UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
☒ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30,
2024
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
_____________
| NEXT TECHNOLOGY HOLDINGS INC |
| (Exact name of small business issuer as specified in its charter) |
| Wyoming | | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Tax. I.D. No.) |
Room 519, 05/F Block T3
Qianhai Premier Finance Centre Unit 2
Guiwan Area, Nanshan District, Shenzhen
(Address of Principal Executive Offices)
(86) 158 2117 2322
(Registrant’s Telephone Number, Including
Area Code)
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, smaller reporting company, or an emerging growth company.
See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ☒ |
| Emerging growth company | ☐ | | |
If an emerging growth company, 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. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of December 9, 2024, there were 6,976,410
shares of common stock outstanding.
TABLE OF CONTENTS
Explanatory Note
Next Technology Holding Inc (formerly known
as WeTrade Group Inc. (the “Company”)) is filing this Amendment (the “Amendment”) to the Quarterly Report on
Form 10-Q for the period ended September 30, 2024, originally filed with the Securities and Exchange Commission (the “SEC”)
on November 15, 2024 (the “Original Filing”), to amend our disclosures in relation to the digital assets and prepayment of
digital assets.
In accordance with the applicable SEC rules,
this Amendment includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, from our Chief
Executive Officer and Chief Financial Officer.
Except as described above, this Form 10-Q/A
does not amend, update or change any other items or disclosures contained in the Original Filing, and accordingly, this Form 10-Q/A does
not reflect or purport to reflect any information or events occurring after the original filing date of the Original Filing or modify
or update those disclosures affected by subsequent events. Accordingly, this Form 10-Q/A should be read in conjunction with the Original
Filing and the Company’s other filings with the SEC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section
21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These forward-looking statements are generally
located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” but may be found in other locations as well. These forward-looking statements are subject to risks and uncertainties
and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance
or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements.
We identify forward-looking
statements by use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate,”
“hope,” “plan,” “believe,” “predict,” “envision,” “intend,” “will,”
“continue,” “potential,” “should,” “confident,” “could” and similar words
and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could
differ materially from those contained in the forward-looking statements.
Forward-looking statements
are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors
that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed
or implied by the forward-looking statements in this report. These factors include, among others:
| |
● |
our ability to execute on our growth strategies; |
| |
|
|
| |
● |
our ability to find manufacturing partners on favorable terms; |
| |
|
|
| |
● |
declines in general economic conditions in the markets where we may compete; |
| |
|
|
| |
● |
our anticipated needs for working capital; and |
Where we express an expectation
or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.
Forward-looking statements
speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent required
by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated events.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
NEXT TECHNOLOGY HOLDINGS INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (All amounts shown
in U.S. Dollars) | |
As of
September 30,
2024 | | |
As of
December 31,
2023
(Audited) | |
| | |
| | |
Restated | |
| ASSETS | |
| | |
| |
| Current assets: | |
| | |
| |
| Cash and cash equivalents | |
$ | 668,387 | | |
$ | 668,387 | |
| Digital assets | |
| 53,037,144 | | |
| 35,137,576 | |
| Accounts receivable-third parties, net | |
| - | | |
| 1,000,000 | |
| Amount due from related parties | |
| 206,724 | | |
| - | |
| Prepayments | |
| 12,125,500 | | |
| 12,125,500 | |
| Total current
assets | |
| 66,037,755 | | |
| 48,931,463 | |
| | |
| | | |
| | |
| Non-current assets: | |
| | | |
| | |
| Investment in associate company | |
| 13,396,000 | | |
| - | |
| Total assets | |
| 79,433,755 | | |
$ | 48,931,463 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’
EQUITY | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Account payables | |
| - | | |
| 800,000 | |
| Amount due to related parties | |
| 1,478,588 | | |
| 1,692,672 | |
| Tax payable | |
| 130,415 | | |
| 130,415 | |
| Other payables | |
| 1,082,500 | | |
| 1,600,000 | |
| Total current liabilities | |
| 2,691,503 | | |
| 4,223,087 | |
| | |
| | | |
| | |
| Non-current liabilities: | |
| | | |
| | |
| Deferred tax liabilities | |
| 2,666,078 | | |
| — | |
| Total liabilities | |
| 5,357,581 | | |
| 4,223,087 | |
| | |
| | | |
| | |
| Stockholders’ equity: | |
| | | |
| | |
| Common stock; no par value; 6,976,410 and 2,625,130 issued and outstanding on September 30, 2024 and December 31, 2023 respectively | |
| 71,718,790 | | |
| 56,348,650 | |
| Retained Earnings /(Accumulated
Deficits) | |
| 2,357,384 | | |
| (11,640,274 | ) |
| Total stockholders’
equity | |
| 74,076,174 | | |
| 44,708,376 | |
| | |
| | | |
| | |
| Total liabilities
and stockholders’ equity | |
$ | 79,433,755 | | |
$ | 48,931,463 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NEXT TECHNOLOGY HOLDINGS INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
| | |
For the
Three Months
End
September 30,
2024 | | |
For the
Three Months
End
September 30,
2023 | | |
For the
Nine Months
End
September 30,
2024 | | |
For the
Nine Months
Ended
September 30,
2023 | |
| Revenue: | |
| | |
| | |
| | |
| |
| Service revenue | |
$ | — | | |
$ | 1,500,000 | | |
$ | — | | |
$ | 1,500,000 | |
| Total service revenue | |
| | | |
| — | | |
| — | | |
| — | |
| Cost of revenue | |
| — | | |
| (270,864 | ) | |
| — | | |
| (270,864 | ) |
| Gross Profit | |
| — | | |
| 1,229,136 | | |
| — | | |
| 1,229,136 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | |
| General and administrative expense | |
| (566,983 | ) | |
| (234,800 | ) | |
| (1,242,128 | ) | |
| (537,576 | ) |
| Total operating expenses | |
| (566,983 | ) | |
| (234,800 | ) | |
| (1,242,128 | ) | |
| (537,576 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| (Loss)/ Profit from operations | |
| (566,983 | ) | |
| 994,336 | | |
| (1,242,128 | ) | |
| 691,560 | |
| Other income/(loss) | |
| 2,303,789 | | |
| (14,406,397 | ) | |
| 17,899,568 | | |
| (14,406,396 | ) |
| Profit/ (loss) before income taxes | |
