registering as a user on the Filecoin mainnet, complying with the general terms and conditions required to become a miner published on the Filecoin mainnet. The essence of Filecoin mining business is that we utilize our Web3 decentralized storage infrastructure and provide cloud storage services to the end customers through the Filecoin mainnet. In exchange for providing storage capacity, we are entitled to a fractional share of the fixed digital asset awards from the Filecoin mainnet, for successfully adding blocks to the blockchain. Our fractional share is relative to the proportion of storage capacity we contribute to Filecoin mainnet toward the total storage capacity contributed by all the Filecoin mainnet’s participants in solving the current algorithm. Providing storage capacity in digital asset transaction verification services is an output of our ordinary activities. The provision of such storage capacity is the only performance obligation in the general terms of the Filecoin mainnet. The transaction consideration we receive, if any, is noncash consideration, which we measure at fair value on the date received, which is not materially different than the fair value at contract inception or the time we have earned the award from the Filecoin mainnet. These considerations are all variable. Since significant reversals of cumulative revenue are possible given the nature of the assets, the consideration is constrained until the all the miners successfully places a block (by being the first to solve an algorithm) and we receive confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component related to these transactions. Fair value of the digital assets award received is determined using the quoted price of the related digital assets at the time of receipt. For the year ended December 31, 2022, we earned $348 in Filecoin mining revenue from physical mining operations. For the year ended December 31, 2023, we earned $285,928 in Filecoin mining revenue from physical mining operations.

The Web3 decentralized storage infrastructure, which we acquired through a share offering in December 2022, is expected to achieve a maximum storage capacity of approximately 100PiB. We plan to use the storage capacity for Filecoin and other cryptocurrency mining and provide cloud storage services to other distributed application product operators. However, due to the continued low market prices of Filecoin in 2023, as well as the average return on unit computing power of Filecoin mining business decreasing with the growth of the computing power of the whole network, as of the end of 2023, we had not opened enough nodes to achieve the initial goals of our Filecoin mining business. Apart from the Filecoin mining business, we had not utilized the infrastructure for any other cryptocurrency mining business, nor had we provided cloud storage services to any other distributed application product operators. Therefore, the Web3 decentralized storage infrastructure was not fully utilized during fiscal year 2023. However, these Web3 decentralized storage infrastructures were recognized for depreciation costs on a straight-line basis, which resulted in significant losses for our business of providing distributed computing and storage services in 2023.

On December 5, 2023, the Company signed an Origin Storage Filecoin Mining Service Contract with Origin Storage PTE. LTD. (“Origin Storage”). The Company have used Origin Storage’s technology to re package the Web3 decentralized storage infrastructure and conduct Filecoin mining business through Origin Storage’s network platform. The Filecoin mining services provided by Origin Storage include but are not limited to storage server services, computing encapsulation server services, and technical services.

In January 2024, we repackaged our Web3 decentralized storage infrastructure for Filecoin mining using new technology provided by Origin Storage and began running two new Filecoin mining nodes. As of the date of this annual report, the effective storage capacity of our two new Filecoin mining nodes has reached 64PiB, exceeding our original target storage capacity of 60.4PiB, and it only take up 6.4PiB of the original storage capacity (the “Raw Byte Power”) of our Web3 decentralized storage infrastructure. In other words, the effective storage capacity of the Company can be magnified tenfold with Origin Storage’s technologies.

In this way, most of the original storage capacity (the “Raw Byte Power”) of the Company’s Web3 decentralized storage infrastructure will remain available for use, which we can utilize to expand our Filecoin mining business, or engage in other cryptocurrency mining businesses, or provide cloud storage services to other distributed application product operators operators. We have not currently determined the other types of cryptocurrencies we may mine or otherwise transact in, and any such decision will be made based on economic return and legal analysis. We will consult our legal advisers and abide by relevant SEC and court guidance on whether such cryptocurrencies constitute securities, but we currently do not have plans to mine any type of cryptocurrency that constitute “securities” under U.S. law. We expect to decide how these remaining storage capabilities will be used by the end of June 2024.

