Abits Group Inc.

Company Overview

Business Model: Abits Group Inc operates primarily in the bitcoin mining industry, generating revenue through the production of bitcoin and, more recently, by providing hosting services for third-party mining equipment. The Company's strategy focuses on accumulating bitcoin, which may be sold for fiat currency based on market conditions and cash flow needs.

Market Position: The Company is a relatively new entrant to the bitcoin mining industry, which is characterized by rapid technological changes and intense competition. Abits Group Inc aims to enhance its competitive position through the deployment of cutting-edge mining equipment, such as the Bitmain S19 XP and Antminer T21, and by optimizing operational costs, particularly electricity and water. The Company's performance and competitive standing are measured by its overall hash rate.

Recent Strategic Developments:

• Mining Capacity Expansion: In March 2025, Abit USA, Inc. purchased HASH super computing servers for $3,214,800, expected to double its mining capacity by April 2025.
• New Mining Facility & Hosting: In December 2024, Abit USA, Inc. entered into a hosting agreement with 4545 S Mendenhall LLC for a new mining facility in Memphis, Tennessee, with an initial power supply of 12 MW, expandable to 22 MW. This agreement was amended in March 2025, increasing the initial deposit to $285,600 and the profit share to 33.5% of net profit. This project is expected to contribute significantly to earnings in Q2 2025.
• Land Acquisition: During 2024, the Company acquired new land in Wisconsin for approximately $687,000 for a potential mining center, though this project is currently stalled pending rezoning approvals.
• Corporate Name Change & Reverse Stock Split: In November 2023, the Company changed its name to Abits Group Inc and its ticker symbol to "ABTS". In March 2025, a one-for-fifteen reverse stock split was effected to regain compliance with Nasdaq's minimum bid price requirement.

Geographic Footprint: Abits Group Inc is a British Virgin Islands holding company. Its principal operations are conducted in the United States through its wholly-owned subsidiary, Abit USA, Inc., which operates a self-owned mining site in Duff, Tennessee. The Company also maintains a registered office in Hong Kong SAR and a subsidiary in Beijing, China, which provides limited in-house administrative support.

Cross-Border Operations:

• Subsidiaries:
  • Abit Hong Kong Limited (Hong Kong): Wholly-owned investment holding subsidiary.
  • Abit USA, Inc. (Delaware, United States): Wholly-owned subsidiary, principal bitcoin mining operations.
  • Abits Inc (Delaware, United States): Wholly-owned subsidiary, bitcoin mining operations.
  • Beijing Bitmatrix Technology Co. Ltd. (People's Republic of China): Wholly-owned subsidiary, provides limited in-house administrative support.
• Funding: Abits Group Inc, as a holding company, relies on its U.S. subsidiaries for funding. Abit USA, Inc. finances its own operating expenses and settles corporate expenses for Abits Group Inc and Abit Hong Kong Limited through non-interest bearing, no-fixed-term inter-company loans. Beijing Bitmatrix Technology Co. Ltd. is a stand-alone operation with its own cash reserves and does not rely on funding from other subsidiaries.
• Regulatory Compliance: The Company believes it is not subject to PRC regulatory approvals for overseas listings (CSRC) or cross-border data transfer (CAC) due to its limited PRC operations and revenue generation outside mainland China.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 50.3% (2024)
• Operating Margin: -11.4% (2024)
• Net Margin: -13.6% (2024)

Investment in Growth:

• R&D Expenditure: Not explicitly disclosed.
• Capital Expenditures: $2,596,673 (2024)
• Strategic Investments:
  • Acquisition of new land in Wisconsin for approximately $687,000 (2024).
  • Purchase of HASH super computing servers for $3,214,800 (March 2025, subsequent event).
  • Initial deposit for Memphis hosting agreement of $275,940 (December 2024), amended to $285,600 (March 2025).

Currency Impact Analysis:

• Foreign exchange adjustment resulted in a loss of $(22,049) in 2024 and $(20,053) in 2023, recorded in comprehensive loss.
• The reporting currency is the U.S. dollar. The Beijing subsidiary's operating expenses are denominated in Renminbi (RMB), with annual expenditure around RMB 1 million, funded by its own reserves.
• The Company considers its foreign exchange exposure minimal due to the limited level of RMB expenditure and adequate cash reserves in the PRC subsidiary. No specific hedging strategies are disclosed.