| 1,736,806 | | |
| (13,412,061 | ) | |
| 16,657,440 | | |
| (13,714,836 | ) |
| Income tax expenses | |
| (364,730 | ) | |
| — | | |
| (2,666,078 | ) | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
| Net profit/ (loss) from continuing operation | |
$ | 1,372,076 | | |
$ | (13,412,061 | ) | |
$ | 13,991,362 | | |
$ | (13,714,836 | ) |
| Net profit/ (loss) from discontinued operation | |
| 6,296 | | |
| 301,392 | | |
| 6,296 | | |
| (1,552,178 | ) |
| Total comprehensive profit/ (loss) | |
$ | 1,378,372 | | |
$ | (13,110,669 | ) | |
$ | 13,997,658 | | |
$ | (15,267,014 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Earnings /(Loss) per share, basic and diluted from continuing operation | |
$ | 0.20 | | |
$ | (9.47 | ) | |
$ | 2.59 | | |
$ | (11.66 | ) |
| Earnings /(Loss) per share, basic and diluted from discontinued operation | |
$ | 0.001 | | |
$ | 0.21 | | |
$ | 0.001 | | |
$ | (1.32 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted-average shares outstanding, basic and diluted | |
| 6,976,410 | | |
| 1,416,813 | | |
| 5,404,232 | | |
| 1,176,618 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NEXT TECHNOLOGY HOLDINGS INC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three months ended September 30, 2024
| | |
Common Stock | | |
Retained | | |
Total
Shareholder | |
| | |
Shares | | |
Amount | | |
Earnings | | |
Equity | |
| Balance as of June 30, 2024 | |
| 6,976,410 | | |
$ | 71,718,790 | | |
$ | 979,012 | | |
$ | 72,697,802 | |
| Net profit for the period | |
| — | | |
| — | | |
| 1,372,076 | | |
| 1,372,076 | |
| Gain from discontinued operation | |
| — | | |
| — | | |
| 6,296 | | |
| 6,296 | |
| Balance as of September 30, 2024 | |
| 6,976,410 | | |
$ | 71,718,790 | | |
$ | 2,357,384 | | |
$ | 74,076,174 | |
Nine months ended September 30, 2024
| | |
Common Stock | | |
(Accumulated Deficits)/
Retained | | |
Total
Shareholder | |
| | |
Shares | | |
Amount | | |
Earnings | | |
Equity | |
| Balance as of December 31, 2023 | |
| 2,625,130 | | |
$ | 56,348,650 | | |
$ | (11,640,274 | ) | |
$ | 44,708,376 | |
| Stock issued during the period | |
| 4,351,280 | | |
| 15,370,140 | | |
| — | | |
| 15,370,140 | |
| Net profit for the period | |
| — | | |
| — | | |
| 13,991,362 | | |
| 13,991,362 | |
| Gain from discontinued operation | |
| — | | |
| — | | |
| 6,296 | | |
| 6,296 | |
| Balance as of September 30, 2024 | |
| 6,976,410 | | |
$ | 71,718,790 | | |
$ | 2,357,384 | | |
$ | 74,076,174 | |
Three months ended September 30, 2023
| | |
Common Stock | | |
Accumulated | | |
Total
Shareholder | |
| | |
Shares | | |
Amount | | |
Deficits | | |
Equity | |
| Balance as of June 30, 2023 | |
| 1,054,530 | | |
$ | 43,732,196 | | |
$ | (3,871,203 | ) | |
$ | 39,860,993 | |
| Stock issued during the period | |
| 1,570,600 | | |
| 12,616,454 | | |
| — | | |
| 12,616,454 | |
| Gain from discontinued operation | |
| — | | |
| — | | |
| 301,392 | | |
| 301,392 | |
| Net loss for the period | |
| — | | |
| — | | |
| (13,412,061 | ) | |
| (13,412,061 | ) |
| Balance as of September 30, 2023 | |
| 2,625,130 | | |
$ | 56,348,650 | | |
$ | (16,981,872 | ) | |
$ | 39,366,778 | |
Nine months ended September 30, 2023
| | |
Common Stock | | |
Accumulated | | |
Accumulated
Other
Comprehensive | | |
Total
Shareholder | |
| | |
Shares | | |
Amount | | |
Deficits | | |
Income | | |
Equity | |
| Balance as of December 31, 2022 | |
| 1,054,530 | | |
$ | 43,732,196 | | |
$ | (1,714,858 | ) | |
$ | (310,576 | ) | |
$ | 41,706,762 | |
| Stock issued during the period | |
| 1,570,600 | | |
| 12,616,454 | | |
| — | | |
| — | | |
| 12,616,454 | |
| Foreign currency translation adjustment | |
| — | | |
| — | | |
| — | | |
| 310,576 | | |
| 310,576 | |
| Loss from discontinued operation | |
| — | | |
| — | | |
| (1,552,178 | ) | |
| — | | |
| (1,552,178 | ) |
| Net loss for the period | |
| — | | |
| — | | |
| (13,714,836 | ) | |
| — | | |
| (13,714,836 | ) |
| Balance as of September 30, 2023 | |
| 2,625,130 | | |
$ | 56,348,650 | | |
$ | (16,981,872 | ) | |
$ | — | | |
$ | 39,366,778 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NEXT TECHNOLOGY HOLDINGS INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | |
For the
Nine months Ended | | |
For the
Nine months Ended | |
| | |
September 30,
2024 | | |
September 30,
2023 | |
| Cash flows from operating activities: | |
| | |
| |
| Net Profit/ (loss) | |
$ | 13,991,362 | | |
$ | (13,714,836 | ) |
| Fair value (gain)/loss from digital assets | |
| (17,899,568 | ) | |
| 3,059,342 | |
| Gain/ (loss) from discontinued operation | |
| 6,296 | | |
| (1,552,178 | ) |
| | |
| | | |
| | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivables | |
| 1,000,000 | | |
| — | |
| Prepayments | |
| — | | |
| 50,000 | |
| Account payables | |
| (800,000 | ) | |
| — | |
| Director fee payable | |
| 92,000 | | |
| — | |
| Accrued expenses | |
| 49,500 | | |
| 270,864 | |
| Other payables | |
| 813,000 | | |
| — | |
| Deferred tax liabilities | |
| 2,666,078 | | |
| — | |
| Net cash flows used in continued operating activities | |
| (81,332 | ) | |
| (11,886,808 | ) |
| Net cash flows used in discontinued operating activities | |
| — | | |
| 32,881,236 | |
| Net cash flows (used in)/ provided by operating activities | |
| (81,332 | ) | |
| 20,994,428 | |
| Cash flow from Investing activities: | |
| | | |
| | |
| Prepayment for digital assets | |
| — | | |
| (12,125,500 | ) |
| Digital assets | |
| — | | |
| (24,990,000 | ) |
| Net cash flows used in investing activities | |
| — | | |
| (37,115,500 | ) |
| Cash flow from financing activities: | |
| | | |
| | |
| Shareholders’ loan | |
| (512,808 | ) | |
| 87,440 | |
| Proceeds from stock issuances | |
| 594,140 | | |
| 12,616,454 | |
| Net cash flows from financing activities | |
| 81,332 | | |
| 12,703,894 | |
| Net cash flows from discontinued activities | |
| — | | |
| 4,500,000 | |
| Net cash flows provided by financing activities | |
| 81,332 | | |
| 17,203,894 | |
| | |
| | | |
| | |
| Effect of exchange rate changes on cash | |
| — | | |
| 310,576 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Change in cash and cash equivalents: | |
| — | | |
| 1,393,398 | |
| | |
| | | |
| | |
| Cash and cash equivalents, beginning of period | |
$ | 668,387 | | |
$ | 22,926 | |
| | |
| | | |
| | |
| Cash and cash equivalents, end of period | |
$ | 668,387 | | |
$ | 1,416,324 | |
| | |
| | | |
| | |
| Supplemental cash flow information: | |
| | | |
| | |
| Cash paid for interest | |
$ | — | | |
$ | — | |
| Cash paid for taxes | |
$ | — | | |
$ | — | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NEXT TECHNOLOGY HOLDINGS INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS
Business
Next Technology Holdings Inc (formerly known as WeTrade Group, Inc) was incorporated in the State of Wyoming on March 28, 2019. We currently pursue two corporate strategies. One business strategy is to continue providing software development services, and the other strategy is to acquire and hold bitcoin.