On January 10, 2023, we entered into an asset purchase agreement (the “Original Contract”) with Jinhe Capital Limited (“Jinhe”), providing for the purchase of 5,000 Antminer S19 PRO Bitcoin mining machines, for an aggregate consideration of $9 million. However, from April to June 2023, our management reassessed the potential adverse effects of changes in the Company’s business environment and readjusted the Company’s business structure and the future development plan. Considering the increasing difficulty of mining in the mining industry and the general loss of the top mining enterprises, we have decided to reduce the procurement scale of Bitcoin miners and reduce the Company’s investment in the mining field. As such, the Company and Jinhe Capital Limited entered into an amendment to the S19 Pro Purchase Agreement (the “Amendment”), pursuant to which the parties have agreed to reduce the purchase order to no more than 2,000 Bitcoin miners for a total amount of no more than $3.6 million. As the Ant miner S19 Pro Bitcoin miner is currently one of the best-selling models in the market and our order is back ordered, our batch of the S19 Pro has not been delivered as of the date of this letter. As of December 31, 2023, the Company had paid the seller $3 million US dollars. On March 10, 2024, the Company and Jinhe entered into a Cancellation Agreement, as which the Original Contract and the Amendment were all cancelled and terminated in its entirety. Going forward, we currently have no plans to resume Bitcoin mining business.

In January 2023, our U.S. subsidiary, MFH Tech signed a Coinbase Prime Broker Agreement with Coinbase, Inc., a copy of which is appended as Exhibit 99.2 to this annual report. The agreement includes the Coinbase Custody Custodial Services Agreement and the Coinbase Master Trading Agreement. The agreement sets forth the terms and conditions pursuant to which the Coinbase entities will open and maintain the prime broker account for us and provide services relating to custody, trade execution, lending or post-trade credit (if applicable), and other services for certain digital assets. We do not currently own and/or hold crypto assets on behalf of third parties. Coinbase Custody maintains, at its sole expense, insurance coverage in such types and amounts as commercially reasonable for the Custodial Services provided in the Coinbase Prime Broker Agreement. Coinbase maintains a commercial crime insurance policy which encompasses losses due to employee collusion or fraud, physical loss or damage of critical material, security breaches or hacks, and fraudulent transfers, including asset theft from both hot and cold storage. Additionally, Coinbase maintains cyber insurance, which covers loss of income and data recovery resulting from security failures leading to business interruptions, covering computer forensic costs, incident response legal fees, notification expenses, and privacy claims by regulators. Based on publicly available information, Coinbase maintains a commercial crime insurance policy of up to $320 million. The insurance maintained by Coinbase is shared among all of Coinbase’s customers, is not specific to our Company and may not be available or sufficient to protect our Company from all possible losses or sources of losses. Coinbase’s insurance may not cover the type of losses experienced by our Company. Alternatively, we may be forced to share such insurance proceeds with other clients or customers of Coinbase, which could reduce the amount of such proceeds that are available to us.

In May 2023, it was reported that a trust sponsor had requested for withdrawal of its registration statement filed with the SEC in deference to the requests in the SEC Staff’s letters, and that the SEC was of the view that Filecoins constituted “securities” under U.S. securities laws. Additionally, in June 2023, the SEC filed a lawsuit against Binance, and named Filecoin as, among other cryptocurrencies, constituting “securities” under U.S. securities laws. Such categorization, as well as further regulatory developments, new legislations and regulations, and changes in regulatory policy, may have materially adverse impacts on our business, financial condition and results of operations, as well as the price of our shares. Our Filecoin assets constituted less than 2.4% of our consolidated total assets as of December 31, 2023. As such, we believe that such regulatory changes will have minimal impacts on us. We are reviewing the recent legal and regulatory development and we intend to alter our business focus and strategy whenever necessary to remain compliant with all applicable laws and regulations. See also “Risk Factors—Risks Relating to Our Business and Industry—Certain crypto assets and cryptocurrencies have been identified as a “security” in certain jurisdictions, and we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.”

