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Digital Assets | 9 Months Ended
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Sep. 30, 2024
Digital Assets [Abstract] |
DIGITAL ASSETS | NOTE 6 – DIGITAL ASSETS As of September 30, 2024, digital assets holdings are as follows:
|  | September 30, 2024 |  |  | December 31, 2023 |
Opening balance |  | $ | 35,137,576 |  |  | $ | — |
Purchase of BTC |  |  | — |  |  |  | 24,990,000 |
Fair value gain from digital assets |  |  | 17,899,568 |  |  |  | 10,147,576 |
Ending balance |  | $ | 53,037,144 |  |  | $ | 35,137,576 |
As of September 30, 2024, the Company held approximately 833 BTC at the total cost of $24,990,000. For the nine months ended September 30, 2024 and for the year ended December 31, 2023, the Company recognized fair value gain of $17,899,568 and $10,147,576 on digital assets respectively. Amended and Restated BTC Trading Contract On September 24, 2024, the Company and the Association Seller entered into an Amended and Restated BTC Trading Contract (the “Amended BTC Contract”), which amended and restated the BTC Contract. Under the Amended BTC Contract, the Company is entitled to purchase up to 5,167 BTC (the “Total BTC”) from the BTC sellers set forth on Schedule I to the Amended BTC Contract (the “Schedule I BTC Sellers”) through the Association Seller at a purchase price of US$30,000 per BTC (subject to an additional purchase price by issuance of warrants to purchase shares of Common Stock at a nominal exercise price as described below) over a 12-month period commencing on the date of the Amended BTC Contract. The purchase price for the Total BTC will be paid by the Company in cash or shares of Common Stock. Although the Amended BTC Contract states that the Association Seller (Party B) “owns the virtual currency”, to our knowledge, this statement was mistakenly made. As of the date of the Amended BTC Contract, it were the Schedule I BTC Sellers who are the individual members of the Association Seller, not the Association Seller itself, who own the BTC to be sold under the Amended BTC Contract. To our knowledge, the Association Seller entered into a cooperation agreement with each Schedule I BTC Sellers (the “Cooperation Agreement”) on the same day when the Amended BTC Contract was entered. Under the Cooperation Agreement, each Schedule I BTC Seller agrees to transfer a specified number of BTC (as set forth in the Cooperation Agreement) to a BTC wallet address designated by the Association Seller for the transactions contemplated under the Amended BTC Contract. While we believe the Association Seller will be able to coordinate with its members to fulfill the Company’s purchase of BTC if the Company so decides, we cannot guarantee that the Company will successfully acquire BTC pursuant to the Amended BTC Contract. The Amended BTC Contract was entered into solely between the Company and the Association Seller and no Schedule I BTC Sellers owe any legal obligation to the Company in connection with the purchase and sale of BTC. Furthermore, as the Company is not a party to the Cooperation Agreement, it cannot enforce the terms of the Cooperation Agreement against any Schedule I BTC Sellers should such Schedule I BTC Sellers do not perform their obligations under the Cooperation Agreement. For example, if a Schedule I BTC Seller does not transfer its committed BTC to the Association Seller pursuant to the Cooperation Agreement, we may not be able to purchase such BTC from the Association Seller pursuant to the Amended BTC Contract. At the time when the Amended BTC Contract was signed, the Company indicated its intent to exercise the option to purchase 5,000 BTC out of the Total BTC pursuant to the Amended BTC Contract (the “Amended 5,000 BTC Transaction”). According to the terms of the Amended BTC Contract, the previously-made Prepayment Amount will be applied towards the total purchase price for the Amended 5,000 BTC Transaction and the Company will pay the remaining balance through (i) the issuance of 135,171,078 shares of Common Stock (the “Shares”) valued at $1.02 per share and (ii) the issuance of warrants to purchase 294,117,647 shares of Common Stock at a nominal exercise price (the “Warrants”). The value of $1.02 per share for the Shares is equal to the sum of (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the Amended BTC Contract, and (ii) $0.01. Using the same per value valuation, the warrants are worth approximately $300,000,000. Pursuant to the Amended BTC Contract, the Company shall exercise its option to purchase BTC thereunder prior to September 24, 2025. While the Company’s purchase option thereunder is time-limited, the Amended BTC Contract itself will remain in effect without a defined expiration date, unless otherwise terminated. In the event of a breach by either party, the non-breaching party has the right to terminate the agreement. In such case, the breaching party will be obligated to pay a penalty of $18,000,000 to the non-breaching party. The above description of the Amended BTC Contract does not purport to be complete, and is qualified in its entirety by reference to the full text of the Amended BTC Contract, a copy of which is attached to the Company’s Current Report on Form 8-K as Exhibit 10.1, filed with the SEC on September 27, 2024, which is incorporated by reference herein. Impact on Company’s Capitalization and Stockholder Approval The issuance of securities pursuant to the Amended BTC Contract will not affect the rights of the Company’s existing stockholders, but such issuances will have a significant dilutive effect on the Company’s existing stockholders, including the voting power of the existing stockholders. As of the date of this report, there were 6,976,410 issued and outstanding shares of the Common Stock. Immediately after the issuance of the Shares (assuming no exercise of the Warrants), there will be 142,147,488 issued and outstanding shares of the Common Stock, and the ownership percentage of the Company’s existing stockholders in the Company will be diluted to approximately 4.91%. Assuming full exercise of the Warrants concurrently with the issuance of the Shares, immediately after the issuance of the Shares, there will be 436,265,135 issued and outstanding shares of Common Stock, and the ownership percentage of the Company’s existing stockholders in the Company will be further diluted to approximately 1.60%. Pursuant to Nasdaq Rule 5635(a), if an issuer intends to issue common stock or securities convertible into or exercisable for common stock, in connection with the acquisition of stock or assets of another company, which may equal or exceed 20% of the outstanding common stock or voting power on a pre-transaction basis, the issuer generally must obtain the prior approval of its stockholders. Pursuant to Nasdaq Rule 5635(d), if an issuer intends to issue common stock or securities convertible into or exercisable for common stock, other than in a public offering, which may equal or exceed 20% of the outstanding common stock or voting power on a pre-transaction basis for a price that is lower than (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of a binding agreement; or (ii) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement for such common stock, the issuer generally must obtain the prior approval of its stockholders. The Shares to be issued to the Schedule I BTC Sellers in the Amended 5,000 BTC Transaction exceeds the threshold for which stockholder approval is required under Nasdaq Rule 5635(a), and the Warrant Shares to be issued to the Schedule I BTC Sellers upon the full exercise of the Warrants could result in the issuance of a number of shares exceeding the threshold and pricing for which stockholder approval is required under Nasdaq 5635(d). As such, the Company is required to obtain requisite stockholder approval for the Amended 5,000 BTC Transaction. As disclosed in a Preliminary Information Statement on Schedule 14C filed by the Company on October 3, 2024, the Company has obtained the requisite stockholder approval for the Amended 5,000 BTC Transaction in accordance with the Company’s articles of incorporation and bylaws on September 24, 2024.

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