Software development
We provide AI-enabled software development
services to our customers, which include developing, designing, and implementing various SAAS software solutions for businesses of all
types, including industrial and other businesses.
Bitcoin Acquisition Strategy
Our bitcoin acquisition strategy generally involves
acquiring bitcoin with our liquid assets that exceed working capital requirements, and from time to time, subject to market conditions,
issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase
bitcoin.
We view our bitcoin holdings as long-term
holdings and expect to continue to accumulate bitcoin. We have not set any specific target for the amount of bitcoin we seek to hold,
and we will continue to monitor market conditions in determining whether to engage in additional financing to purchase additional bitcoin.
This overall strategy also contemplates that we
may (i) periodically sell bitcoin for general corporate purposes, including to generate cash for treasury management or in connection
with strategies that generate tax benefits in accordance with applicable law, (ii) enter into additional capital raising transactions
that are collateralized by our bitcoin holdings, and (iii) consider pursuing additional strategies to create income streams or otherwise
generate funds using our bitcoin holdings.
We believe that, due to its limited supply, bitcoin
offers the opportunity for appreciation in value if its adoption increases and has the potential to serve as a hedge against inflation
in the long-term.
The following table presents a roll-forward of
our bitcoin holdings, including additional information related to our bitcoin purchases, and digital asset impairment losses during the
period:
| | |
Digital asset
original cost
basis | | |
Gain from
digital asset | | |
Market
Value of
digital
asset | | |
Approximate
number of
Bitcoin held | |
| Balance on December 31, 2023 | |
$ | 24,990,000 | | |
$ | 10,147,576 | | |
$ | 35,137,576 | | |
| 833 | |
| Digital asset purchase | |
| - | | |
| - | | |
| - | | |
| - | |
| Fair value change during the period | |
| - | | |
| 17,899,568 | | |
| 17,899,568 | | |
| - | |
| Balance on September 30, 2024 | |
$ | 24,990,000 | | |
$ | 28,047,144 | | |
$ | 53,037,144 | | |
| 833 | |
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Preparation of Financial Statements
The condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The
condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company
transactions and balances have been eliminated in consolidation.
The condensed consolidated financial statements
of the Company as of and for the nine months ended September 30, 2024 and 2023 are unaudited. In the opinion of management, all adjustments
(including normal recurring adjustments) that have been made are necessary to fairly present the financial position of the Company as
of September 30, 2024, the results of its operations for the nine months ended September 30, 2024 and 2023, and its cash flows for the
nine months ended September 30, 2024 and 2023. Operating results for the quarterly periods presented are not necessarily indicative of
the results to be expected for a full fiscal year.
The statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules
and regulations. These financial statements should be read in conjunction with the financial statements and other information included
in the Company’s Annual Report on Form 10-K as filed with the SEC for the fiscal year ended December 31, 2023.
Revenue recognition
The Company follows the guidance of Accounting
Standards Codification (ASC) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise
judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying
our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price
to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies
the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for
the services it transfers to its clients.
Goodwill and Other - Crypto Assets
In December 2023, the FASB issued ASU 2023-08,
Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which establishes
accounting guidance for crypto assets meeting certain criteria. Bitcoin meets these criteria. The amendments require crypto assets to
meet the criteria to be recognized at fair value with changes recognized in net income each reporting period. Upon adoption, a cumulative-effect
adjustment is made to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption. ASU 2023-08
is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption
is permitted. The Company has early applied ASU 2023-08 and measured crypto assets (presented as digital assets) at fair value with changes
recognized in net income this period.
The following table summarizes the Company’s
digital asset holdings as of:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| Approximate number of bitcoins held | |
| 833 | | |
| 833 | |
| Digital assets carrying value | |
$ | 53,037,144 | | |
$ | 35,137,576 | |
| Gain on digital assets during the period/year | |
$ | 17,899,568 | | |
$ | 10,147,576 | |
As of September 30, 2024, the Company had approximately
833 bitcoins which had a carrying value of approximately $53.04 million.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with a maturity period of three months or less to be cash or cash equivalents. The carrying amounts reported in the accompanying
unaudited condensed consolidated balance sheets for cash and cash equivalents approximate their fair value. All of the Company’s
cash that is held in bank accounts in Hong Kong and PRC are not protected by Federal Deposit Insurance Corporation (“FDIC”)
insurance.
Functional Currency
The Company’s principal countries of
operations are USA and Hong Kong. The accompanying condensed consolidated financial statements are presented in US$ and the functional
currency of the Company is US$.
Investment
Investment in associate company that we have significant influence
but do not have control over the investee are accounted for under the equity method. We will periodically review the investment for impairment.
The initial measurement and periodic subsequent adjustments of the investment are calculated by applying the ownership percentage to the
net assets or equity of the partially owned entity under ASC 323.
Consolidation
The Company’s condensed consolidated financial
statements include the financial statements of the Group and subsidiaries. All transactions and balances among the Group and its subsidiaries
have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity
with US GAAP requires management to make judgement estimates and assumptions that affect the amounts reported in the condensed consolidated
financial statements and accompanying notes. Management believes that the estimates used in preparing the financial statements are reasonable
and prudent; however, actual results could differ from these estimates. Significant accounting estimates include the allowance for expected
credit loss, valuation of deferred tax assets, and certain accrued liabilities such as contingent liabilities.