Business Segment Analysis

Bitcoin Mining & Hosting Services

Financial Performance:

• Revenue: $6,711,225 (+299.1% YoY)
• Operating Margin: -11.4% (2024)
• Key Growth Drivers:
  • Increased mining output: 100.55 bitcoins in 2024, up from 43.93 bitcoins in 2023.
  • Strong bitcoin price performance: Prices rose from approximately $40,000 to $90,000 per coin during 2024.
  • New revenue stream from hosting activities: $140,705 in 2024.

Product Portfolio:

• Bitcoin mining: Production of bitcoin using specialized ASIC chips (e.g., Bitmain S19 XP, Antminer T21).
• Hosting services: Provision of electricity, network services, facility maintenance, and technical support for third-party mining equipment.

Market Dynamics:

• Competitive Positioning: The Company operates in a highly competitive and evolving industry, competing with individual miners, professional mining operations, and other financial vehicles.
• Key Customer Types: Primarily participants in mining pools, where resources are pooled, and rewards are split proportionally to contributed hashing power.
• Regulatory Environment: Subject to evolving regulatory requirements in the U.S. and potential indirect impacts from PRC regulations on its administrative subsidiary.
• Halving Events: The bitcoin reward for solving a block was halved to 3.125 in April 2024, leading to a drop of over 40% in output from May onwards, increasing industry competitiveness.

Geographic Revenue Distribution:

• United States: 100% of segment revenue.
• Growth Markets: The Company is actively exploring new mining sites in the U.S. to upscale operations, including a new project in Memphis, Tennessee, and a stalled project in Wisconsin.

International Operations & Geographic Analysis

Revenue by Geography:

International Business Structure:

• Subsidiaries:
  • Abit Hong Kong Limited (Hong Kong SAR): Wholly-owned investment holding company.
  • Abit USA, Inc. (Delaware, United States): Wholly-owned subsidiary, responsible for principal bitcoin mining operations.
  • Abits Inc (Delaware, United States): Wholly-owned subsidiary, engaged in bitcoin mining.
  • Beijing Bitmatrix Technology Co. Ltd. (People's Republic of China): Wholly-owned subsidiary, provides limited in-house administrative support.
• Joint Ventures: None disclosed.
• Licensing Agreements: None disclosed.

Cross-Border Trade:

• Export Markets: Not explicitly detailed.
• Import Dependencies: The global supply chain for bitcoin miners is heavily dependent on China, posing a risk of disruption. The Company acquires miners from third parties, including Bitmain Technologies Delaware Limited.
• Transfer Pricing: The Company's PRC subsidiary's activities are limited to intra-subsidiary administrative support, and no specific transfer pricing policies for revenue-generating activities are detailed. Transfer pricing risks are mentioned in the context of international tax strategy.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: None disclosed.
• Dividend Payments: Abits Group Inc has never declared or paid cash dividends and intends to retain future earnings for business operations and growth.
• Dividend Yield: 0%
• Future Capital Return Commitments: No specific future capital return commitments are disclosed, with the focus on reinvestment in the business.

Balance Sheet Position (as of December 31, 2024):

• Cash and Equivalents: $1,118,929
• Total Debt: $0 (as of December 31, 2024; a $3 million loan was incurred in March 2025, subsequent to the reporting period)
• Net Cash Position: $1,118,929
• Credit Rating: Not disclosed.
• Debt Maturity Profile: A $3,000,000 loan was secured in March 2025, bearing 12.0% simple interest per annum, repayable in 24 equal monthly installments. The loan is secured by certain assets of Abit USA, Inc. in Duff, Tennessee.

Cash Flow Generation:

• Operating Cash Flow: $1,917,048 (2024), an increase of 9.2% from $1,755,913 (2023).
• Free Cash Flow: $(679,625) (2024), calculated as Operating Cash Flow minus Capital Expenditures.
• Cash Conversion Metrics: Not explicitly disclosed.

Currency Management:

• Cash holdings by major currencies: Not explicitly detailed, but the Beijing subsidiary holds approximately RMB 1.0 million in cash reserves.
• Natural hedging through operational diversification: Not explicitly stated as a strategy, but the Company's primary operations are in the U.S., with limited RMB exposure from its administrative subsidiary.
• Financial hedging instruments and strategies: The Company has not entered into any hedging transactions to reduce foreign exchange risk, considering its exposure minimal.