In addition, due to recent developments in the regulations of cryptocurrencies, particularly in the U.S., such as the creation of subcommittees of the House Financial Services Committee, the approval of custodians for digital assets securities, and the Security and Exchange Commission’s crackdown on illegal trading platforms, we have seen increases of the price volatility of various cryptocurrency assets. For instance, the price of Bitcoins experienced sharp volatility in the first seven months of 2023, including a high price of more than $31,000 and a low price of less than $17,000, and the price of Filecoins also experienced sharp volatility in the first seven months of 2023, including a high price of more than $9 and a low price of less than $3. Our total cryptocurrency asset (excluding the Bitcoins and USD Coins out of control, which have been fully recognized as impairment losses) holdings constituted less than 2.4% of our consolidated total assets as of December 31, 2023. As such, we believe that the immediate impact of such regulatory changes will be limited to us. We are closely monitoring the changes and trends in prices of cryptocurrencies, and we may make changes to our business focus and strategies in the future should the need arise. See also “Risk Factors— Risks Relating to Our Business and Industry—Our operating results may fluctuate and continue to fluctuate, including due to the highly volatile nature of crypto.”

Similarly, due to the increased price volatility of cryptocurrencies in general, individualized management failures, failures of internal control and oversight, as well as other macroeconomic or other factors, a string of bankruptcies have occurred in the crypto asset industry, including those of Genesis Global Capital, FTX, BlockFi, Celsuis Network, Voyager Digital and Three Arrows Capital. Such bankruptcies and adverse developments in the crypto asset industry and have not impacted and is not expected to materially and adversely impact our business, financial condition, customers, and counterparties, either directly or indirectly, as the Company is not a direct counterparty to such entities. We do not have any material assets that may not be recovered due to the bankruptcies of those named companies or may otherwise be lost or misappropriated. We are also not aware of any material direct or indirect exposures to other counterparties, customers, custodians, or other participants in crypto asset markets that have filed for bankruptcy, that have been decreed insolvent or bankrupt, that have made any assignment for the benefit of creditors, or have had a receiver appointed for them, that have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, that have the crypto assets of their customers unaccounted for; or that have experienced material corporate compliance failures. However, it is possible that these recent bankruptcies may have exacerbated the further pricing decline of certain cryptocurrencies, such as Bitcoin, in 2023 which may have imposed adverse impacts to our mining losses and/or value of the cryptocurrencies we hold.

Investors in our securities should be aware that engaging in cryptocurrency mining may result in certain environmental harms and transition risks related to climate change that may affect our business, financial condition and results of operations, as mining operations consume a substantial amount of power, which may contribute to increased carbon emissions. Recent policy and regulatory changes relating to limiting carbon emissions could impose additional operational and compliance burdens on our cryptocurrency mining operations, such as more stringent reporting requirements or higher compliance fees. There have also been recent market trends that may alter business opportunities for our industry, stemming from recent regulatory and policy changes in the jurisdictions in which we operate, where regulators have come out to state that certain cryptocurrencies constitute “securities” and that there would be increased regulation and oversight over businesses engaged in cryptocurrencies, which is highly power-consuming and poses environmental risks. These may lead to increased credit risks, which may lead to financiers and lenders being less willing to enter into business relationships with us, as well as increased litigation risks related to climate change in the jurisdictions in which we carry out mining operations, Some businesses as well as some investors may have also ceased accepting cryptocurrencies for certain types of purchases, and stopped investing in businesses involved in cryptocurrencies businesses, due to environmental concerns associated with cryptocurrencies mining, which may have adverse impacts on our business, financial condition, and results of operations. See “Risk Factors— Risks Relating to Our Business and Industry—Environmental concerns associated with cryptocurrencies mining could have adverse impacts on our business, financial condition, and results of operations.”

Our clients

Business consultation services

Our business consultation services mainly serves clients from Greater China, Southeast Asia, and North America. As of December 31, 2023, we have obtained two clients, one from China and the other from the United States. We have plans to invest more into promotion and brand awareness to attract more clients in the future.

Financial advisory services and Brokerage services

Our financial advisory services and brokerage services business mainly targets clients from Greater China, Southeast Asia, and North America. Our financial advisory services and brokerage services (securities underwriting and other brokerage services) can only be carried out after we have completed the acquisition of J.V. Delaney & Associates and obtained the financial license and FINRA approval required for brokerage services business. Therefore, as of December 31, 2023, we have not yet obtained the corresponding clients.

