Bit Origin (BTOG) Risk Analysis

In March 2022, President Biden signed an executive order directing federal agencies to study cryptocurrencies and consider potential regulatory frameworks, including evaluation of a U.S. central-bank digital currency (CBDC). Since then, federal legislators and regulators have advanced a series of proposals that could redefine how digital assets are classified and supervised. For example, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), signed in July 2025, established the first U.S. framework for payment stablecoins by requiring that such tokens be fully backed by high-quality liquid assets and treated as payment instruments rather than securities. The Digital Asset Market Clarity Act (CLARITY Act), which passed the U.S. House of Representatives in 2025 but has not yet been enacted, would allocate jurisdiction over digital commodities to the Commodity Futures Trading Commission (CFTC) and over digital securities to the Securities and Exchange Commission (SEC) and would impose registration, customer protection and anti-money-laundering obligations on exchanges and brokers. The CLARITY Act also includes provisions allowing issuers to self-certify that a token is a digital commodity and safe-harbor exemptions for peer-to-peer transactions. These legislative efforts illustrate Congress' intent to delineate categories of digital assets, but their ultimate scope and effect remain uncertain. Separately, federal agencies continue to interpret and enforce existing laws. The CFTC currently views Bitcoin and certain other cryptocurrencies as commodities, a position supported by several federal court decisions. The Commodities Exchange Act of 1936 (CEA) does not impose direct obligations on us for mining or exchanging Bitcoin. However, the CEA and related CFTC regulations apply to transactions involving futures, options, swaps or leveraged or margined transactions that do not result in delivery within 28 days. Changes in the CEA, its implementing regulations or interpretations could subject Bitcoin to additional oversight. The CFTC has authority to pursue enforcement actions against persons who engage in market manipulation or deceptive practices in any contract of sale of a commodity in interstate commerce, including spot transactions in Bitcoin. While the CFTC has not yet promulgated rules governing spot Bitcoin transactions, it has pursued enforcement actions in connection with fraud and manipulation. Moreover, state securities regulators continue to bring enforcement actions under state "blue sky" laws and have urged Congress to preserve state antifraud authority even as federal legislation advances. If our mining activities were deemed to constitute an investment contract or pooled investment in derivatives, we could be required to register as a commodity pool operator or otherwise comply with CFTC regulations, which would impose significant compliance costs. We may decide not to pursue such registrations, which could force us to cease certain operations. The SEC has stated that many digital assets may be securities under existing securities laws and has pursued enforcement actions against token issuers and intermediaries. Senior SEC officials have indicated that Bitcoin is not a security, yet these statements are non-binding and could be revisited. The SEC's FinHub published a framework for analyzing whether a token is an investment contract, but this framework is not a rule and does not bind courts or the Commission. The SEC's Spring 2025 regulatory agenda contemplates new rules addressing offers and sales of digital assets, trading on alternative trading systems and custody of digital-asset securities. In early 2024 the SEC approved several spot-Bitcoin exchange-traded products, and in September 2025 it adopted generic listing standards for commodity-based exchange-traded products, signalling a willingness to permit trading of certain digital-asset products. At the same time, the Commission has argued in court that many tokens are unregistered securities and has obtained settlements or judgments accordingly. Should the SEC or a court determine that Bitcoin, Dogecoin or other tokens we mine constitute securities, we could be required to register as an issuer of securities, comply with the reporting and disclosure requirements of the Securities Exchange Act of 1934, and adhere to the Investment Company Act of 1940 and other federal securities laws. We could also face private litigation or governmental enforcement for offers or sales of unregistered securities. In addition to securities and commodities laws, other regulatory developments create further compliance risks. In October 2023, the Financial Crimes Enforcement Network (FinCEN) proposed a rule identifying convertible virtual-currency mixing as a transaction of primary money-laundering concern and requiring financial institutions to report mixing transactions with foreign counterparties. On August 4 2025, FinCEN issued a notice urging financial institutions to monitor CVC kiosks for scam payments and reminding operators of their Bank Secrecy Act obligations. These actions signal increased AML scrutiny across the crypto ecosystem and could lead to additional compliance obligations for businesses operating mining pools or offering custodial services. Separately, ASU 2023-08 issued by the Financial Accounting Standards Board requires companies to measure certain crypto assets at fair value with changes recognised in earnings, effective for public companies in fiscal years beginning after December 15 2024. Although this accounting guidance does not directly regulate our operations, it may affect how investors perceive volatility in our financial statements. The regulatory treatment of Bitcoin and other digital assets may also change based on how they are used. For example, tokens that confer governance rights, pay dividends or represent fractionalized interests in underlying assets may be more likely to be deemed securities. Decentralized finance platforms and staking programs have attracted regulatory attention and could influence how miners are regulated. Because our business involves pooling computational resources to secure the Bitcoin blockchain and sharing rewards among hash-rate contributors, regulators could view our activities as a collective investment vehicle. If regulators or courts classify our mining rewards as distributions of a security or our arrangements as derivative transactions, we may need to register and comply with additional regulatory regimes. Any such classification could require significant changes to our business model, impose additional costs, or subject us to fines and penalties. Given the dynamic and uncertain regulatory environment, we cannot predict whether Bitcoin or other digital assets we hold or mine will be classified as a security, a commodity, a currency or a new form of regulated financial instrument. We also cannot predict whether any future legislation will preempt state laws or expand federal jurisdiction. Any new regulation-whether issued by the SEC, the CFTC, FinCEN, the IRS or state authorities-could require us to incur substantial compliance costs, limit our ability to mine or hold digital assets, restrict our access to markets, or require us to register as a commodity pool operator or broker-dealer. If we fail to comply with applicable regulations or if regulators determine that our operations violate securities or commodities laws, we could be subject to investigations, enforcement actions, civil or criminal penalties, and private litigation. Such outcomes could have a material adverse effect on our business, financial condition and results of operations.

In general, novel or unique assets such as Bitcoin, Dogecoin, and other digital assets may be classified as securities if they meet the definition of investment contracts under U.S. law. In recent years, the offer and sale of digital assets other than Bitcoin, most notably Kik Interactive Inc.'s Kin tokens and Telegram Group Inc.'s TON tokens, have been deemed to be investment contracts by the SEC. While we believe that Bitcoin and Dogecoin are unlikely to be considered an investment contract, and thus a security under the investment contract definition, we cannot provide any assurances that digital assets that we mine or otherwise acquire or hold for our own account, including Bitcoin and Dogecoin, will never be classified as securities under U.S. law. This would obligate us to comply with registration and other requirements by the SEC and, therefore, cause us to incur significant, non-recurring expenses, thereby materially and adversely impacting an investment in the Company.

The Alberta Utilities Commission ("AUC") is the Province of Alberta's electric generation regulatory agency. The AUC regulates and oversees the development of and generation of electricity under the Hydro and Electric Act (the "Act"). The AUC ensures that proposed electric generation activities are in the public interest while considering related environmental and social issues. As such, the AUC must approve all cryptocurrency miners seeking to develop their own electric generation in Alberta, unless their operations are exempt. The AUC has announced a pause on approvals of new renewable electricity generation projects over one megawatt until Feb. 29, 2024, and that it will review policies and procedures for the development of renewable electricity generation. With the pause expiring on February 27, 2024, the Alberta Government has formally announced the direction its new policy on renewables will take. The Minister of Affordability and Utilities, in a letter to the AUC, directed the AUC to develop policy for the approval of renewable energy developments. We may in the future lease mining facilities in Canada. If our hosting partner fails to meet the AUC requirements in the future, it may be required to discontinue operations and we may have to look for an alternative site to accommodate our miners. If we are not able to find an alternative with acceptable fees, our result of operation will be adversely impact.

As of the date of this annual report, there are no legislation or prohibitions directly applicable to Bitcoin or cryptocurrency mining as an activity. To the extent that cryptocurrency mining constitutes a regulated product in the future, it may fall under the scope of the Securities and Futures Act 2001, the Commodity Trading Act 1992 or the Payment Services Act 2019. Nevertheless, profits arising from operations that mine cryptocurrencies in exchange for money are subject to income tax. We are not currently engaging in any active business and is seeking opportunities in crypto asset mining and blockchain technologies in Singapore. Should we participate in the mining or other blockchain technologies in Singapore, we may be subject to additional laws and regulations such as the new Financial Services and Markets Bill passed in April 2022. Such circumstances could have a material adverse effect on the amount of Bitcoin we may be able to mine, the value of Bitcoin and any other cryptocurrencies we may potentially acquire or hold in the future and, consequently, our business, prospects, financial condition and operating results.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act, (2021 Revision) (the "Substance Act") came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain "relevant activities," which, in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company, compliance obligations include filing annual notifications for the Company, which needs to state whether we are carrying out any relevant activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.

Our crypto mining business may be or may become 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 typically applied to financial services and banking, securities, commodities, the exchange, and transfer of digital assets, cross-border and domestic money and cryptocurrency transmission businesses, as well as those governing data privacy, data governance, data protection, cybersecurity, fraud detection, payment services (including payment processing and settlement services), consumer protection, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, 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, digital assets, and related technologies. As a result, they often do not contemplate or address unique issues associated with digital assets, are subject to significant uncertainty, and vary widely across U.S. federal, state, and local 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 relative novelty and evolving nature of our business and the significant uncertainty surrounding the regulation of digital assets requires us to exercise our judgement 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, limitations on our business, reputational harm, and other regulatory consequences, as well as criminal penalties, each of which may be significant and could adversely affect our business, operating results and financial condition. In addition to existing laws and regulations, various governmental and regulatory bodies, including legislative and executive bodies, in the United States, as well as in other countries may adopt new laws and regulations, or new interpretations of existing laws and regulations may be issued by such bodies or the judiciary, which may adversely impact the development and use of digital assets as a whole, digital asset mining operations, and our legal and regulatory status in particular by changing how we operate our business, how our operations are regulated, and what products or services we and our competitors can offer, requiring changes to our compliance and risk mitigation measures, imposing new licensing requirements or new costs of doing business, or imposing a total ban on certain activities or transactions with respect to digital assets, as has occurred in certain jurisdictions in the past. If laws or regulations or their respective interpretation change, we may become subject to ongoing examinations, oversight, and reviews by U.S. federal and state regulators, which would have broad discretion to audit and examine our business if we become subject to their oversight. Adverse changes to, or our failure to comply with, any laws and regulations have had, and may continue to have, an adverse effect on our reputation and brand and our business, operating results and financial condition.

The SEC and its staff have taken the position that certain digital assets fall within the definition of a "security" under the U.S. federal securities laws. The legal test for determining whether any given digital asset is a security, as described below, is a highly complex, fact-driven analysis that may evolve over time, and the outcome is difficult to predict. Our determination that the digital assets we hold are not securities is a risk-based assessment and not a legal standard or one binding on regulators. The SEC generally does not provide advance guidance or confirmation on the status of any particular digital asset as a security. Furthermore, the SEC's views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements made by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin is a security (as currently offered and sold). However, such statements are not official policy statements by the SEC and reflect only the speakers' views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital asset. As of the date of this annual report, with the exception of certain centrally issued digital assets that have received "no-action" letters from the SEC staff, Bitcoin and Ethereum, or ETH, are the only digital assets which senior officials at the SEC have publicly stated are unlikely to be considered securities. As a Bitcoin mining company, we do not believe we are an issuer of any "securities" as defined under the federal securities laws. Our internal process for determining whether the digital assets we hold or plan to hold is based upon the public statements of the SEC and existing case law. The digital assets we hold or plan to hold, other than Bitcoin, may have been created by an issuer as an investment contract under the Howey test, SEC v. Howey Co., 328 U.S. 293 (1946), and may be deemed to be securities by the SEC. However, the Company was not the issuer that created these digital assets and is holding them on an interim basis until liquidated. Should the SEC state that Bitcoin, or other digital assets we hold should be deemed to be securities, we may no longer be able to hold any of these digital assets. It will then likely become difficult or impossible for such digital asset to be traded, cleared or custodied in the United States through the same channels used by non-security digital assets, which in addition to materially and adversely affecting the trading value of the digital asset is likely to cause substantial volatility and significantly impact its liquidity and market participants' ability to convert the digital asset into U.S. dollars. Our inability to exchange Bitcoin for fiat or other digital assets (and vice versa) to administer our treasury management objectives may decrease our earnings potential and have an adverse impact on our business and financial condition. Under the Investment Company Act of 1940, as amended (the "Investment Company Act"), a company may fall within the definition of an investment company under section 3(c)(1)(A) thereof if 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 under section 3(a)(1)(C) thereof if it is engaged or proposes to engage in business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire "investment securities" (as defined therein) having a value exceeding 40% of its total assets (exclusive of government securities and cash items) on an unconsolidated basis. There is no authoritative law, rule or binding guidance published by the SEC regarding the status of digital assets as "securities" or "investment securities" under the Investment Company Act. Although we believe that we are not engaged in the business of investing, reinvesting, or trading in investment securities, and we do not hold ourselves out as being primarily engaged, or proposing to engage primarily, in the business of investing, reinvesting or trading in securities, to the extent the digital assets which we mine, own, or otherwise acquire may be deemed "securities" or "investment securities" by the SEC or a court of competent jurisdiction, we may meet the definition of an investment company. If we fall within the definition of an investment company under the Investment Company Act, we would be required to register with the SEC. If an investment company fails to register, it likely would have to stop doing almost all business, and its contracts would become voidable. Generally non-U.S. issuers may not register as an investment company without an SEC order. The classification of a digital asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the mining, sale and trading of such assets. For example, a digital 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 digital assets that are securities in the United States may be subject to registration with the SEC as a "broker" or "dealer." There can be no assurances that we will properly characterize any given digital asset as a security or non-security for purposes of determining which digital assets to mine, hold and trade, or that the SEC, or a court, if the question was presented to it, would agree with our assessment. We could be subject to judicial or administrative sanctions for failing to offer or sell digital assets in compliance with the registration requirements, or for acting as a broker or dealer without appropriate registration. Such an action could result in injunctions, cease and desist orders, as well as civil monetary penalties, fines, and disgorgement, criminal liability, and reputational harm. For instance, all transactions in such supported digital asset would have to be registered with the SEC, or conducted in accordance with an exemption from registration, which could severely limit its liquidity, usability and transactability. Further, it could draw negative publicity and a decline in the general acceptance of the digital asset. Also, it may make it difficult for such digital asset to be traded, cleared, and custodied as compared to other digital assets that are not considered to be securities.