Operational Excellence

Production & Service Model: Abits Group Inc operates a bitcoin mining facility in Duff, Tennessee, with the primary intent of accumulating bitcoin. The facility also provides hosting services to third parties. Operations are optimized to run mostly during off-peak electricity hours, utilizing three technicians working shifts and a site manager. Hydro-power is used for cooling to reduce electricity consumption and noise levels.

Global Supply Chain Architecture: Key Suppliers & Partners:

• Mining Equipment: Bitmain Technologies Delaware Limited (supplier of Antminer S19 XP and Antminer T21 machines).
• Electricity: La Follette Utility Board (up to 10 MW for Duff, Tennessee site, under long-term agreement).
• Water: Clear-fork Utility District (for Duff, Tennessee site, under long-term agreement).
• Hosting Services: 4545 S Mendenhall LLC (for Memphis, Tennessee facility).

Facility Network:

• Manufacturing: Not applicable; the Company is a bitcoin miner, not a manufacturer.
• Research & Development: Not explicitly detailed as separate R&D centers; innovation is focused on adopting advanced mining equipment.
• Distribution:
  • Duff, Tennessee: Self-owned property at 4458 White Oak Road, comprising an office building, water reservoir, mining rigs, and ancillary equipment on approximately 1.86 acres. Electricity capacity up to 10 MW.
  • Memphis, Tennessee: New mining facility under a hosting agreement with an initial 12 MW power supply, expandable to 22 MW, expected to be operational in Q2 2025.
  • Wisconsin: New land acquired for approximately $687,000 for a potential mining center, currently stalled due to rezoning approvals.
  • Hong Kong SAR: Registered office at Level 24, Lee Garden One, 33 Hysan Avenue.
  • Beijing, China: Small office (approx. 200 sq. meters) for 3 staff engaged in accounting and administrative functions, with plans to move these operations to the United States.

Operational Metrics (2024):

• Mining Output: 100.55 bitcoins
• Hash Rate: 500 pH/sec (by Q1 2025)
• Electricity Cost: Approximately $0.04 per KWH
• Water Cost: Approximately $0.07 per gallon
• Capacity Utilization: Duff operation running at optimum level.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Mining Pools: The Company participates in third-party mining pools to combine processing power and receive proportional bitcoin rewards. This is the primary method for monetizing mining efforts.
• Direct Sales: Not explicitly detailed, but the Company may sell accumulated bitcoin for fiat currency depending on market conditions.
• Digital Platforms: The Company uses its primary trading platform for bitcoin to determine fair value and for exchanges.

Customer Portfolio: Enterprise Customers:

• Mining Pool Operators: Key partners for aggregating hashing power and distributing rewards.
• Hosting Clients: Third-party entities utilizing Abits Group Inc's facilities and services for their mining equipment. Customer Concentration: Not explicitly detailed, but reliance on mining pools implies a distributed customer base for mining rewards.

Regional Market Penetration:

• United States: Primary market for bitcoin mining operations and hosting services.
• Growth Markets: Focus on expanding mining capacity and hosting services within the U.S. (e.g., Memphis, Wisconsin projects).

Competitive Intelligence

Global Market Structure & Dynamics

Industry Characteristics: The bitcoin mining industry is highly competitive, rapidly evolving, and characterized by significant technological changes, new product introductions, and evolving industry standards. It is influenced by bitcoin price volatility, the periodic halving of mining rewards, and the increasing difficulty of mining. The industry has seen a shift from individual miners to professionalized mining operations requiring substantial capital investment.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Other Bitcoin Mining Companies: The Company competes with other entities that focus on owning or operating bitcoin exchanges, developing blockchain programming, and mining activities.
• Mining Pools: Competition exists among mining pools for attracting hashing power, and the Company relies on third-party pools for its rewards.

Regional Competitive Dynamics: The U.S. market for bitcoin mining is competitive, with significant competition for suitable mine locations and access to cost-effective electrical power. Government regulators may also restrict electricity supply to mining operations.

Risk Assessment Framework

Strategic & Market Risks

Global Market Dynamics:

• Bitcoin Price Volatility: The Company's results are highly sensitive to bitcoin price fluctuations, which are influenced by speculation, regulatory actions, and market acceptance. Significant price reductions could materially and adversely affect financial results.
• Technology Disruption: Rapid technological changes in the blockchain industry, including new mining hardware and software, could render current equipment obsolete, requiring substantial capital investment to remain competitive.
• Evolving Business Model: The Company's relatively new and evolving business model in bitcoin mining is subject to uncertainties, and failure to adapt to emerging trends could harm the business.