Accounts Receivable
Accounts receivables are presented net of allowance
for expected credit loss. The Company uses specific identification in providing for bad debts when facts and circumstances indicate that
collection is doubtful and based on factors listed in the following paragraph. If the financial conditions of its customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowance may be required.
The Company maintains an allowance for expected
credit loss which reflects its best estimate of amounts that potentially will not be collected. In determining the amount of the allowance
for credit losses, the Company considers historical collection history based on past due status, the current aging of receivables, customer-specific
credit risk factors including their current financial condition, current market conditions, and probable future economic conditions which
inform adjustments to historical loss patterns. Additionally, the Company makes specific bad debt provisions based on any specific knowledge
the Company has acquired that might indicate that an account is uncollectible. The facts and circumstances of each account may require
the Company to use substantial judgment in assessing its collectability.
Leases
The Company adopted Accounting Standards Update
No. 2016-02, Leases (Topic 842) (ASU 2016-02), and generally requires lessees to recognize operating and financing lease liabilities and
corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty
of cash flows arising from leasing arrangements.
Operating leases are included in operating lease
right-of-use (“ROU”) assets and short-term and long-term lease liabilities in our condensed consolidated balance sheets. Finance
leases are included in property and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated
balance sheets.
ROU assets represent the Company’s right
to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments
over the lease term. As most of the leases do not provide an implicit rate, we use the industry incremental borrowing rate based on the
information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options
to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is
recognized on a straight-line basis over the lease term.
ASU 2016-02 requires that public companies use a secured incremental
browning rate for the present value of lease payments when the rate implicit in the contract is not readily determinable.
Software Development Costs
We apply ASC 985-20, Software—Costs of Software
to Be Sold, Leased, or Marketed, in analyzing our software development costs. ASC 985-20 requires the capitalization of certain software
development costs subsequent to the establishment of technological feasibility for a software product in development. Research and development
costs associated with establishing technological feasibility are expensed as incurred. Based on our software development process, technological
feasibility is established upon the completion of a working model. In addition, we apply this to our review of development projects related
to software used exclusively for our SaaS subscription offerings. In these reviews, all costs incurred during the preliminary project
stages are expensed as incurred. Once the projects have been committed to and it is probable that the projects will meet functional requirements,
costs are capitalized.
Income Tax
Income taxes are determined in accordance with
the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income
tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled.
Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date.
ASC 740 prescribes a comprehensive model for
how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected
to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely
than not that the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently
be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with
the tax authority assuming full knowledge of the position and relevant facts.
The Company has subsidiaries in Hong Kong and
PRC. The Company is subject to tax in Hong Kong and PRC jurisdictions. As a result of its future business activities, the Company will
be required to file tax returns that are subject to examination by the Inland Revenue Department of Hong Kong and Tax Department of PRC.
Earnings/ (Loss) Per Share
Earnings/ (loss) per share of common stock attributable
to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average shares of common
stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying
outstanding stock-based awards, warrants, options, or convertible debt using the treasury stock method or the if-converted method, as
applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when
their effect is dilutive.
Potential dilutive securities are excluded from
the calculation of diluted EPS in profit periods as their effect would be anti-dilutive.
As of September 30, 2024, there were no potentially
dilutive shares.
| |
|
Three Months
Ended |
|
|
Three Months
Ended |
|
|
Nine Months
Ended |
|
|
Nine Months
Ended |
|
| |
|
For
the period
September 30,
2024 |
|
|
For
the period
September 30,
2023 |
|
|
For
the period
September 30,
2024 |
|
|
For
the period
September 30,
2023 |
|
| Statement of Operations
Summary Information: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Profit/
(Loss) |
|
$ |
1,372,076 |
|
|
$ |
(13,412,061 |
) |
|
$ |
13,991,362 |
|
|
$ |
(13,714,836 |
) |
| Weighted-average common
shares outstanding - basic and diluted |
|
|
6,976,410 |
|
|
|
1,416,813 |
|
|
|
5,404,232 |
|
|
|
1,176,618 |
|
| Earnings/ (loss) per share,
basic and diluted |
|
$ |
0.20 |
|
|
$ |
(9.47 |
) |
|
$ |
2.59 |
|
|
$ |
(11.66 |
) |
Fair Value Measurements
The Company follows guidance for accounting for
fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized
or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value
measurement related to non-financial items that are recognized and disclosed at fair value in the financial statements on a non-recurring
basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving
significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the
asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity
of these instruments.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements issued by the
FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by
management to have a material impact on the Company’s present or future financial statements.
NOTE 4 – REVENUE
We are in the business of acquiring and holding of bitcoin and providing
AI-enabled software development services for industrial and other customers.
As of and for the period ended September 30,
2024, there was no revenue generated from SAAS business.
NOTE 5 – CASH AND CASH EQUIVALENTS
As of September 30, 2024, the Company held
cash in bank in the amount of $668,387, which consists of the following:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| Bank Deposits- Outside USA | |
$ | 668,387 | | |
$ | 668,387 | |
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.
NOTE 7 – ACCOUNTS RECEIVABLE
As of September 30, 2024, accounts receivable
are related to the services fee from customers as follows:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| Accounts Receivable | |
$ | — | | |
$ | 1,000,000 | |
The Company does not require collateral for accounts
receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. The Company records
the allowance against bad debt expense through the condensed consolidated statements of operations, included in general and administrative
expense, up to the amount of revenues recognized to date. Receivables are written off and charged against the recorded allowance when
the Company has exhausted collection efforts without success. There is no allowance for expected credit loss as the accounts receivable
has been received as at reporting date.
NOTE 8 – PREPAYMENTS
As of September 30, 2024, prepayments consist
of the following:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| Prepayment for digital assets | |
$ | 12,125,500 | | |
$ | 12,125,500 | |
As previously disclosed in a Form 8-K filed
on September 28, 2023, the Company entered into a BTC Trading Contract (the “BTC Contract”) with an autonomous organization
(the “Association Seller”), which supports its members in the sale of BTC. While the Association Seller provides services
to facilitate the sale of BTC by its members, it does not exert control over them by ownership or contract, nor does it make decisions
for its members relating to the sale of BTC. None of the members of the Association Seller hold equity, serve as director or officer,
or otherwise have voting power or management rights of the Association Seller.