Distributed storage and computing services

From 2021 to 2023, our distributed storage and computing business only includes cryptocurrency mining. Our clients in the Bitcoin mining business we conducted from October 2021 to April 2022 were F2Pool mining pool operators. We provided computing power to the mining pool and received Bitcoin rewards as compensation for our services. Since December 2022, our clients for Filecoin mining business have been the end users (storage demanders) on the Filecoin Mainnet. We have been providing storage services to these end users and receiving Filecoin rewards as compensation for our services.

Marketing

We engage various marketing channels to promote our business to more business partners and individual customers. We also provide various incentives to our customers to increase their spending and loyalty, and we send e-mails to our customers periodically with product recommendations and/or promotions. To enhance our brand awareness, we also have engaged in brand promotion activities.

In addition to the online marketing activities, we also utilize offline activities to attract more users and promote our brand recognition. For example, we attended offline meetings to enhance our brand awareness and promote our presence in the industry.

As our business continues to evolve and expand into different areas, we have plans to steadily increase our marketing and promotional investment and efforts alongside the projected growth relative to these investments.

Competition

For our business consultation services, there are many business, management and financial consulting companies in the United States that will become our competitors, and their team members may come from some well-known consulting firms, investment banks and broker dealers. For our distributed storage and computing services, the digital asset industry is intensely competitive and is densely populated by global competitors, including Marathon (MARA), Riot (RIOT), Bit Digital (BTBT), BIT Mining (BTCM), The9 (NCTY), among others.

Our competitors may have entered the industry much earlier than us. They may be better capitalized, may have more industry connections, may have a stronger team, and may be able to adapt more quickly to new technologies or may be able to devote greater resources to the development, marketing and sale of their products and services than we can.

We anticipate that the demand for global business consulting will continue to increase, and the digital asset market will continually evolve and will continue to experience rapid technological change, evolving industry standards, shifting customer requirements, and frequent innovation. We must continually innovate to remain competitive. We believe that the principal competitive factors in our industry are:

We believe that we are well-positioned to effectively compete on the basis of the factors listed above and that our Company benefits from many advantages over the competition. However, some of our current or future competitors have or may provide higher quality services or introduce new technology that are superior to ours.

Seasonality

We have not experienced seasoned fluctuations in our current principal business. Due to our limited operating history in our current core business, the seasonal trends that we experienced are not necessarily indicative of the seasonal trends that we may experience in the future.

Intellectual Property

We regard trademarks, copyrights, domain names, know-how, proprietary technologies, and similar intellectual property as critical to our success, and from time to time we rely on copyright and trademark law and confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. As of December 31, 2023, we have registered a generic top-level domain name. Our registered domain name is www.mercurityfintech.com.

Regulations

This section sets forth a summary of the most significant rules and regulations that affect our business activities in the PRC. Although our sources of revenue have been outside the Chinese mainland since 2021, we still have office and staff teams in China to seek more Chinese customers for our business consulting services, and we do not rule out the possibility of continuing to develop new business in China in the future.

Regulations Relating to Foreign Investment

Industry Catalogue Relating to Foreign Investment. Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue, which was promulgated and is amended from time to time by the Ministry of Commerce and the National Development and Reform Commission. Industries listed in the Catalogue are divided into three categories: encouraged, restricted and prohibited. Industries not listed in the Catalogue are generally deemed as constituting a fourth “permitted” category. The current Special Administrative Measures (Negative List) for Admission of Foreign Investment (Year 2021) was promulgated in December 2021 and Industry Guidelines on Encouraged Foreign Investment (Year 2022) was promulgated in December 2022. Establishment of wholly foreign-owned enterprises is generally allowed in encouraged and permitted industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. In addition, restricted category projects are subject to higher-level government approvals. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in the Catalogue are generally open to foreign investment unless specifically restricted by other PRC regulations.