Operational & Execution Risks

Global Supply Chain Vulnerabilities:

• Supplier Dependency: Heavy reliance on China for bitcoin miner supply exposes the Company to disruptions (e.g., pandemics, trade restrictions).
• Regional Disruptions: Dependence on a single primary mining site (Duff, Tennessee) creates risks from local factors such as power failures or adverse weather conditions.
• Internet Disruptions: Bitcoin mining is dependent on internet connectivity; significant disruptions could affect network operations and mining ability.
• Single Miner Model Reliance: Current reliance on MicroBT miners (Bitmain S19 XP) increases vulnerability to system errors, defects, or failures specific to that model.
• Third-Party Mining Pool Reliance: Dependence on mining pool operators for reward distribution exposes the Company to risks of downtime, cyber-attacks, software malfunctions, and inaccuracies in record-keeping.

Financial & Regulatory Risks

Currency & Financial Risks:

• Foreign Exchange: Exposure to RMB fluctuations for its Beijing subsidiary's administrative expenses, though currently considered minimal.
• Investment Company Act: Risk of inadvertently violating the Investment Company Act if digital assets exceed 40% of total assets, potentially requiring registration as an investment company or termination of operations.
• Liquidity & Capital Needs: History of operating losses and potential need for additional capital, which may not be available on acceptable terms.
• Halving Events: Periodic halving of bitcoin mining rewards reduces revenue per block, requiring a corresponding increase in bitcoin price to maintain profitability.

Regulatory & Compliance Risks:

• Multi-Jurisdictional Compliance (HFCAA): Risk of delisting from Nasdaq if the PCAOB determines it cannot inspect or investigate the Company's auditor for two consecutive years, despite the current auditor being based in Singapore and providing full access.
• PRC Laws & Regulations: Uncertainty in interpretation and application of evolving PRC laws (e.g., CSRC, CAC, Data Security Law, PIPL) to its limited administrative activities in China, potentially leading to fines or sanctions.
• Illegality of Cryptocurrencies: Potential for future regulatory actions in various countries to restrict or prohibit the acquisition, ownership, or use of bitcoin, adversely affecting the business.
• Cybersecurity Threats: Vulnerability to cyber-attacks, hacking, and software flaws, which could lead to loss or theft of bitcoins, operational disruptions, and financial losses.
• Significant Electrical Power Needs: Dependence on substantial and cost-effective electrical power, with risks of government restrictions or power outages.

Geopolitical & External Risks

Country-Specific Risks:

• Geopolitical Events: Global crises or economic downturns could impact supply and demand for cryptocurrencies, leading to price volatility.
• Past Association with China Operations: Potential for negative impact from being previously associated with Moxian subsidiaries that operated in mainland China, including investigative actions by Chinese authorities.

Innovation & Technology Leadership

Research & Development Focus: Global R&D Network: The Company does not explicitly detail a separate R&D network. Its innovation focus is on the timely adoption and implementation of advanced mining technologies and hardware to maintain competitiveness. Innovation Pipeline: The Company continuously evaluates new technologies and techniques in the blockchain industry to improve performance and efficiency of its mining operations.

Intellectual Property Portfolio:

• Patent Strategy: Abits Group Inc does not currently own, nor plans to seek, patents for its blockchain and cryptocurrency operations.
• Licensing Programs: The Company expects to rely on trade secrets, trademarks, service marks, trade names, copyrights, and may license intellectual property rights from third parties.
• IP Litigation: The Company may be subject to intellectual property infringement claims, which could divert resources and disrupt operations.

Technology Partnerships:

• Strategic Alliances: Not explicitly detailed, but the Company relies on third-party suppliers for mining hardware and software.
• Research Collaborations: Not explicitly detailed.

Leadership & Governance

Executive Leadership Team

International Management Structure:

• Mr. Conglin Deng (CEO) maintains residence in both the U.S. and China, spending significant time in the U.S. overseeing bitcoin mining operations.
• Mr. Wanhong Tan (CFO) is a Malaysian national residing in Malaysia for a substantial portion of his time.
• The senior management member in charge of bitcoin mining operations, Mr. Phillip Hicks, is a U.S. citizen residing in the U.S.
• Regional leadership and reporting relationships are not explicitly detailed beyond the U.S. and PRC subsidiary structures.

Board Composition:

• The Board of Directors consists of 5 members: Conglin Deng (CEO & Director), Wanhong Tan (CFO), Khuat Leok Choong, Lionel (Independent Director & Audit Chair), Tao Xu (Independent Director), Chuan Zhan (Independent Director), and Yanyan Sun (Executive Director).
• Independence: Khuat Leok Choong, Lionel, Tao Xu, and Chuan Zhan are determined to be independent directors under NASDAQ rules.
• International Expertise: Directors bring diverse international experience from Hong Kong, Malaysia, and China, with expertise in accounting, finance, corporate governance, and investment.
• Committee Structure: The Board has an Audit Committee (chaired by Khuat Leok Choong, Lionel), a Compensation Committee (chaired by Tao Xu), and a Corporate Governance and Nominating Committee (chaired by Chuan Zhan), all composed of independent directors.

Regulatory Environment & Compliance

Multi-Jurisdictional Regulatory Framework: Primary Regulatory Environments:

• United States: Subject to U.S. federal securities laws (e.g., Exchange Act, HFCAA) due to Nasdaq listing. U.S. corporate tax rate is 21%.
• British Virgin Islands: Incorporated in BVI, not subject to BVI income tax on dividends or capital gains. No withholding tax on dividends.
• Hong Kong SAR: Abit Hong Kong Limited is incorporated in Hong Kong, where the profits tax rate is 16.5%.
• People's Republic of China: Beijing Bitmatrix Technology Co. Ltd. is subject to PRC laws, including a statutory income tax rate of 25%, but has not derived taxable income. Cross-Border Compliance:
• Holding Foreign Companies Accountable Act (HFCAA): The Company was identified as a Commission-Identified Issuer in June 2022. While its current auditor (Audit Alliance LLP, Singapore-based) provides complete access to the PCAOB, future PCAOB determinations or regulatory changes could lead to delisting if the auditor cannot be inspected.
• PRC Regulatory Uncertainty: Despite limited PRC operations, the Company faces uncertainties regarding the interpretation and application of evolving PRC laws and regulations (e.g., CSRC Trial Administrative Measures, CAC Measures for Security Assessment of Cross-border Data Transfer, Data Security Law, Personal Information Protection Law). The Company believes it is not currently subject to these due to its non-PRC revenue and primary business activities outside mainland China, but acknowledges the risk of future applicability.
• Sanctions Compliance: Required to comply with OFAC sanctions, but the pseudonymous nature of blockchain transactions poses a risk of inadvertent engagement with sanctioned persons.
• Child Pornography Risk: Acknowledges the risk of inadvertently possessing prohibited visual depictions embedded on blockchains, which could lead to legal proceedings.

International Tax Strategy:

• Transfer Pricing: Not explicitly detailed, but mentioned as a risk in the context of international tax planning.
• Tax Treaties: No income tax treaty between the U.S. and British Virgin Islands, though a Tax Information Exchange Agreement is in force.
• BEPS Compliance: Not explicitly detailed.

Environmental & Social Impact

Global Sustainability Strategy: Environmental Commitments:

• Climate Strategy: The Company has an initiative to reduce electricity consumption by using hydro-power for cooling, including enlarging its water reservoir for increased rainfall capture. This is noted as a cheaper and more environmentally friendly approach with reduced noise levels.
• Carbon Neutrality: Not explicitly detailed.
• Renewable Energy: Utilization of hydro-power as a substitute for electric consumption in certain tasks.

Regional Sustainability Initiatives:

• Duff, Tennessee: Local environmental programs include efforts to increase water reservoir capacity for hydro-power use.
• Supply Chain: Not explicitly detailed.

Social Impact by Region:

• Community Investment: Not explicitly detailed.
• Labor Standards: Not explicitly detailed beyond the number of employees and their roles.

Currency Management & Financial Strategy

Multi-Currency Operations: Currency Exposure:

Hedging Strategies:

• Transaction Hedging: Not explicitly stated; the Company has not entered into hedging transactions for foreign exchange risk.
• Translation Hedging: Not explicitly stated.
• Economic Hedging: The Company's primary operations in the U.S. and the self-funded nature of its PRC subsidiary's RMB expenses serve as a form of natural operational diversification, minimizing perceived foreign exchange risk.