Under the BTC Contract, the Company has the
right to purchase up to 6,000 BTC from the members of the Association Seller (each, a “BTC Seller”) through the Association
Seller at a locked price of $30,000/BTC over a 12-month period commencing on September 25, 2023, with payment to be made in the form
of cash or the Company’s shares. Although the 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 BTC Contract, it were the individual members
of the Association Seller, not the Association Seller itself, who own the BTC to be sold under the BTC Contract. We believe the Association
Seller will coordinate with its members to fulfill the Company’s purchase of BTC, however, we cannot guarantee that the Company
will be able to purchase BTC from the BTC Sellers. The BTC Contract was entered into solely between the Company and the Association Seller
and no BTC Sellers owe any legal obligation to the Company in connection with the purchase and sale of BTC.
Following the execution of the BTC Contract, the
Company purchased 833 BTC from the BTC Sellers and decided to purchase an additional 1,000 BTC (the “1,000 BTC Purchase”).
As of December 31, 2023, the Company made a prepayment to the BTC Sellers through the Association Seller of approximately $12,125,500
(the “Prepayment Amount”), representing 40% of the total purchase price for 1000 BTC. The prepayment was made to secure favorable
pricing and demonstrate the Company’s commitment to completing the 1,000 BTC Purchase. This prepayment is refundable if the 1,000
BTC Purchase is not completed. While negotiating the terms of the 1,000 BTC Purchase with the BTC Sellers, the Company decided to exercise
its right under the BTC Contract to purchase 5,000 BTC (the “5,000 BTC Purchase”), which includes the previously planned 1,000
BTC. To reflect the then price increase in BTC and finalize the transaction details of the 5,000 BTC Purchase, the Company and the Association
Seller entered into that certain Amendment Agreement (the “Amendment Agreement”) on May 2, 2024, which was previously disclosed
in a Form 8-K filed by the Company on May 6, 2024.
According to the Amendment Agreement, the Company
agreed to pay the aggregate price for the 5,000 BTC through the issuance of 40,000,000 shares of the Company’s common stock (the
“Common Stock”) valued at $3.75 per share, which was the closing market price of the Common Stock as of May 1, 2024 (the “Then
FMV”) and warrants to purchase 80,000,000 shares of the Common Stock with the exercise price of $2.6 per share (equal to 70% of
the Then FMV). In connection with the 5,000 BTC Purchase, on May 8, 2024, the Company filed a Preliminary Information Statement on Schedule
14C (the “Preliminary 14C”). Subsequently, the Company decided to cease pursuing the 5,000 BTC Purchase due to the market
fluctuations in BTC and further discussions with the BTC Sellers, which was previously disclosed on a Form 8-K filed by the Company on
June 26, 2024.
Despite the cancellation of the 5,000 BTC Purchase, negotiations regarding
the original 1,000 BTC Purchase continued. The Company’s original plan was to settle the remaining 60% of the total purchase price
for 1,000 BTC through the issuance of the Common Stock at a per share price based on the average market price over a five-day period immediately
prior to the date of the completion of the 1,000 BTC Purchase. However, the Board believed in the potential long-term appreciation of
the BTC. As a result, it has decided to halt the 1,000 BTC Purchase and instead re-negotiate the terms with the Associate Seller to acquire
5,167 BTC, which represents the maximum number of BTC that the Company was entitled to purchase under the BTC Contract minus the BTC already
acquired under the BTC Contract.
NOTE 9 – INVESTMENT
As of September 30, 2024, investment consist of
the following:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
| | | |
| | |
| Investment in an associate company | |
$ | 13,396,000 | | |
$ | - | |
In April 2024, there are 3,940,000 shares issued
with the total amount of $13,396,000 for the acquisition of 20% of associate company. The officers, directors and selling shareholders
of associate company are not related party and independent with each other, which are not acting in concert with others.
Investment in associate company that we have significant
influence but do not have control over the investee are accounted for under the equity method. We will periodically review the investment
for impairment. The initial measurement and periodic subsequent adjustments of the investment are calculated by applying the ownership
percentage to the net assets or equity of the partially owed entity under ASC 323.
NOTE 10 – AMOUNT DUE TO RELATED PARTIES
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
| | |
| |
| Related parties payable | |
$ | 282,533 | | |
$ | 282,535 | |
| Amount due to shareholders | |
| 300,055 | | |
| 606,137 | |
| Director fee payable | |
| 896,000 | | |
| 804,000 | |
| | |
$ | 1,478,588 | | |
$ | 1,692,672 | |
The related party balance of $282,533 represented
advances from former shareholders for the Company’s daily operation.
As of September 30, 2024, the amount due to shareholders
of $300,055 represented advances and professional expenses paid on behalf by Shareholders, which consist of audit fees, lawyers’
fee and other professional expenses.
As of September 30, 2024, the director fee payable
of $896,000 represented the accrual of director fees from the appointment date to September 30, 2024.
The amount due to related parties are interest
free, unsecured and have no fixed repayment period.
NOTE 11 – ACCOUNT PAYABLES
As of September 30, 2024 and December 31, 2023, account
payables are related to the software services fee payables to suppliers as follow:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
| | | |
| | |
| Account payables | |
$ | — | | |
$ | 800,000 | |
NOTE 12 – OTHER PAYABLES
As of September 30, 2024, other payables consist
of unpaid professional fee as follows:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
| | |
| |
| Professional fees | |
$ | 1,082,500 | | |
$ | 1,600,000 | |
Professional fee payables of $1,082,500 comprise outstanding legal
fees in relation to shareholders’ litigation, BTC consultant fee and listing compliance fee owing to professional parties.
NOTE 13 – SHAREHOLDERS’ EQUITY
The Company has an unlimited number of authorized ordinary shares and
has issued 6,976,410 shares with no par value as of September 30, 2024.
On March 29, 2019, the Company issued 100,000,000
shares with no par value to thirty-three founders. On September 3, 2019, the Company issued a total 74,000 shares at $3 each to 5 non-US
shareholders. The total outstanding shares has increased to 100,074,000 shares as of December 31, 2019.
In February 2020, 1,666,666 shares were issued at $3 per share to 2
new shareholders. On July 10, 2020, the Company issued another 26,000 shares at $3 per share to 2 new shareholders and the total outstanding
shares has increased to 101,766,666 shares.
On September 15, 2020, the Wyoming Secretary of
State approved the Company’s certificate of amendment to amend its Articles of Incorporation to effect 3 for 1 forward stock split.
The total issued and outstanding shares of the Company’s common stock has been increased from 101,766,666 to 305,299,998 shares,
with the par value unchanged at zero.
On September 21, 2020, there are 151,500 shares
issued at $5 per share to 303 new shareholders, the Company’s common stock issued has been increased to 305,451,498 shares as of
December 31, 2020.
On April 13, 2022, the Company and 15 shareholders
entered into that certain Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which Company and the 15
Shareholders have cancelled 120,418,995 shares of Common Stock (“Cancellation Shares”). Upon completion of the transaction,
the outstanding shares of the Company’s Common Stock has been decreased from 305,451,498 shares to 185,032,503 shares as of June
30, 2022.