Through our WFOE and the previous VIEs, we were engaged in certain industries that are classified as “restricted” under the Catalogue. We engage in the development of computer network technology, technical consultancy and technical services, which belong to the permitted category. Under PRC law, the establishment of a wholly foreign owned enterprise is subject to the approval of, or the requirement for record filing with, the Ministry of Commerce or its local counterparts and the wholly foreign owned enterprise must register with the competent industry and commerce bureau. We have duly obtained the approvals from the Ministry of Commerce or its local counterparts for our interest in our wholly owned PRC subsidiaries and completed the registration of these PRC subsidiaries with the competent industry and commerce bureau.

The Ministry of Commerce issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises, as amended in June 2018, which was replaced by Measures on Reporting of Foreign Investment Information promulgated in December 2019. According to Measures on Reporting of Foreign Investment Information, foreign investors carrying out investment activities in the PRC directly shall submit investment information to the Ministry of Commerce or its local counterparts. Pursuant to the Announcement [2016] No. 22 of the National Development and Reform Commission and the Ministry of Commerce dated October 8, 2016, the special entry administration measures for foreign investment apply to restricted and prohibited categories specified in the Catalogue, and the encouraged categories are subject to certain requirements relating to equity ownership and senior management under the special entry administration measures.

On January 1, 2020, Foreign Investment Law of the People’s Republic of China became effective. For foreign-invested enterprises established after the Foreign Investment Law, the organization form, institution and activity requirement shall be governed by the PRC Company Law and PRC Partnership Law. The established foreign-invested enterprises have a five-year transition period. During the transition period, the enterprises could retain the original organization form. Specific implementation measures will be further formulated by the State Council.

On August 5, 2020, the opinions of the general office of the State Council on further stabilizing foreign trade and foreign investment came into effect. The rules put forward requirements on expanding the online channels of foreign trade and improving the convenience of foreign business personnel to come to the PRC, which is of great benefit to the field of foreign investment.

Foreign Investment in Value-Added Telecommunications Businesses. The Regulations for Administration of Foreign-invested Telecommunications Enterprises promulgated by the PRC State Council in December 2001 and subsequently amended in September 2008, February 2016 and March 2022 set forth detailed requirements with respect to capitalization, investor qualifications and application procedures in connection with the establishment of a foreign-invested telecommunications enterprise. These regulations prohibit a foreign entity from owning more than 50% of the total equity interest in any value-added telecommunications service business in the PRC and require the major foreign investor in any value-added telecommunications service business in the PRC have a good and profitable record and operating experience in this industry.

Regulations Relating to Blockchain Technology

Since May 2019, we started to engage in blockchain-enabled digital asset infrastructure solutions business. The PRC has promulgated laws and restrictions against illegal activities conducted through blockchain technologies.

In January 2019, the Cyberspace Administration of China promulgated the Administrative Regulation on Blockchain Information Services, which regulates the information services provided to the public through internet sites, applications, etc. based on blockchain technology or systems. It states that blockchain information services suppliers shall implement the responsibility for information content security management, establish and improve management systems such as user registration, information review, emergency response, and security protection, they shall also have the technical conditions suitable for their services, establish and disclose management rules and platform conventions, sign service agreements with blockchain information services users, etc. This is the first time China conducted compliance supervision on the blockchain.

The PRC Cryptography Law, which entered into force on January 1, 2020, is the latest normative legal document that regulates the blockchain industry. The term “cryptography” refers to products, technologies and services that use specific transformations to carry out encryption protection or security authentication for information, etc. The use of blockchain technology to encrypt and protect the information it collects is a “cryptography” under PRC law and shall be regulated by the PRC Cryptography Law.

Under PRC criminal law, the illegal use of blockchain technology may involves four types of crimes: crime of refusing to perform network security management obligations, crime of helping information network criminal activities, crime of violating citizens’ information and crime of endangering public safety. Among them, the crime of refusing to perform network security management obligations may cause the mass dissemination of illegal information, the leakage of user information and leads to a serious consequence, the loss of evidence in criminal cases in a serious circumstance and other serious circumstance. Refusing to make corrections after being ordered by the regulatory authority to make corrective measures is subject to imprisonment of up to three years, detention or control and a fine.