On July 21, 2022, the Company completed uplisting
of its common stock to the Nasdaq Capital Market, and the closing of its public offering of 10,000,000 shares of common stock with the
gross proceeds of $40,000,000 and net proceeds of $37,057,176 after deducting the total offering cost of $2,942,824. The shares were priced
at $4.00 per share, and the offering was conducted on a firm commitment basis. The shares continue to trade under the stock symbol “WETG.”
The Company’s total issued and outstanding common stock has been increased to 195,032,503 shares after the offering.
On July 22, 2022, the Company issued 25,000 shares
of common stock to certain service providers for services in connection with the public offering, the fair value of the share was $477,500.
The Company’s total issued and outstanding common stock has been increased to 195,057,503 shares in 2022.
On June 9, 2023, the Wyoming Secretary of State
approved the Company’s certificate of amendment to amend its Articles of Incorporation to effect 1 for 185 reverse stock split (“Reverse
Stock Split”). The total issued and outstanding shares of the Company’s common stock decreased from 195,057,503 to 1,054,530
shares, with the par value unchanged at zero.
In September 2023, there were 1,570,600 shares
issued with the total amount of $12,616,454, and the Company’s common stock issued has been increased to 2,625,130 shares as of
December 31, 2023.
In April 2024, there are 3,940,000 shares issued
with the total amount of $13,396,000 for the acquisition of 20% of associate company.
On April 9, 2024, an addition of 411,280 shares were converted to equity
from loan and outstanding professional fee with the amount of $1,974,140 at the conversion price of $4.80 per share based on average price
of last 10 trading days. These loans are related to the long outstanding salaries, professional fee, litigation lawyer fees and BTC consultant
fee paid by shareholders on behalf of the Company. The amount due to related parties is interest free, unsecured and has no fixed repayment
period. Prior to the loan conversion to equity, the amount of $1,974,140 is recorded as current liabilities. Subsequent to loan to equity
conversion, the amount of $1,974,140 was converted to 411,280 shares and recorded in stockholders’ equity as follows:
| Nature of loan: | | Amount: | | | Conversion price: | | | Number of shares converted: | | Financial impact of conversion: |
Advance from shareholders to pay outstanding legal fee, salaries, Edgar
filing fee, audit fee, which accumulated from January 2023 to March 2024.
| | $ | 594,140 | | | $ | 4.80 | | | 123,780 shares | | Reclassification from amount due to related parties to equity |
Accounting and compliance fee, which accumulated from January 2023
to March 2024.
| | $ | 420,000 | | | $ | 4.80 | | | 87,500 shares | | Reclassification from other payables to equity
|
| Legal advisory fee in relation to BTC transaction which
accumulated from January 2023 to March 2024. | | $ | 480,000 | | | $ | 4.80 | | | 100,000 shares | | Reclassification from other payables to equity
|
| BTC Consultant fee, which accumulated from January 2023 to March 2024. | | $ | 480,000 | | | $ | 4.80 | | | 100,000 shares
| | Reclassification from other payables to equity
|
| Total | | $ | 1,974,140 | | | | | | | 411,280 shares | | |
As of September 30, 2024, the Company’s
common stock issued has been increased to 6,976,410 shares.
NOTE 14 – INCOME TAXES
The Company is subject to U.S. Federal tax laws.
The Company has not recognized an income tax benefit for its operating losses in the United States because the Company does not expect
to commence active operations in the United States.
There are several subsidiaries incorporated in Hong Kong and are subject
to Hong Kong profits tax at a tax rate of 16.5%.
The Company is currently conducting certain
operations in the PRC through its subsidiaries, which are subject to tax from 15% to 25%.
NOTE 15 – SUBSEQUENT EVENTS
There were no subsequent events noted
from the end of September 30, 2024 to the date of this report.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial
condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in
this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary
Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking
statements as a result of certain factors discussed elsewhere in this report.
Business
Next Technology Holdings Inc (formerly known as
“WeTrade Group, Inc”) was incorporated in the State of Wyoming on March 28, 2019. We currently pursue two corporate strategies.
One business strategy is to continue providing software development services, and the other strategy is to acquire and hold bitcoin.
Software development
We provide AI-enabled software development
services to our customers, which include developing, designing, and implementing various SAAS software solutions for businesses of all
types, including industrial and other businesses.
Bitcoin Acquisition Strategy
Our bitcoin acquisition strategy generally involves
acquiring bitcoin with our liquid assets that exceed working capital requirements, and from time to time, subject to market conditions,
issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase
bitcoin.
We view our bitcoin holdings as long-term
holdings and expect to continue to accumulate bitcoin. We have not set any specific target for the amount of bitcoin we seek to hold,
and we will continue to monitor market conditions in determining whether to engage in additional financing to purchase additional bitcoin.
This overall strategy also contemplates that we
may (i) periodically sell bitcoin for general corporate purposes, including to generate cash for treasury management or in connection
with strategies that generate tax benefits in accordance with applicable law, (ii) enter into additional capital raising transactions
that are collateralized by our bitcoin holdings, and (iii) consider pursuing additional strategies to create income streams or otherwise
generate funds using our bitcoin holdings.
We believe that, due to its limited supply, bitcoin
offers the opportunity for appreciation in value if its adoption increases and has the potential to serve as a hedge against inflation
in the long-term.
Results of Operations
Results of Operations for the Nine-month
Period Ended September 30, 2024 and 2023
The following tables provide a comparison
of a summary of our results of operations for the nine-month period ended September 30, 2024 and 2023.
| | |
For the
period
September 30,
2024 | | |
From the
period
September 30,
2023 | |
| Revenue: | |
| | |
| |
| Service revenue | |
$ | — | | |
$ | 1,500,000 | |
| Cost of Revenue | |
| — | | |
| (270,864 | ) |
| Gross profit | |
| — | | |
| 1,229,136 | |
| Operating Expenses: | |
| | | |
| | |
| Other income/ (expenses) | |
| 17,899,568 | | |
| (14,406,396 | ) |
| General and administrative expenses | |
| (1,242,128 | ) | |
| (537,576 | ) |
| Net profit/ (loss) before income tax | |
| 16,657,440 | | |
| (13,714,836 | ) |
| Income tax expenses | |
| (2,666,078 | ) | |
| — | |
| Net profit/ (loss) | |
$ | 13,991,362 | | |
$ | (13,714,836 | ) |
Revenue from Operations
For
the nine-month period ended September 30, 2024 and 2023, total revenue were $nil and $1,500,000 respectively.
The decrease is mainly due to decrease in AI SAAS revenue during the period.
General and Administrative Expenses
For the nine-month period ended September
30, 2024 and 2023, general and administrative expenses were $1,242,128 and $537,576 respectively. The increase is mainly due to
an increase in BTC consulting fee and legal fees during the period.
Other Income/ (expenses)
The other income of $17,899,568 is mainly due to an increase in gain
from digital assets during the period as compared to the provision for bad debts of $11,347,054 in prior period.
Net Profit/ (loss)
As a result of the factors described above, there
was a net profit of $13,991,362 and net loss of $13,714,836 for the period ended September 30, 2024 and 2023, respectively. The increase
in net profit is mainly due to gain from digital assets during the period.
Results of Operations for the Three-month
Period Ended September 30, 2024 and 2023
The following tables provide a comparison of a summary of our results
of operations for the three-month period ended September 30, 2024 and 2023.
| | |
For the
period
September 30,
2024 | | |
From the
period
September 30,
2023 | |
| Revenue: | |
| | |
| |
| Service revenue | |
$ | — | | |
$ | 1,500,000 | |
| Cost of Revenue | |
| — | | |
| (270,864 | ) |
| Gross profit | |
| — | | |
| 1,229,136 | |
| Operating Expenses: | |
| | | |
| | |
| Other income/ (expenses) | |
| 2,303,789 | | |
| (14,406,397 | ) |
| General and administrative expenses | |
| (566,983 | ) | |
| (234,800 | ) |
| Net profit/ (loss) before income tax | |
| 1,736,806 | | |
| (13,412,061 | ) |
| Income tax income | |
| (364,730 | ) | |
| — | |
| Net loss | |
$ | 1,372,076 | | |
$ | (13,412,061 | ) |
Revenue from Operations
For
the three-month period ended September 30, 2024 and 2023, total revenue was $nil and $1,500,000 respectively. The decrease is mainly
due to decrease in AI SAAS system revenue during the period.
General and Administrative Expenses
For the three-month period ended September
30, 2024 and 2023, general and administrative expenses were $566,983 and $234,800 respectively. The increase is mainly due to an increase
in BTC consulting fee and legal fees during the period.
Other income/ (expenses)
The other income of $2,303,789 is mainly due to
loss from digital assets during the period. The other expenses of $14,406,397 were mainly for fair value loss of digital assets of $3.05
million and provision for bad debts of $11.3 million in prior reporting period.
Net loss
As a result of the factors described above, there
was a net profit of $1,372,076 and net loss of $13,412,061 for the period ended September 30, 2024 and 2023, respectively. The increase
in net profit is mainly due to loss from digital assets and no provision for bad debts were incurred during the period.
Liquidity and Capital Resources
As of September 30, 2024, we had cash on hand of $668,387. There is
no change in cash held during the period.
Operating activities
As of September
30, 2024, our cash flow used in operating activities is $81,332 for the period ended September 30, 2024 as compared to the net cash flow
from operating activities of $11,886,808 in prior period.
The decrease was mainly due to the turnaround of the net profit of $13.9 million from the net losses of $13.7 million in prior reporting
period.
Investing activities
Cash provided used in investing activities was $nil for the period
ended September 30, 2024 as compared to cash used in investing activities of $37,115,500 in prior period. The decrease is mainly due to
no digital assets being purchased during the period.
Financing activities
Cash provided by our financing activities was $81,332 for the period
ended September 30, 2024 as compared to cash provided by financing activities of $17,203,894. The decrease is mainly due to lesser in
shareholders’ advance and no issuance of stock during the period as compared to the prior period.
Inflation
Inflation does not materially affect our business
or the results of our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
We prepare our financial statements in accordance
with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting
and disclosure rules and requirements. The preparation of our financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those
estimates. We use historical data to assist in the forecast of our future results. Deviations from our projections are addressed when
our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows
us to rely on proven data rather than having to make assumptions regarding our estimates.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but
not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company
financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are a “smaller reporting company”
as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant
to Item 305 of Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
The management of the Company is responsible for
establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting
is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external
purposes in accordance with U.S. generally accepted accounting principles.
With respect to the period ended September 30,
2024, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design
and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934.
Based upon our evaluation regarding the period
ended September 30, 2024, the Company’s management, including its Principal Executive Officer, has concluded that its disclosure
controls and procedures were not effective due to the Company’s limited internal resources and lack of ability to have multiple
levels of transaction review. Material weaknesses noted are lack of an audit committee, lack of a majority of outside directors on the
board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
and management is dominated by two individuals, without adequate compensating controls. However, management believes the financial statements
and other information presented herewith are materially correct.
Our management assessed the effectiveness of our
internal control over financial reporting as of September 30, 2024. In making this assessment, our management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework
- Guidance for Smaller Public Companies (the COSO criteria). Based on our assessment, management identified material weaknesses related
to: (i) our internal audit functions; (ii) a lack of segregation of duties within accounting functions; and the lack of multiple levels
of review of our accounting data. Based on this evaluation, our management concluded that as of September 30, 2024, we did not maintain
effective internal control over financial reporting.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with any
policies and procedures may deteriorate. Due to our size and nature, segregation of all conflicting duties may not always be possible
and may not be economically feasible. To the extent possible, we will implement procedures to assure that the initiation of transactions,
the custody of assets and the recording of transactions will be performed by separate individuals. With proper funding we plan on remediating
the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that
our management deems appropriate.
A material weakness is a control deficiency (within
the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5) or combination of control deficiencies, that results
in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected
on a timely basis.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control
over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Wyoming Shareholder Lawsuits: Since mid-September
2023, Mr. Zheng Dai, Mr. Pijun Liu, and certain individuals under their control (the “Unauthorized Persons”) had been falsely
and repeatedly holding themselves out as representing and/or authorized to represent the Company. For example, the Unauthorized Persons
caused to be filed certain current reports on Forms 8-K dated September 28, 2023 and October 10, 2023, in which they purported to appoint
new officers and directors. These filings were false and should be disregarded.
On September 28, 2023, a derivative lawsuit was
filed by certain purported shareholders affiliated with the Unauthorized Persons in the United States District Court for the District
of Wyoming against certain officers and directors of the Company, seeking control of the Company. This case was dismissed without prejudice
on October 18, 2023.
On October 18, 2023, the same individuals
who filed the above-described derivative suit filed a direct action against the Company in the Chancery Court of the State of
Wyoming (the “Chancery Court”), again seeking control of the Company. The Company responded to the lawsuit, sought a
temporary restraining order restraining the plaintiff-shareholders and their affiliates (including the Unauthorized Persons) from
claiming to be in control of the Company.