In September 2021, ten PRC governmental authorities, including the People’s Bank of China (PBOC), jointly issued the “Notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation” to clarify that cryptocurrency is not a legal tender in the PRC. Additionally, in September 2021, eleven governmental authorities, including the National Development and Reform Commission and the People’s Bank of China jointly issued the “Notice of Rectifying Virtual Currency Mining Activities” to strictly prohibit the virtual currency mining activities in the PRC. As of the date of this annual report, all cryptocurrency transactions in the PRC are considered illegal, including offshore exchanges to provide services to Chinese citizens. In response to such rapid and adverse regulatory changes in the PRC, we had to remodel our business plans and shift the business focus outside of the PRC.

Regulations Relating to E-Commerce

Prior to July 22, 2019, our principal business was food-industry B2B services and we were subject to regulations relating to e-commerce. As a result of the divestiture of the previous food business, we are no longer subject to E-commerce related rules and regulations.

Regulations Relating to Internet Content and Information Security

The Administrative Measures on Internet Information Services specify that internet information services regarding news, publications, education, medical and health care, pharmacy and medical appliances, among other things, are to be examined, approved and regulated by the relevant authorities. Internet information providers are prohibited from providing services beyond those included in the scope of their ICP licenses or filings. Furthermore, these measures clearly specify a list of prohibited content. Internet information providers are prohibited from producing, copying, publishing or distributing information that is humiliating or defamatory to others or that infringes the lawful rights and interests of others. Internet information providers that violate the prohibition may face criminal charges or administrative sanctions by the PRC authorities. Internet information providers must monitor and control the information posted on their websites. If any prohibited content is found, they must remove the offending content immediately, keep a record of it and report to the relevant authorities.

Internet information in the PRC is also regulated and restricted from a national security standpoint. The National People’s Congress, the PRC’s national legislative body, has enacted the Decisions on Maintaining Internet Security, which may subject violators to criminal punishment in the PRC for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The Ministry of Public Security has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content.

In July 2019, the Cyberspace Administration of the PRC promulgated The Measures for Credit Information Management of Internet Untrustworthy Subjects (draft) to credit construction in the field of internet information services and strengthen credit information management of internet information service untrustworthy subjects. The draft lists four specific cases of serious untrustworthy activities and stipulates the subject of the above-mentioned acts shall be included in the blacklist of serious untrustworthy of internet information service. The validity period is three years, during which the subject will be restricted to engage in internet information service. Relatively minor behaviors which committed several times but have not reached the blacklist determination criteria will be included in the focus list.

In January 2021, the state Internet Information Office issued the administrative measures for Internet information services (Revised Draft for comments). The PRC has set up a blacklist system for Internet information services. Organizations and individuals whose licenses or records have been revoked by the competent authorities shall not re apply for relevant licenses or records within three years; organizations and individuals whose accounts have been cancelled or websites have been shut down by the competent authorities shall not re provide similar services for them within three years.

On July 10, 2021, the PRC State Internet Information Office issued the Measures of Cybersecurity Review, which requires cyberspace companies with personal information of more than one (1) million users that want to list their securities on a non-Chinese stock exchange to file a cybersecurity review with the Office of Cybersecurity Review of China. On December 28, 2021, a total of thirteen governmental departments of the PRC, including the PRC State Internet Information Office issued the Measures of Cybersecurity Review, which will become effective on February 15, 2022.

We (1) are not required to obtain permissions from any PRC authorities to offer to sell or issue our ordinary shares to non-Chinese investors, (2) are not covered by the permission requirements from the China Securities Regulatory Commission (the “CSRC”) and Cyberspace Administration of China (the “CAC”) or any other entity that is required to approve of the operations of ours and our subsidiaries, and (3) have not received nor been denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the July 6, 2021 Opinions, which were made available to the public on July 6, 2021. The July 6, 2021 Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment, it is uncertain whether and when we or our subsidiaries will be required to obtain any permission from the PRC government to list on a U.S. stock exchanges in the future, and even when we obtain such permission, whether it will be denied or rescinded.

Regulations Relating to Internet Privacy

In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. The Administrative Measures on Internet Information Services prohibit ICP service operators from insulting or slandering a third-party or infringing upon the lawful rights and interests of a third-party. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in 2011, an ICP operator may not collect any user personal information or provide any such information to third parties without the consent of a user. An ICP service operator must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An ICP service operator is also required to properly keep the user personal information, and in case of any leak or likely leak of the user personal information, the ICP service operator must take immediate remedial measures and, in severe circumstances, to make an immediate report to the telecommunications regulatory authority. In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the Standing Committee of the National People’s Congress in December 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes. An ICP service operator must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroying of any such information, or selling or proving such information to other parties. Any violation of the above decision or order may subject the ICP service operator to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or even criminal liabilities. Furthermore, in June 2016, the State Internet Information Office issued the Administrative Provisions on Mobile Internet Applications Information Services, which became effective on August 1, 2016, to further strengthen the regulation of the mobile application information services. Pursuant to these provisions, owners or operators of mobile internet applications that provide information services are required to be responsible for information security management, establish and improve the protective mechanism for user information, observe the principles of legality, rightfulness and necessity, and expressly state the purpose, method and scope of, and obtain user consent to, the collection and use of users’ personal information. In addition, the new Cyber Security Law, which became effective on June 1, 2017, also requires network operators to strictly keep confidential users’ personal information that they have collected and to establish and improve user information protective mechanism. We have required our users to consent to our collecting and using their personal information, and established information security systems to protect user’s privacy.

On May 24, 2019, the Cyberspace Administration of the PRC promulgated the Cybersecurity Review Measures (Exposure Draft), which, together with the Article 35 of the Cybersecurity Law, focuses on the cyber security review. It has clear and detailed provisions on the review object, review scope and review process, and provides guidance for law enforcement agencies.

On May 28, 2019, the Cyberspace Administration of the PRC promulgated the Administrative Measures on Data Security, which further stipulates the network security protection obligations that network operators should perform under the PRC Cybersecurity Law, clarifies the standards for the collection, processing, using and security supervision of personal information and important data, and states that network operators shall make a filing with the local cyberspace administration when they collect important data or sensitive personal information for the purposes of business operations, any network operator that collects and uses personal information through products such as websites and applications shall develop and disclose the rules for collection and use separately.

In October 2019, the Information Security Technology - Personal Information Security Specification (Exposure Draft) was published to seek comments from the general public. Although the draft is a national recommended standard but not legally enforceable, from a practical point of view, existing internet companies were inquired by the Cyberspace Administration of the PRC for not conforming to the draft’s spirit and ordered to make rectification. In January 2020, National Information Security Standardization Technical Committee promulgated Information Security Technology - Basic Specification for the Collection of Personal Information by Mobile Internet Application (App) (Exposure Draft). This draft clarifies the basic requirements that mobile Internet applications should meet to collect personal information, which means that APP developers and operators who collect user’s personal information shall strictly comply with the requirement.

In December 2019, the Cyberspace Administration of China promulgated Provisions on the Ecological Governance of Network Information Contents, which took effect on March 1, 2020. Its goal is to meet the requirement of a network comprehensive management system and promote and create a good network ecology and network space. It specifies the obligations of network information content producers, network information content service platforms and network information content service users regarding related ecological governance.

Regulations Relating to Intellectual Property Rights

The PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks and domain names.

Copyright. Pursuant to the Copyright Law and its implementation rules, creators of protected works enjoy personal and property rights, including, among others, the right of disseminating the works through information networks. Pursuant to the relevant PRC regulations, rules and interpretations, internet service providers will be jointly liable with the infringer if they (a) participate in, assist in or abet infringing activities committed by any other person through the internet, (b) are or should be aware of the infringing activities committed by their website users through the internet, or (c) fail to remove infringing content or take other action to eliminate infringing consequences after receiving a warning with evidence of such infringing activities from the copyright holder. To comply with these laws and regulations, we have implemented internal procedures to monitor and review the content we have licensed from content providers before releasing on our website and remove any infringing content promptly after we receive notice of infringement from the legitimate rights holder.