In early 2024, the Court issued an order restraining
the Unauthorized Persons from purporting to control the Company. The Unauthorized Persons’ lawsuit was subsequently dismissed with
prejudice, meaning they can no longer attempt to assert control over the Company.
New York Loan Guarantee Litigation: In
May 2024, certain non-U.S. Parties believed to be affiliated with the Unauthorized Persons described above filed a lawsuit in New
York State court against many non-U.S. borrowers, alleging the borrowers have not paid certain loans. These lender-plaintiffs also
sued the Company under alleged guarantees it allegedly signed to guarantee the loans at issue. The Company does not believe these
guarantees were legitimate, nor that New York is the proper place for it. The Company has moved to dismiss.
Books and records litigation: In September
2024, the Unauthorized Persons filed a lawsuit in Wyoming State court for books and records. The Company does not believe the lawsuit
has merit under Wyoming’s books and records statute and is defending this suit.
ITEM 1A. RISK FACTORS
We are a “smaller reporting company”
as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No senior securities were issued and outstanding
during the nine months ended September 30, 2024.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5. OTHER INFORMATION
Capitalization
On June 9, 2023, the Wyoming Secretary of State
approved the Company’s certificate of amendment to amend its Articles of Incorporation to effect 1 for 185 Reverse Stock Split.
The total issued and outstanding shares of the Company’s common stock decreased from 195,057,503 to 1,054,364 shares, with the par
value unchanged at zero.
The Reverse Stock Split is intended to more expediently
enable the Company to regain compliance to achieve a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth
in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”). As a result of the Reverse Stock Split, every one-for-one
hundred and eighty-five (185) shares of the Company’s Common Stock then issued and outstanding will automatically, and without any
action of the Company or any holder thereof, be combined, converted, and changed into one (1) validly issued and non-assessable share
of Common Stock. No fractional shares will be issued to any shareholder, and in lieu of issuing any such fractional shares, the fractional
shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share of Common Stock.
In September 2023, there were 1,570,600 shares
issued with the total amount of $12,616,454, and the Company’s common stock issued has been increased to 2,625,130 shares as of
December 31, 2023. In April 2024, there are 4,351,280 shares issued with the total amount of $14,776,000 for the acquisition of 20% of
associate company and loan conversion to equity, the Company’s common stock issued has been increased to 6,976,410 shares as of
September 30, 2024.
Bitcoin Option Contract
On May 2, 2024, the Company entered into a
Bitcoin Option Contract (the “Option Contract”) with the Association Seller. Under the Option Contract, the Association Seller
agrees to sell, and the Company has the option to purchase, up to 20,000 BTC at a fixed price of US$60,000 per BTC over a three-year
period commencing on May 2, 2024. The Company can exercise this option at any time during the three-year period, either in one or multiple
transactions, as mutually agreed upon by both parties. Payments for the BTC can be made in cash or in the Company’s common stock,
at the Company’s discretion. In addition, the Option Contract allows for an optional 10% advance payment in cash if agreed upon
by both parties. Although the Option 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 Option Contract, it were the individual members of the Association
Seller, not the Association Seller itself, who own the BTC to be sold under the Option Contract.
As of the date of this report, the Company has
not paid any advance payment, nor exercised its option to purchase any BTC under the BTC Option Contract. Further, the Company does not
intend to exercise its option to purchase any BTC under the BTC Option Contract.
The above description of the Option Contract does
not purport to be complete, and is qualified in its entirety by reference to the full text of the Option Contract, a copy of which is
attached to the Company’s Current Report on Form 8-K as Exhibit 10.2, filed with the SEC on May 6, 2024, which is incorporated by
reference herein.
ITEM 6. EXHIBITS
| Exhibit
No. |
|
Description
|
| 10.1 |
|
BTC
Trading Contract, dated September 25, 2023, between Next Technology Holdings Inc., as Party A (Buyer) and Party B (Seller) (Incorporated
by reference to Exhibit 10.1 to Form 8-K filed on September 28, 2023) |
| 10.2 |
|
Amendment
Agreement, dated May 2, 2024, between Next Technology Holdings Inc., as Party A (Buyer) and Party B (Seller)(Incorporated by reference
to Exhibit 10.1 to Form 8-K filed on May 6, 2024) |
| 10.3 |
|
Bitcoin
Option Contract, dated May 2, 2024, between Next Technology Holdings Inc., as Party A (Buyer) and Party B (Seller)(Incorporated by
reference to Exhibit 10.2 to Form 8-K filed on May 6, 2024) |
| 10.4 |
|
Contract
Cancellation Agreement, dated June 20, 2024, between Next Technology Holdings Inc., as Party A (Buyer) and Party B (Seller) |
| 10.5 |
|
Bitcoin
Option Contract Cancellation Agreement, dated June 20, 2024, between Next Technology Holdings Inc., as Party A (Buyer) and Party
B (Seller) |
| 10.6 |
|
Amended
and Restated BTC Trading Contract, dated September 24, 2024, between Next Technology Holdings Inc., as Party A (Buyer) and Party
B (Seller)(Incorporated by reference to Exhibit 10.1 to Form 8-K filed on September 27, 2024) |
| 31.1 |
|
Certification
of Principal Executive Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 Filed herewith |
| 31.2 |
|
Certification
of Principal Financial Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 Filed herewith |
| 32.1 |
|
Certification
of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 Filed herewith |
| 32.2 |
|
Certification
of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 Filed herewith |
| 101 |
|
Financial statements
from the quarterly report on Form 10-Q of Next Technology Holdings Inc for the fiscal quarter ended September 30, 2024, formatted
in XBRL: (i) the Balance Sheet; (ii) the Statement of Income; (iii) the Statement of Cash Flows; and (iv) the Notes to the Financial
Statements Filed herewith |
| 104 |
|
Cover Page Interactive
Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
NEXT TECHNOLOGY HOLDINGS INC |
| |
|
|
| Date: December 9, 2024 |
By: |
/s/
Wei Hong Liu |
| |
|
Wei Hong Liu |
| |
|
Chief Executive Officer |
| |
|
/s/ Eve Chan |
| |
|
Eve Chan |
| |
|
Chief Financial Officer |
25
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I, Liu Wei Hong, Director and Chief Executive
Officer of Next Technology Holdings Inc. (the “Company”), do hereby certify, in connection with Quarterly Report on Form 10-Q/A
for the quarter ended September 30, 2024 (the “Report”) of the Company, the undersigned, in the capacity and on the date indicated
below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
I, Eve Chan, Director and hief Financial
Officer of Next Technology Holdings Inc . (the “Company”), do hereby certify, in connection with Quarterly Report on
Form 10-Q/A for the quarter ended September 30, 2024 (the “Report”) of the Company, the undersigned, in the capacity
and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that: