Next Technology Holding Inc 10-K/A for FY2023
Next Technology Holding Inc. (NXTT)
About this 10-K/A
Next Technology Holding Inc filed this 10-K/A on September 9, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.63M
- Net loss
- $9.92M
- compared with a net loss of $9.16M a year earlier
- Diluted EPS
- $2.10
- compared with -$5.60 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM
For the fiscal year ended:
For the transition period from ____________ to _____________
| (FORMERLY KNOWN AS WETRADE GROUP INC) |
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| People’s Republic of |
| (Address of principal executive offices) (Zip code) |
| (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, no par value
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 ☐
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or an amendment to this form 10-K.
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 | ☐ |
| ☐ | 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
As of June 21, 2024, there were
Explanatory Note
Next Technology Holding Inc (Formerly known as WeTrade Group Inc. (the “Company”)) is filing this Amendment (the “Amendment”) to the Annual Report on Form 10-K for the year ended December 31, 2023, originally filed with the Securities and Exchange Commission on April 16, 2024 (the “Original Filing”), to amend our consolidated financial statements.
This Form 10-K/A is being filed to include audit opinion on the financial statements for the year ended December 31, 2023 and 2022 and adjustment for the allowance of doubtful debt for the amount due from a related party.
In accordance with 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-K/A does not amend, update or change any other items or disclosures contained in the Original Filing, and accordingly, this Form 10-K/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-K/A should be read in conjunction with the Original Filing and the Company’s other filings with the SEC
TABLE OF CONTENTS
i
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 headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and “Properties” 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 raise capital; | |
| ● | our ability to identify suitable acquisition targets; | |
| ● | our ability to successfully execute acquisitions on favorable terms; | |
| ● | declines in general economic conditions in the markets where we may compete; | |
| ● | unknown environmental liabilities associated with any companies we may acquire; and | |
| ● | significant competition in the markets where we may operate. |
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.
ii
PART I
ITEM 1. BUSINESS
Overview
Next Technology Holding Inc (Formerly known as “WeTrade Group, Inc”) (the “Company”) was incorporated in the State of Wyoming on March 28, 2019. As of December 31, 2023, the Company 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 included 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 held for trading 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, fair value change in digital asset and number of Bitcoin held during the year:
| Digital asset original cost basis | Fair value change in digital asset | Digital asset fair value | Number of Bitcoin held | |||||||||||||
| Balance at December 31, 2022 | - | - | - | - | ||||||||||||
| Digital asset purchase | $ | 24,990,000 | - | $ | 35,137,576 | 833 | ||||||||||
Fair value gain on digital asset | - | $ | 10,147,576 | - | - | |||||||||||
| Balance at December 31, 2023 | $ | 24,990,000 | $ | 10,147,576 | $ | 35,137,576 | 833 | |||||||||
1
Regulatory Permissions and Developments
Our counsel as to PRC law has advised us that the laws and regulations of the PRC do not currently have any material impact on our business, financial condition or results of operations. However, there is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future. If there is a significant change to current political arrangements between mainland China and Hong Kong, companies operating in Hong Kong such as us may face similar regulatory risks as those operated in PRC, including their ability to offer securities to investors, list their securities on a U.S. or other foreign exchange, conduct their business or accept foreign investment. In light of China’s recent expansion of authority in Hong Kong, there are risks and uncertainties which we cannot foresee for the time being, and rules and regulations in China can change quickly with little or no advance notice. The Chinese government may intervene or influence our current and future operations in Hong Kong at any time, or may exert more control over offerings conducted overseas and/or foreign investment in issuers likes ourselves.
We are aware that the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
For example, on June 10, 2021, the Standing Committee of the National People’s Congress enacted the PRC Data Security Law, which took effect on September 1, 2021. The law requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for data security.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on certain activities in the securities markets and promote the high-quality development of the capital markets, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over Chinese-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
On August 20, 2021, the 30th meeting of the Standing Committee of the 13th National People’s Congress voted and passed the “Personal Information Protection Law of the People’s Republic of China,” or “PRC Personal Information Protection Law,” which became effective on November 1, 2021. The PRC Personal Information Protection Law applies to the processing of personal information of natural persons within the territory of China that is carried out outside of China where (i) such processing is for the purpose of providing products or services for natural persons within China, (ii) such processing is to analyze or evaluate the behavior of natural persons within China, or (iii) there are any other circumstances stipulated by related laws and administrative regulations.
On December 28, 2021, the Cyberspace Administration of China (the “CAC”) jointly with the relevant authorities formally published Measures for Cybersecurity Review (2021) which took effect on February 15, 2022, replacing the former Measures for Cybersecurity Review (2020) issued on July 10, 2021. Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services, and online platform operators (together with the operators of critical information infrastructure, the “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, and any online platform operator who controls more than one million users’ personal information must undergo a cybersecurity.
On February 17, 2023, with the approval of the State Council, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, (i) domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following their submission of initial public offerings or listing applications. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines; (ii) if the issuer meets both of the following criteria, the overseas offering and listing conducted by such issuer shall be deemed an indirect overseas offering and listing by a PRC domestic company: (A) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year were derived from PRC domestic companies; and (B) the majority of the issuer’s business activities are carried out in mainland China, or its main place(s) of business are located in mainland China, or the majority of its senior management team in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. In such circumstances, where a PRC domestic company is seeking an indirect overseas offering and listing in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for an initial public offering or listing in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is submitted.
2
On February 24, 2023, the CSRC, together with the MOF, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and became effective on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As of the date of this Report, the revised Provisions have come into effect. Any failure or perceived failure by our Company or our subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
Except for the Basic Law, national laws of the PRC do not apply in Hong Kong unless they are listed in Annex III of the Basic Law and applied locally by promulgation or local legislation. National laws that may be listed in Annex III are currently limited under the Basic Law to those which fall within the scope of defense and foreign affairs as well as other matters outside the limits of the autonomy of Hong Kong. National laws and regulations relating to data protection, cybersecurity and anti-monopoly have not been listed in Annex III and do not apply directly to Hong Kong and, as such, we are advised by our counsel as to PRC law that that the CAC and CSRC do not currently have jurisdiction over companies operating in Hong Kong.
Our counsel as to PRC law has advised us that that we are not currently required to obtain any permission or approval from the CSRC, the CAC or any other regulatory authority in the PRC for our operations, the trading of our securities on the OTCQB and the offering of our securities to foreign investors. The business of our subsidiary is not subject to cybersecurity review with the CAC, given that PRC laws on data protection and cybersecurity do not currently apply to Hong Kong. To the extent that if we become subject to such PRC laws in the future, we do not believe we are required to conduct a cybersecurity review because (i) we do not possess a large amount of personal information in our business operations; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities. In addition, we are not subject to merger control review by China’s anti-monopoly enforcement agency as such PRC enforcement agency does not currently have jurisdiction over our Hong Kong operating subsidiary. However, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry, if we inadvertently conclude that such approvals are not required when they are, or applicable laws, regulations, or interpretations change and we are required to obtain approval in the future. We may be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if we fail to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on the OTCQB, which may cause the value of our securities to significantly decline or become worthless.
In addition, in light of the recent statements and regulatory actions by the PRC government, such as those related to Hong Kong’s national security, the promulgation of regulations prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns, we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that the PRC government could disallow our holding company structure, which may result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. These adverse actions could cause the value of our securities to significantly decline or become worthless.
There may be prominent risks associated with our operations being in Hong Kong. For example, as a U.S.-listed public company operating primarily in Hong Kong, we may face heightened scrutiny, criticism and negative publicity, which could result in a material change in our operations and the value of our common stock. Additionally, we are subject to certain legal and operational risks associated with our business operations in Hong Kong, which is subject to political and economic influence from China. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and we may face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong and the profitability of such business. Therefore, these risks associated with being based in or having the majority of our operations in Hong Kong could likely cause the value of our securities to significantly decline or be worthless. Furthermore, these risks would likely result in a material change in our business operations or a complete hinderance of our ability to offer or continue to offer our securities to investors. Furthermore, changes in Chinese internal regulatory mandates, such as the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), the Anti-Monopoly Law, the Cybersecurity Law and the Data Security Law, may target the Company’s corporate structure and impact our ability to conduct business in Hong Kong, accept foreign investments, or list on an U.S. or other foreign exchange.
The U.S. government, including the SEC, has recently made statements and taken certain actions that may lead to significant changes to U.S. and international relations, and will impact companies with connections to the United States or China (including Hong Kong). The SEC has issued statements primarily focused on companies with significant China-based operations. For example, on July 30, 2021, Gary Gensler, Chairman of the SEC, issued a Statement on Investor Protection Related to Recent Developments in China, pursuant to which Chairman Gensler stated that he has asked the SEC staff to engage in targeted additional reviews of filings for companies with significant China-based operations.
3
Government Regulation
The laws and regulations applicable to Bitcoin and digital assets are evolving and subject to interpretation and change.
Governments around the world have reacted differently to digital assets; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as the U.S., digital assets are subject to overlapping, uncertain and evolving regulatory requirements.
As digital assets have grown in both popularity and market size, the U.S. Executive Branch, Congress and a number of U.S. federal and state agencies, including the Financial Crimes Enforcement Network, the Commodity Futures Trading Commission (“CFTC”), the SEC, the Financial Industry Regulatory Authority, the Consumer Financial Protection Bureau, the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial regulators, have been examining the operations of digital asset networks, digital asset users and digital asset exchanges, with particular focus on the extent to which digital assets can be used to violate state or federal laws, including to facilitate the laundering of proceeds of illegal activities or the funding of criminal or terrorist enterprises, and the safety and soundness and consumer-protective safeguards of exchanges or other service-providers that hold, transfer, trade or exchange digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors. In addition, federal and state agencies, and other countries have issued rules or guidance regarding the treatment of digital asset transactions and requirements for businesses engaged in activities related to digital assets.
Depending on the regulatory characterization of Bitcoin, the markets for Bitcoin in general, and our activities in particular, our business and our Bitcoin acquisition strategy may be subject to regulation by one or more regulators in the United States and globally. Ongoing and future regulatory actions may alter, to a materially adverse extent, the nature of digital assets markets, the participation of industry participants, including service providers and financial institutions in these markets, and our ability to pursue our Bitcoin strategy. Additionally, U.S. state and federal and foreign regulators and legislatures have taken action against industry participants, including digital assets businesses, and enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming from digital assets activity. U.S. federal and state energy regulatory authorities are also monitoring the total electricity consumption of cryptocurrency mining, and the potential impacts of cryptocurrency mining to the supply and dispatch functionality of the wholesale grid and retail distribution systems. Many state legislative bodies have passed, or are actively considering, legislation to address the impact of cryptocurrency mining in their respective states.
The CFTC takes the position that some digital assets, including Bitcoin, fall within the definition of a “commodity” under the Commodities Exchange Act of 1936, as amended (the “CEA”). Under the CEA, the CFTC has broad enforcement authority to police market manipulation and fraud in spot digital assets markets in which we may transact. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactions involving digital asset commodities that do not utilize margin, leverage, or financing. In addition, CFTC regulations and CFTC oversight and enforcement authority apply with respect to futures, swaps, other derivative products and certain retail leveraged commodity transactions involving digital asset commodities, including the markets on which these products trade.
The SEC and its staff have taken the position that certain other digital assets fall within the definition of a “security” under the U.S. federal securities laws. Public statements made by senior officials and senior members of the staff at the SEC indicate that the SEC does not consider Bitcoin to be a security under the federal securities laws. 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 assets.
In addition, since transactions in Bitcoin provide a degree of anonymity, they are susceptible to misuse for criminal activities, such as money laundering. This misuse, or the perception of such misuse, could lead to greater regulatory oversight of Bitcoin and Bitcoin platforms, and there is the possibility that law enforcement agencies could close Bitcoin platforms or other Bitcoin-related infrastructure with little or no notice and prevent users from accessing or retrieving Bitcoin held via such platforms or infrastructure. For example, in her January 2021 nomination hearing before the Senate Finance Committee, Treasury Secretary Janet Yellen noted that cryptocurrencies have the potential to improve the efficiency of the financial system but that they can be used to finance terrorism, facilitate money laundering, and support activities that threaten U.S. national security interests and the integrity of the U.S. and international financial systems. The U.S. Treasury Department’s Office of Foreign Assets Control has issued updated advisories regarding the use of virtual currencies, added a number of digital asset exchanges and service providers to the Specially Designated Nationals and Blocked Persons list and engaged in several enforcement actions, including a series of enforcement actions that have either shut down or significantly curtailed the operations of several smaller digital asset exchanges associated with Russian and/or North Korean nationals.
Our business operations are not currently impacted by the cryptocurrency restrictions imposed by the Chinese government (collectively, the “PRC Crypto Restrictions”) in any material respect, even though the Chinese government has adopted an increasingly stringent approach in recent years, as outlined and discussed below.
On December 3, 2013, the People’s Bank of China, China’s central bank (“PBoC”), issued the Notice on Preventing Risks Associated with Bitcoin, emphasizing that Bitcoin should be deemed as a virtual commodity rather than a fiat currency. This notice prohibits financial and payment institutions in China from providing Bitcoin-related services, highlighting the potential risks of money-laundering associated with Bitcoin.
Further tightening the regulatory environment, on September 4, 2017, the PBoC issued the Announcement on Preventing Risks Associated with Financing Activities through ICOs, which prohibits the initial coin offerings (ICOs) which was characterized as a potentially criminal activity, potentially involving suspected illegal issuance and sales of tokens and notes, unauthorized public issuance of securities, illegal fundraising, financial fraud, and Ponzi schemes.
The most recent regulatory measure came on September 24, 2021, when the PBoC, along with nine other Chinese national government bodies, issued the Notice Regarding Further Prevention and Management of Risks Associated with Cryptocurrency Trading Hype banning overseas cryptocurrency exchanges from providing services to residents in mainland China. This notice also prohibits individuals in mainland China from working for overseas exchanges, and restricts companies and individuals from providing marketing, payment, settlement services or technical support to these exchanges. A comprehensive monitoring system was also established to oversee cryptocurrency activities of individuals and companies in mainland China, giving local authorities extensive authority to monitor their regions and raise early warning flags.
4
We believe our business operations are not currently subject to these PRC Crypto Restrictions. We are not a PRC company, nor do we have any PRC subsidiaries. We are not a financial or payment institution operating within China either. We currently do not conduct any business activities within China. We do not engage in any exchange business between fiat currency and cryptocurrency or among cryptocurrencies. We do not issue digital tokens through ICOs or otherwise, nor do we provide marketing, payment, settlement services or related technical support for any cryptocurrency exchanges.
Our involvement with Bitcoin is limited to purchasing, holding and selling Bitcoins, which is not prohibited under the PRC Crypto Restrictions. Furthermore, the holding of certain executive roles by Chinese citizens in our company does not violate any PRC Crypto Restrictions.
While our current business operations are not subject to the PRC Crypto Restrictions, future changes in our business strategies or operations could expose us to these restrictions. In addition, the PRC Crypto Restrictions are continuously evolving and can be subject to significant changes. There is a possibility that the Chinese government may broaden its regulatory scope to include a wider range of cryptocurrency-related activities, potentially impacting companies operating outside of China. If new regulations are introduced or if our business evolves to include activities that fall under the PRC jurisdiction, we could face increased regulatory scrutiny, compliance costs or operational restrictions, which, in turn, could materially affect our current or anticipated business operations.
As noted above, activities involving Bitcoin and other digital assets may fall within the jurisdiction of more than one financial regulator and various courts and such laws and regulations are rapidly evolving and increasing in scope. On March 9, 2022, President Biden signed an executive order relating to cryptocurrencies. While the executive order did not mandate the adoption of any specific regulations, it instructed various federal agencies to consider potential regulatory measures, including the evaluation of the creation of a U.S. CBDC. On September 16, 2022, the White House released a framework for digital asset development, based on reports from various government agencies, including the U.S. Department of Treasury, the Department of Justice, and the Department of Commerce. Among other things, the framework encourages regulators to pursue enforcement actions, issue guidance and rules to address current and emergent risks, support the development and use of innovative technologies by payment providers to increase access to instant payments, consider creating a federal framework to regulate nonbank payment providers, and evaluate whether to call upon Congress to amend the Bank Secrecy Act and laws against unlicensed money transmission to apply explicitly to digital asset service providers. There have also been several bills introduced in Congress that propose to establish additional regulation and oversight of the digital asset markets.
Implications of Holding Foreign Company Accountable Act
On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the Holding Foreign Company Accountable Act, or the HFCAA. An identified issuer will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. In June 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if signed into law, would reduce the time period for the delisting of foreign companies under the HFCAA to two consecutive years instead of three years. If our auditor cannot be inspected by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the trading of our securities on any U.S. national securities exchanges, as well as any over-the-counter trading in the U.S., will be prohibited. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions. On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “Statement of Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance of China. The terms of the Statement of Protocol would grant the PCAOB complete access to audit work papers and other information so that it may inspect and investigate PCAOB-registered accounting firms headquartered in China and Hong Kong. According to the PCAOB, its December 2021 determinations under the HFCAA remain in effect. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. Under the PCAOB’s rules, a reassessment of a determination under the HFCAA may result in the PCAOB reaffirming, modifying or vacating the determination. In the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company’s auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the Company’s securities to be prohibited under the HFCAA ultimately result in a determination by a securities exchange to delist the Company’s securities.
5
Transfers of Cash to and from Our Subsidiaries
Next Technology Holding Inc. is a holding company with no operations of its own. We conduct our operations in Hong Kong and China primarily through our subsidiaries in both Hong Kong and China. We may rely on dividends to be paid by our Hong Kong and PRC subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our Hong Kong and PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
Next Technology Holding Inc. is permitted under the Wyoming laws to provide funding to our subsidiaries in Singapore, Hong Kong and PRC through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Next Technology is also permitted under the laws of Hong Kong to provide funding to Next Technology Inc. through dividend distribution without restrictions on the amount of the funds. As of the date of this annual report, there has been no distribution of dividends or assets among the holding company or the subsidiaries. We currently do not have any cash management policies in place.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Subject to the Wyoming Business Corporations Act and our bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There is no further Wyoming statutory restriction on the amount of funds which may be distributed by us by dividend.
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from Next Technology Holding Inc. to Hong Kong subsidiaries or from Hong Kong subsidiaries to Next Technology Holding Inc. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of HK dollar into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S investors.
Current PRC regulations permit our PRC subsidiaries to pay dividends to Next Technology only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.
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Overview of Business and Industry
Software Development
We provide AI-enabled software development services to our customers in USA, Hong Kong, China and Singapore, which included developing, designing and implementing various SAAS software solutions for business of all types, including industrials and other businesses.
The analytics market is highly competitive and subject to rapidly changing technology and market conditions. Our ability to compete successfully depends on a number of factors within and outside of our control. Some of these factors include software quality, performance and reliability; the quality of our service and support teams; marketing and prospecting effectiveness; the ability to incorporate artificial intelligence and other technically advanced features; and our ability to differentiate our products. Failure to perform in these or other areas may reduce the demand for our offerings and materially adversely affect our revenue from both existing and prospective customers.
Bitcoin Holding
We hold substantially all of our Bitcoin in custody accounts at Japanese based, institutional-grade custodians that have demonstrated records of regulatory compliance and information security. 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 held for trading 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.
Bitcoin Industry and Market
Bitcoin is a digital asset that is issued by and transmitted through an open-source protocol, known as the Bitcoin protocol, collectively maintained by a peer-to-peer network of decentralized user nodes. This network hosts a public transaction ledger, known as the Bitcoin blockchain, on which Bitcoin holdings and all validated transactions that have ever taken place on the Bitcoin network are recorded. Balances of Bitcoin are stored in individual “wallet” functions, which associate network public addresses with one or more “private keys” that control the transfer of Bitcoin. The Bitcoin blockchain can be updated without any single entity owning or operating the network.
Creation of New Bitcoin and Limits on Supply
New Bitcoin is created and allocated by the Bitcoin protocol through a “mining” process that rewards users that validate transactions in the Bitcoin blockchain. Validated transactions are added in “blocks” approximately every 10 minutes. The mining process serves to validate transactions and secure the Bitcoin network. Mining is a competitive and costly operation that requires a large amount of computational power to solve complex mathematical algorithms. This expenditure of computing power is known as “proof of work.” To incentivize miners to incur the costs of mining Bitcoin, the Bitcoin protocol rewards miners that successfully validate a block of transactions with newly generated Bitcoin.
The Bitcoin protocol limits the total number of Bitcoin that can be generated over time to 21 million. The current reward for miners that successfully validate a block of transactions is 6.25 Bitcoin per mined block. Based on current mining rates, we anticipate the reward will decrease by half to 3.125 Bitcoin per mined block sometime in April 2024. This decrease in mining reward is referred to as a Bitcoin halving, and it occurs after every 210,000 blocks are mined, which has historically occurred approximately every four years.
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Modifications to the Bitcoin Protocol
Bitcoin is an open-source network that has no central authority, so no one person can unilaterally make changes to the software that runs the network. However, there is a core group of developers that maintain the code for the Bitcoin protocol, and they can propose changes to the source code and release periodic updates and other changes. Unlike most software that has a central entity that can push updates to users, Bitcoin is a peer-to-peer network in which individual network participants, called nodes, decide whether to upgrade the software and accept the new changes. As a practical matter, a modification becomes part of the Bitcoin protocol only if the proposed changes are accepted by participants collectively having the most processing power, known as hash rate, on the network. If a certain percentage of the nodes reject the changes, then a “fork” takes place and participants can choose the version of the software they want to run.
Bitcoin Industry Participants
The primary Bitcoin industry participants are miners, investors and traders, digital asset exchanges and service providers, including custodians, brokers, payment processors, wallet providers and financial institutions.
Miners. Miners range from Bitcoin enthusiasts to professional mining operations that design and build dedicated mining machines and data centers, including mining pools, which are groups of miners that act cohesively and combine their processing power to mine Bitcoin blocks.
Investors and Traders. Bitcoin investors and traders include individuals and institutional investors who, directly or indirectly, purchase, hold, and sell Bitcoin or Bitcoin-based derivatives. On January 10, 2024, the Securities and Exchange Commission (“SEC”) issued an order approving several applications for the listing and trading of shares of spot Bitcoin exchange-traded products (“ETPs”) on U.S. national securities exchanges. While the SEC had previously approved exchange-traded funds where the underlying assets were Bitcoin futures contracts, this order represents the first time the SEC has approved the listing and trading of ETPs that acquire, hold and sell Bitcoin directly. ETPs can be bought and sold on a stock exchange like traditional stocks, and provide investors with another means of gaining economic exposure to Bitcoin through traditional brokerage accounts.
Digital Asset Exchanges. Digital asset exchanges provide trading venues for purchases and sales of Bitcoin in exchange for fiat or other digital assets. Bitcoin can be exchanged for fiat currencies, such as the U.S. dollar, at rates of exchange determined by market forces on Bitcoin trading platforms, which are not regulated in the same manner as traditional securities exchanges. In addition to these platforms, over-the-counter markets and derivatives markets for Bitcoin also exist. The value of Bitcoin within the market is determined, in part, by the supply of and demand for Bitcoin in the global Bitcoin market, market expectations for the adoption of Bitcoin as a store of value, the number of merchants that accept Bitcoin as a form of payment, and the volume of peer-to-peer transactions, among other factors. For a discussion of risks associated with digital asset exchanges, see “Item 1A. Risk Factors—Risks Related to Our Bitcoin Acquisition Strategy and Holdings—Due to the unregulated nature and lack of transparency surrounding the operations of many Bitcoin trading venues, Bitcoin trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in Bitcoin trading venues and adversely affect the value of our Bitcoin.”
Service providers. Service providers offer a multitude of services to other participants in the Bitcoin industry, including custodial and trade execution services, commercial and retail payment processing, loans secured by Bitcoin collateral, and financial advisory services. If adoption of the Bitcoin network continues to materially increase, we anticipate that service providers may expand the currently available range of services and that additional parties will enter the service sector for the Bitcoin network.
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Revenue Model
In the business of providing AI-enable software development services and solutions, we derive our revenue from AI-software development and technical supporting services.
Competition
The AI-enable software development market is highly competitive and subject to rapidly changing technology and market conditions. Our ability to compete successfully depends on a number of factors within and outside of our control. Some of these factors include software quality, performance and reliability; the quality of our service and support teams; marketing and prospecting effectiveness; the ability to incorporate artificial intelligence and other technically advanced features; and our ability to differentiate our products. Failure to perform in these or other areas may reduce the demand for our offerings and materially adversely affect our revenue from both existing and prospective customers.
Domain
We have the right to use the following domain registration issued in the USA:
| Number | Issue Date | Expiration Date | Registration Agency | Domain Name | ||||
| 1 | 2023/09/15 | 2024/09/14 | GoDaddy Operating Company, LLC | wetradegroup.technology |
Our Employees
As of the date hereof and in the fiscal year 2023, we have 6 full-time employees. The following table sets forth the number of our employees by function:
| Functional Area | Number of Employees | |||
| Operating | 1 | |||
| Technology | 2 | |||
| General and Administrative | 1 | |||
| Financial Department | 2 | |||
| Total | 6 | |||
We provide employee benefits for each employee in accordance with Hong Kong law. These include pension, medical, unemployment, work injury and maternity insurance, and a housing provident fund.
Our employees have not formed any employee union or association. We believe we maintain a good working relationship with our employees and have not experienced any difficulty in recruiting staff for our operations.
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Insurance
We maintain certain insurance policies to safeguard us against risks and unexpected events. For example, we provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees in compliance with applicable Hong Kong and PRC laws. We do not maintain business interruption insurance or product liability insurance, which are not mandatory under Hong Kong and PRC laws. We do not maintain key man insurance, insurance policies covering damages to our network infrastructures or information technology systems nor any insurance policies for our properties. During the fiscal years 2023 and 2022, we did not make any material insurance claims in relation to our business.
Legal Proceedings
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 be in control of the Company.
On November 7, 2023, the Chancery Court issued a temporary restraining order substantially restraining the plaintiff-shareholders and their affiliates from claiming to act on behalf of the Company. The lawsuit remains pending as at reporting date.
On November 30, 2023, the Company responded to plaintiffs’ arguments that they controlled the Company, pointing out that plaintiffs’ case (Mr. Dai Zheng and his affiliates) was largely built upon forged signatures and other fabricated materials. In response, the plaintiffs withdrew their opposition to the Company’s request for an injunction.
On January 5, 2024, the Chancery Court entered a preliminary injunction order (attached hereto). Specifically, the order restrained Mr. Dai Zheng and his affiliates from the following conduct:
| (i) | acting as or holding themselves out as majority shareholders, directors, executives, or employees of the Company and its affiliates; |
| (ii) | making any attempts to contact the SEC, Nasdaq, government authorities, or make any filing or press release on behalf of the Company; |
| (iii) | making any attempts to change the board composition and executive team; |
| (iv) | disseminating false statements regarding the Company and its leadership; |
| (v) | making any attempts to contact the Company’s service providers, including auditors, stock transfer agents, and filing agents; |
| (vi) | making any attempts to issue the Company’s shares. |
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REGULATIONS
This section sets forth a summary of the principal PRC laws and regulations relevant to our business and operations in China.
Regulations on Overseas Listings
On February 17, 2023, CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (the “Trial Measures”), which became effective on March 31, 2023. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes on the Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answers to Reporter Questions (collectively, the “Guidance Rules and Notice”) on the CSRC’s official website. Pursuant to the Trial Measures, PRC domestic enterprises that have submitted valid applications for overseas offerings and listing but have not obtained the approval from the relevant overseas regulatory authority or overseas stock exchanges shall complete filings with the CSRC prior to their overseas offerings and listings.
According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or “the CSRC Notice”, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
On February 24, 2023, the CSRC, together with the MOF, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the “Provisions.” The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies”, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
In August 2006, six PRC regulatory authorities, including the CSRC, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, amended in June 2009. The M&A Rules, among other things, require that if an overseas company established or controlled by PRC companies or individuals, or PRC Citizens, intends to acquire equity interests or assets of any other PRC domestic company affiliated with the PRC Citizens, such acquisition must be submitted to the MOFCOM for approval. The M&A Rules also require that an Overseas SPV formed for overseas listing purposes and controlled directly or indirectly by the PRC Citizens shall obtain the approval of the CSRC prior to overseas listing and trading of such Overseas SPV’s securities on an overseas stock exchange.
Our PRC legal counsel, Beijing DOCVIT Law Firm, has advised us that, based on its understanding of the current PRC laws and regulations, our corporate structure and arrangements are not subject to the M&A Rules. However, our PRC legal counsel has further advised us that there are substantial uncertainties as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules.
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Regulations on Internet Information Security and Privacy Protection
In November 2016, the Standing Committee of the National People’s Congress, or the SCNPC, promulgated the Cyber Security Law of the PRC, or the Cyber Security Law, which became effective on June 1, 2017. The Cyber Security Law requires that a network operator, which includes, among others, internet information services providers, take technical measures and other necessary measures in accordance with applicable laws and regulations and the compulsory requirements of the national and industrial standards to safeguard the safe and stable operation of its networks. We are subject to such requirements as we are operating website and mobile application and providing certain internet services mainly through our mobile application. The Cyber Security Law further requires internet information service providers to formulate contingency plans for network security incidents, report to the competent departments immediately upon the occurrence of any incident endangering cyber security and take corresponding remedial measures.
Internet information service providers are also required to maintain the integrity, confidentiality and availability of network data. The Cyber Security Law reaffirms the basic principles and requirements specified in other existing laws and regulations on personal data protection, such as the requirements on the collection, use, processing, storage and disclosure of personal data, and internet information service providers being required to take technical and other necessary measures to ensure the security of the personal information they have collected and prevent the personal information from being divulged, damaged or lost. Any violation of the Cyber Security Law may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, shutdown of websites or criminal liabilities.
As of the date hereof, the Company is in compliance with the Cyber Security Law.
PRC Laws and Regulations on Foreign Investment
Investment in the PRC by foreign investors and foreign-invested enterprises shall comply with the Catalogue for the Guidance of Foreign Investment Industries (2020 Revision) (the “Catalogue”), which was last amended and issued by MOFCOM and National Development and Reform Commission (NDRC) on December 27, 2020 and became effective since January 27, 2021, and the Special Management Measures for Foreign Investment Access (2019 version), or the Negative List, which came into effect on July 30, 2019. The Catalogue and the Negative List contains specific provisions guiding market access for foreign capital and stipulates in detail the industry sectors grouped under the categories of encouraged industries, restricted industries and prohibited industries. Any industry not listed on the Negative List is a permitted industry unless otherwise prohibited or restricted by other PRC laws or regulations.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the PRC, or the Foreign Investment Law, which came into effect on January 1, 2020, repealing simultaneously the Law of the PRC on Sino-foreign Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned Enterprises and the Law of the PRC on Sino-foreign Cooperative Joint Ventures. The Foreign Investment Law adopts the management system of pre-establishment national treatment and negative list for foreign investment. Policies in support of enterprises shall apply equally to foreign-funded enterprises according to laws and regulations. Foreign investment enterprises shall be guaranteed that they could equally participate in the setting of standards, and the compulsory standards formulated by the State shall be equally applied. Fair competition for foreign investment enterprises to participate in government procurement activities shall be protected. The Foreign Investment Law also stipulates the protection on intellectual property rights and trade secrets. The State also establishes information reporting system and national security review system according to the Foreign Investment Law.
PRC Laws and Regulations on Wholly Foreign-Owned Enterprises
The establishment, operation and management of corporate entities in China are governed by the PRC Company Law, which was promulgated by the SCNPC on December 29, 1993 and became effective on July 1, 1994. It was last amended on October 26, 2018 and the amendments became effective on October 26, 2018. Under the PRC Company Law, companies are generally classified into two categories, namely, limited liability companies and joint stock limited companies. The PRC Company Law also applies to limited liability companies and joint stock limited companies with foreign investors. Where there are otherwise different provisions in any law on foreign investment, such provisions shall prevail.
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The Law of the PRC on Wholly Foreign-invested Enterprises was promulgated and became effective on April 12, 1986, and was last amended and became effective on October 1, 2016. The Implementing Regulations of the PRC Law on Foreign-invested Enterprises were promulgated by the State Council on October 28, 1990. They were last amended on February 19, 2014 and the amendments became effective on March 1, 2014. The Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises were promulgated by MOFCOM and became effective on October 8, 2016, and were last amended on July 20, 2017 with immediate effect. The above-mentioned laws form the legal framework for the PRC Government to regulate Foreign-invested Enterprises. These laws and regulations govern the establishment, modification, including changes to registered capital, shareholders, corporate form, merger and split, dissolution and termination of Foreign-invested Enterprises.
According to the above regulations, a Foreign-invested Enterprise should get approval by MOFCOM before its establishment and operation.
PRC Laws and Regulations on Foreign Exchange
Registration of Foreign Investment Enterprises
Pursuant to the Notice of State Administration of Foreign Exchange on Promulgation of the Provisions on Foreign Exchange Control on Direct Investments in China by Foreign Investors promulgated by the SAFE, or the Notice, upon establishment of a foreign investment enterprise pursuant to the law, registration formalities shall be completed with the foreign exchange bureau. Upon completion of registration formalities by the entities involved in direct investments in China, the entities may open accounts for direct investments in China such as preliminary expense account, capital fund account and asset realization account, etc. with the bank based on the actual needs. Upon completion of such registration formalities, foreign investment enterprises could also conduct settlement when contributing foreign exchange funds, and remit funds overseas in the event of capital reduction, liquidation, advance recovery of investment, profit distribution, etc.
PRC Laws and Regulations on Dividend Distribution
The principal regulations governing distribution of dividends of foreign-invested enterprises include the Foreign-Invested Enterprise Law, that became effective on January 1, 2020, and its implementation rules. Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, when a wholly foreign-owned enterprise in China distributes its after-tax profits of a fiscal year, it shall allocate 10% of the profits to the company’s statutory common reserve fund. If the accumulated amount of the company’s statutory reserve fund is more than 50% of the company’s registered capital, the company is no longer required to allocate more funds to the reserve. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.
PRC Laws and Regulations on Taxation
Enterprise Income Tax
The Enterprise Income Tax Law of the People’s Republic of China (the “EIT Law”) was promulgated by the Standing Committee of the National People’s Congress on March 16, 2007 and became effective on January 1, 2008, and was later amended on February 24, 2017 and on December 29, 2018 separately. The Implementation Rules of the EIT Law (the “Implementation Rules”) were promulgated by the State Council on December 6, 2007 and became effective on January 1, 2008. According to the EIT Law and the Implementation Rules, enterprises are divided into resident enterprises and non-resident enterprises. Resident enterprises shall pay enterprise income tax on their incomes obtained in and outside the PRC at the rate of 25%. Non-resident enterprises setting up institutions in the PRC shall pay enterprise income tax on the incomes obtained by such institutions in and outside the PRC at the rate of 25%. Non-resident enterprises with no institutions in the PRC, and non-resident enterprises whose incomes having no substantial connection with their institutions in the PRC, shall pay enterprise income tax on their incomes obtained in the PRC at a reduced rate of 10%.
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The Arrangement between the PRC and Hong Kong Special Administrative Region for the Avoidance of Double Taxation the Prevention of Fiscal Evasion with respect to Taxes on Income (the “Arrangement”) was promulgated by the State Administration of Taxation (“SAT”) on August 21, 2006 and came into effect on December 8, 2006. According to the Arrangement, a company incorporated in Hong Kong will be subject to withholding tax at the lower rate of 5% on dividends it receives from a company incorporated in the PRC if it holds a 25% interest or more in the PRC company. The Notice on the Understanding and Identification of the Beneficial Owners in the Tax Treaty (the “Notice”) was promulgated by SAT and became effective on October 27, 2009. According to the Notice, a beneficial ownership analysis will be used based on a substance-over-form principle to determine whether or not to grant tax treaty benefits.
Value-added Tax
Pursuant to the Provisional Regulations on Value-added Tax of the PRC, or the VAT Regulations, which were promulgated by the State Council on December 13, 1993, took effect on January 1, 1994, and were amended on November 10, 2008, February 6, 2016, and November 19, 2017, respectively, and the Rules for the Implementation of the Provisional Regulations on Value-added Tax of the PRC, which were promulgated by the MOF on December 25, 1993, and were amended on December 15, 2008, and October 28, 2011, respectively, entities and individuals that sell goods or labor services of processing, repair or replacement, sell services, intangible assets, or immovables, or import goods within the territory of the People’s Republic of China are taxpayers of value-added tax. The VAT rate is 17% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified; 11% for taxpayers selling services of transportation, postal, basic telecommunications, construction and lease of immovable, selling immovable, transferring land use rights, selling and importing other specified goods including fertilizers; 6% for taxpayers selling services or intangible assets.
According to the Notice on the Adjustment to the Value-added Tax Rates issued by the SAT and the MOF on April 4, 2018, where taxpayers make VAT taxable sales or import goods, the applicable tax rates shall be adjusted from 17% to 16% and from 11% to 10%, respectively. Subsequently, the Notice on Policies for Deepening Reform of Value-added Tax was issued by the SAT, the MOF and the General Administration of Customs on March 30, 2019 and took effective on April 1, 2019, which further adjusted the applicable tax rate for taxpayers making VAT taxable sales or importing goods. The applicable tax rates shall be adjusted from 16% to 13% and from 10% to 9%, respectively. The VAT rate applicable to the company is currently 6%; the income tax rate applicable to the company is 25%. We are also eligible for receiving tax refund according to certain favorable government policies starting from 2021.
Dividend Withholding Tax
The Enterprise Income Tax Law states that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident investors that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.
Pursuant to an Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes (“Double Tax Avoidance Arrangement”) and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties (the “SAT Circular 81”) issued on February 20, 2009 by SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According to the Circular on Several Questions regarding the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT and took effect on April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of his or her income in twelve months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further provides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements.
We have not commenced the application process for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that we will be granted such a Hong Kong tax resident certificate. We have not filed required forms or materials with the relevant PRC tax authorities to prove that we should enjoy the 5% PRC withholding tax rate.
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PRC Laws and Regulations on Employment and Social Welfare
Labor Law of the PRC
Pursuant to the Labor Law of the PRC, which was promulgated by the Standing Committee of the NPC on July 5, 1994 with an effective date of January 1, 1995 and was last amended on August 27, 2009 and the Labor Contract Law of the PRC, which was promulgated on June 29, 2007, became effective on January 1, 2008 and was last amended on December 28, 2012, with the amendments coming into effect on July 1, 2013, enterprises and institutions shall ensure the safety and hygiene of a workplace, strictly comply with applicable rules and standards on workplace safety and hygiene in China, and educate employees on such rules and standards. Furthermore, employers and employees shall enter into written employment contracts to establish their employment relationships. Employers are required to inform their employees about their job responsibilities, working conditions, occupational hazards, remuneration and other matters with which the employees may be concerned. Employers shall pay remuneration to employees on time and in full accordance with the commitments set forth in their employment contracts and with the relevant PRC laws and regulations. We have entered into written employment contracts with all the employees and performed their obligations under the relevant PRC laws and regulations.
Social Insurance and Housing Fund
Pursuant to the Social Insurance Law of the PRC, which was promulgated by the Standing Committee of the NPC on October 28, 2010 and became effective on July 1, 2011, employers in the PRC shall provide their employees with welfare schemes covering basic pension insurance, basic medical insurance, unemployment insurance, maternity insurance, and occupational injury insurance. We have been complying with local regulations regarding social security and employee insurance.
According to the Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations on Unemployment Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold relevant social insurance premiums for or on behalf of employees. The Law on Social Insurance of the PRC, which was promulgated by the SCNPC on October 28, 2010, became effective on July 1, 2011, and was most recently updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance. Without force majeure reasons, employers must not suspend or reduce their payment of social insurance for employees, otherwise, competent governmental authorities will have the power to enforce employers to pay up social insurance within a prescribed time limit, and a fine of 0.05% of the unpaid social insurance can be charged on the part of the employers per day commencing from the first day of default. Provided that the employers still fail to make the payment within the prescribed time limit, a fine of over one time and up to three times of the unpaid sum of social insurance can be charged.
According to the Regulations on the Administration of Housing Provident Fund, which was promulgated by the State Counsel and became effective on April 3, 1999, and was amended on March 24, 2002 and was partially revised on March 24, 2019 by Decision of the State Council on Revising Some Administrative Regulations (Decree No. 710 of the State Council), housing provident fund contributions by an individual employee and housing provident fund contributions by his or her employer shall belong to the individual employee. Registration by PRC companies at the applicable housing provident fund management center is compulsory and a special housing provident fund account for each of the employees shall be opened at an entrusted bank.
The employer shall timely pay up and deposit housing provident fund contributions in full amount and late or insufficient payments shall be prohibited. The employer shall process housing provident fund payment and deposit registrations with the housing provident fund administration center. Under the circumstances where financial difficulties do exist due to which an employer is unable to pay or pay up housing provident funds, permission of labor union of the employer and approval of the local housing provident funds commission must first be obtained before the employer can suspend or reduce their payment of housing provident funds. With respect to companies who violate the above regulations and fail to process housing provident fund payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be ordered by the housing provident fund administration center to complete such procedures within a designated period. Those who fail to process their registrations within the designated period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When companies breach these regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory enforcement against those who still fail to comply after the expiry of such period.
Our PRC subsidiary is in compliance with PRC’s social insurance and housing fund regulations.
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Regulations Related to our Business Operations in Hong Kong
Business registration requirement
The Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong) requires every person carrying on any business to make an application to the Commissioner of Inland Revenue in the prescribed manner for the registration of that business. The Commissioner of Inland Revenue must register each business for which a business registration application is made and as soon as practicable after the prescribed business registration fee and levy are paid and issue a business registration certificate or branch registration certificate for the relevant business or the relevant branch, as the case may be. The Company has applied and received business registration certificate in HK and is in compliance with such regulations.
Regulations related to Hong Kong Taxation
Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)
Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong), where an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than three months after the date of commencement of such employment. Where an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than one month before such individual ceases to be employed in Hong Kong.
Capital gains tax
No tax is imposed in Hong Kong in respect of capital gains from the sale of shares.
Profits tax
Trading gains from the sale of shares by persons carrying on a trade, profession or business in Hong Kong, where such gains are derived from or arise in Hong Kong, will be subject to Hong Kong profits tax which is imposed at the rates of 8.25% on assessable profits up to HKD 2,000,000 and 16.5% on any part of assessable profits over HKD 2,000,000 on corporations from the year of assessment commencing on or after 1 April 2018. Certain categories of taxpayers (for example, financial institutions, insurance companies and securities dealers) are likely to be regarded as deriving trading gains rather than capital gains unless these taxpayers can prove that the investment securities are held for long-term investment purposes.
Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong)
Under the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong), the Hong Kong stamp duty currently charged at the ad valorem rate of 0.1% on the higher of the consideration for or the market value of the shares, will be payable by the purchaser on every purchase and by the seller on every sale of Hong Kong shares (in other words, a total of 0.2% is currently payable on a typical sale and purchase transaction of Hong Kong shares). In addition, a fixed duty of HKD 5 is currently payable on any instrument of transfer of Hong Kong shares. Where one of the parties is a resident outside Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If no stamp duty is paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.
As of the date hereof, the Company is in compliance with the regulations regarding Hong Kong taxation.
ITEM 1A. RISK FACTORS
Not applicable as we are a smaller reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We have established procedures for evaluating, recognizing, and managing significant risks stemming from potential unauthorized events occurring on or through our electronic information systems. These procedures comprise an important part of our overall enterprise risk management system and are aimed at preventing, detecting, or mitigating data breaches, theft, misuse, unauthorized access, or any other security incidents or vulnerabilities affecting digitally stored data. Internally we have an Internet, Email and Computer Use Policy and all of our employees have been trained on the policy and related tools. Additionally, we employ processes to manage and identify risks arising from cybersecurity threats linked to supplier and customer relationships and our utilization of third-party technology and systems.
We adhere to a risk management framework based on applicable laws and regulations to handle cybersecurity risks across our products, services, infrastructure and corporate assets. We regularly conduct risk assessments to gauge the effectiveness of our systems, identifying areas for improvement. These processes enable us to make informed, risk-based decisions and prioritize cybersecurity measures and risk mitigation strategies. Our risk mitigation efforts encompass a range of technical and operational actions. Our cybersecurity risks and related responses are evaluated by senior leadership, including as part of our enterprise risk assessments that are reviewed by our Board of Directors. Our management team supervises efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents. However, we cannot guarantee that our efforts will prevent any cybersecurity incident from occurring.
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As of the date of this report, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that we believe have, or are likely to, materially affect us, our business strategy, results of operations or financial condition.
ITEM 2. PROPERTIES
Our principal executive office is located at Room 519, 05/F Block T3, Qianhai Premiert Finance Centre Unit 2, Guiwan Area, Nanshan District, Shenzhen, People Republic of China. The office lease term is from January 1, 2023 to December 31, 2025. The rent of Shenzhen office was paid by the shareholders and there is no lease agreement was signed by the Company.
The following table sets forth the leases term and monthly rent:
| Lease Term | Address | Space (square meters) | ||||
| January 1, 2023 to December 31, 2025 | Room 519, 05/F Block T3, Qianhai Premiert Finance Centre Unit 2, Guiwan Area, Nanshan District, Shenzhen, People Republic of China. | 200 | ||||
ITEM 3. LEGAL PROCEEDINGS
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 be in control of the Company.
On November 7, 2023, the Chancery Court issued a temporary restraining order substantially restraining the Mr. Dai Zheng and his affiliates from claiming to act on behalf of the Company. The lawsuit remains pending as at reporting date.
On November 30, 2023, the Company responded to plaintiffs’ arguments that they controlled the Company, pointing out that plaintiffs’ case (Mr. Dai Zheng and his affiliates) was largely built upon forged signatures and other fabricated materials. In response, the plaintiffs withdrew their opposition to the Company’s request for an injunction.
On January 5, 2024, the Chancery Court entered a preliminary injunction order (attached hereto). Specifically, the order restrained Mr. Dai Zheng and his affiliates from the following conduct:
| (i) | acting as or holding themselves out as majority shareholders, directors, executives, or employees of the Company and its affiliates; |
| (ii) | making any attempts to contact the SEC, Nasdaq, government authorities, or make any filing or press release on behalf of the Company; |
| (iii) | making any attempts to change the board composition and executive team; |
| (iv) | disseminating false statements regarding the Company and its leadership; |
| (v) | making any attempts to contact the Company’s service providers, including auditors, stock transfer agents, and filing agents; |
| (vi) | making any attempts to issue the Company’s shares. |
The Company is controlled by its current board of directors, composed of the following personnel: Lichen Dong (Chairman of the Board), Lim Kian Wee, Mahesh Thapaliya, and Jianbo Sun as of reporting date.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is listed on the Nasdaq Capital Market under the symbol “NXTT”. The following table sets forth, for the periods indicated since then, the high and low closing prices of our common stock on the Nasdaq Capital Market as reported by Yahoo Finance.
| High bid | Low bid | |||||||
| Fiscal Year 2024 | ||||||||
| March 31, 2024 | $ | 6.7 | $ | 3.8 | ||||
| Fiscal Year 2023 | ||||||||
| December 31, 2023 | $ | 6.2 | $ | 2.1 | ||||
| September 30, 2023 | $ | 14.3 | $ | 2.8 | ||||
| June 30, 2023(from June 9, 2023, post-reverse stock split) | 9.9 | 9.3 | ||||||
| March 31, 2023 | 55.5 | 51.8 | ||||||
The last reported sales price for our shares of common stock on the Nasdaq Capital Market as of March 31, 2024 was $6.22 per share. As of March 31, 2024, we had approximately 3,200 shareholders of record for our common stock.
Transfer Agent
The transfer agent for our common stock is Globex Transfer LLC. The transfer agent’s telephone number and address is (813) 344-4490 and 780 Deltona Blvd, Deltona, FL 32725.
Holders
As of the close of business on December 31, 2023, there were approximately 3,200 holders of record of our common stock.
Dividends
We have not declared any cash dividends on our common stock during our two most recent fiscal years. In the near future, we intend to retain any earnings to finance the development and expansion of our business. We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of cash dividends by us are subject to the discretion of the Board. Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant at the time by the board of Directors. We are not currently subject to any contractual arrangements that restrict our ability to pay cash dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
As of December 31, 2023, there are no compensation plans under which our equity securities are authorized for issuance.
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Recent Sales of Unregistered Securities
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, 1,570,600 shares were issued for $12,616,454. The Company’s common stock issued increased to 2,625,130 shares as of December 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not, nor did anyone on our behalf or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Exchange Act, repurchase any outstanding shares of our common stock during any month of our fiscal year ended December 31, 2023.
ITEM 5A. SELECTED FINANCIAL DATA
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 301 of Regulation S-K.
ITEM 6. 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 annual 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 annual report.
Overview
Next Technology Holding 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 held for trading and expect to continue to accumulating 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 financings 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.
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Change of Officer and Director
On December 11, 2023, according to the voting results of the Annual Shareholders’ Meeting (the “Meeting”), Lichen Dong, Lim Kian Wee, Mahesh Thapaliya and Jianbo Sun were respectively appointed as the directors of the Company, forming the new Board of Directors of the Company. Biming Guo, Ning Qin, Yuxing Ye no longer serves as the director of the Company.
On December 11, 2023, the new Board of Directors held a regular meeting, and made the following resolutions:
1. Mr. Lichen Dong is appointed as the Chairman of the Board.
2. The Audit Committee of the Company is composed of all four independent directors (Lichen Dong, Lim Kian Wee, Mahesh Thapaliya and Jianbo Sun) as members, and Lim Kian Wee is designated as the Chair of the Audit Committee.
3. The Nominating Committee of the Company is composed of all four independent directors (Lichen Dong, Lim Kian Wee, Mahesh Thapaliya and Jianbo Sun) as members, and Lichen Dong is designated as the Chair of the Nominating Committee.
4. The Compensation Committee of the Company is composed of all four independent directors (Lichen Dong, Lim Kian Wee, Mahesh Thapaliya and Jianbo Sun) as members, and Jianbo Sun is designated as the Chair of the Compensation Committee.
Each of Lichen Dong, Lim Kian Wee, Mahesh Thapaliya and Jianbo Sun qualifies as an independent director under rules of The Nasdaq Stock Market, and does not have a family relationship with any director or executive officer of the Company, and has not been involved in any transaction with the Company during the past two years that would require disclosure under Item 404(a) of Regulation S-K.
On December 13, 2023, Ms. Annie Huang tendered her resignation as a Chief Financial officer of Next Technology Holding Inc. (the “Company”), effective from December 13, 2023. On the same day, approved by the Board of Directors, the Nominating Committee and the Compensation Committee, Mr. Ken Tsang was appointed as the Chief Financial Officer of the Company, effective December 13, 2023.
On December 28, 2023, Mr. Wei He Chun tendered his resignation as the chief executive officer, effective December 28, 2023. Mr. Liu Wei Hong was subsequently appointed as the chief executive officer, effective January 31, 2024.
Result of Operations
The following tables provide a comparison of a summary of our results of operations for the fiscal years ended December 31, 2023 and 2022.
Results of Operations for the fiscal years ended December 31, 2023 and 2022
| For the year ended December 31, 2023 | For the year ended December 31, 2022 | |||||||
| Revenue: | ||||||||
| Service revenue, non-related party | $ | 2,633,308 | $ | - | ||||
| Cost of Revenue | (1,198,033 | ) | - | |||||
| Gross Profit | 1,435,275 | - | ||||||
| Operating Income/ (Expenses): | ||||||||
| General and Administrative | (2,666,662 | ) | (6,793,718 | ) | ||||
| Fair value gain on digital assets | 10,147,576 | - | ||||||
| Profit from operations | 8,916,189 | (6,793,718 | ) | |||||
| Other expenses | (5,805,500 | ) | - | |||||
| Other income | 45,900 | - | ||||||
| Profit before income tax | 3,156,589 | (6,793,718 | ) | |||||
| Income tax expenses | (130,412 | ) | - | |||||
| Net Profit/ (Loss) | $ | 3,026,177 | $ | (6,793,718 | ) | |||
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Revenue from Operations
For the fiscal year ended December 31, 2023 and 2022, total revenue was $2,633,308 and $nil, respectively. The revenue is mainly generated from the AI software development and SAAS software solutions for industrial and other businesses users.
Cost of revenue
Cost of revenue mainly consists of staff payroll, system development costs and outsourcing staff cost for system development, which is in line with the increase in revenue during the period.
General and Administrative Expenses
For the fiscal year ended December 31, 2023 and 2022, general and administrative expenses were $2,666,662 and $6,793,718 respectively. The decrease is mainly due to lesser expenses incurred for the Nasdaq IPO professional fees in 2023 as compared to the prior reporting year.
Other expenses
For the fiscal year ended December 31, 2023 and 2022, other expenses was $5,805,500 and $nil, respectively. The increase in other expense is due to waiver of related company loan of $5,805,500 during the year.
Net profit/ (loss)
As a result of the factors described above, there was a net profit of $3,026,177 and net loss of $6,793,718 for the fiscal year ended December 31, 2023 and 2022, respectively, the increase in net profit is mainly due to gain in fair value in digital assets and lesser expenses were incurred for the Nasdaq IPO professional fees in 2023 as compare to the prior reporting year.
The following chart provides a summary of our balance sheets for the fiscal years ended December 31, 2023 and 2022. It should be read in conjunction with the financial statements, and notes thereto.
| 2023 | 2022 | |||||||
| Cash and Cash equivalents | $ | 668,387 | $ | 22,926 | ||||
| Digital Assets | 35,137,576 | - | ||||||
| Receivables | 1,133,117 | - | ||||||
| Prepayments | 12,125,500 | 50,000 | ||||||
| Other receivables | - | 5,805,500 | ||||||
| Assets related to discontinued operations | - | 40,644,600 | ||||||
| Total assets | $ | 49,064,580 | $ | 46,523,026 | ||||
| Accounts payable | 926,456 | - | ||||||
| Amount due to related parties | 1,693,096 | 1,220,366 | ||||||
| Other liabilities | 1,730,944 | 50,000 | ||||||
| Liabilities related to discontinued operations | - | 3,545,900 | ||||||
| Total liabilities | $ | 4,350,496 | $ | 4,816,266 | ||||
| Total stockholders’ equity | $ | 44,714,084 | 42,200,493 | |||||
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As of December 31, 2023, we had total assets of $49,064,580, which mainly consisted of $668,387 in cash, $35,137,576 in digital assets, and $13,258,617 in other receivables and prepayments; we had total liabilities of $4,350,496 which consisted of $926,456 in accounts payable, $1,693,096 in amount due to related parties and $1,730,944 in other liabilities; we had total stockholders’ equity of $44,714,084.
| For the year ended December 31, 2023 | For the year ended December 31, 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net profit/ (loss) | $ | 3,026,177 | $ | (6,793,718 | ) | |||
| Loss from discontinued operation | (12,945,877 | ) | (2,365,697 | ) | ||||
| Fair value gain on digital asset | (10,147,576 | ) | - | |||||
| Loss on amount due from a related party | 5,805,500 | - | ||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | (1,133,116 | ) | - | |||||
| Prepaid expenses | 50,000 | (50,000 | ) | |||||
| Accounts payable | 926,457 | - | ||||||
| Accrued expenses | - | (39,832 | ) | |||||
| Tax payables | 130,944 | - | ||||||
| Director fee payable | 34,000 | 402,000 | ||||||
| Other payables | 1,550,000 | 50,000 | ||||||
| Net cash flows used in continued operating activities: | (12,703,491 | ) | (8,797,247 | ) | ||||
| Net cash flows provided by/ (used in) discontinued operating activities: | 32,598,698 | (29,006,097 | ) | |||||
| Net cash flows provided by/ (used in) operating activities: | 19,895,207 | (37,803,344 | ) | |||||
| Cash flow from Investing activity: | ||||||||
| Prepayment for digital assets | (12,125,500 | ) | - | |||||
| Digital assets | (24,990,000 | ) | - | |||||
| Net cash flow used in continued investing activity: | (37,115,500 | ) | - | |||||
| Net cash flows provided by discontinued investing activities: | 4,500,000 | - | ||||||
| Net cash flows used in investing activities: | (32,615,500 | ) | ||||||
| Cash flow from financing activities: | ||||||||
| Proceeds from issuance of common stock | 12,616,454 | 39,345,676 | ||||||
| Related party loan | 438,732 | 182,365 | ||||||
| Net cash provided by continued financing activities | 13,055,186 | 39,528,041 | ||||||
| Net cash provided by discontinued financing activities: | - | - | ||||||
| Net cash provided by continued financing activities: | 13,055,186 | 39,528,041 | ||||||
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Operating activities
Our continuing cash flow generated from operating activities was $19,895,207 for the fiscal year ended December 31, 2023 as compared to the cash flow used in operating activities of $37,803,344 in prior year. The increase was mainly due to increase in net profit and waiver of amount due from a related party during the year.
Investing activities
Our continuing cash flow used in investing activities was $32,615,500 for the fiscal year ended December 31, 2023 was compared to $nil in prior year. The increase was mainly due to acquisition of 833 Bitcoin amounting to $24,990,000 and prepayment for Bitcoin with the amount of $12,125,500 during the year.
Financing activities
Cash generated from financing activities was $13,055,186 for the year ended December 31, 2023 was compared to the net cash generated from financing activities of $39,528,041 in prior year, which was decreased by approximately of $26.8million.
The decrease was mainly due to lesser share placement of approximately $12.6 million for the fiscal year ended December 31, 2023 as compared to share placement of $37.5 million in prior year.
Inflation
Inflation does not materially affect our business or the results of our operations.
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.
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.
Use of Estimate
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.
Accounts receivable
Accounts receivable are presented net of allowance for expected credit loss. The Group 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. The Company determines the allowance for expected credit loss on general basis taking into consideration various factors including but not limited to the historical collection experience and credit-worthiness of the customers as well as the age of the individual receivables balance. Additionally, the Company makes specific bad debt provisions based on any specific knowledge the Company acquires 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.
23
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.
Post-Balance Sheet Events
On March 1, 2024, the Company entered into a share purchase agreement (the “Purchase Agreement”) with certain existing shareholders (the “Sellers”) of Future Dao Group Holding Limited, an exempted company incorporated and existing under the laws of the Cayman Islands (the “Target”), pursuant to which the Company agrees to purchase from the Sellers indirectly through Next Investment Group Holding Limited, a wholly-owned subsidiary of the Company (“Next Investment”), and the Sellers agree to sell to Next Investment, an aggregate of 2,000 ordinary shares (the “Purchased Shares”) of the Target (the “Transaction”) at a per share purchase price of $6,698 per share for an aggregate purchase price of $13,396,000 (the “Purchase Price”). Pursuant to the Purchase Agreement, at the closing of the Transaction, the Company will pay the Purchase Price by issuing to the Sellers an aggregate of 3,940,000 shares of common stock of the Company (the “Next Technology Common Stock”) based on an agreed-upon valuation of $3.4 per share (the “Per Share Price”). The Per Share Price is above $3.19, which is the average price per share of the shares of common stock of the Company traded on Nasdaq Capital Market in the five trading days prior to the signing date of the Purchase Agreement. Pursuant to the Purchase Agreement, each Seller will receive its portion of the Company’s Common Stock proportionate to the number of the Purchased Shares to be sold by such Seller to Next Investment under the Purchase Agreement, the transaction is expected to complete in end of April 2024.
Change of Company name
Effective April 2, 2024, Wetrade Group Inc. (the “Company”) changed its name to Next Technology Holding Inc. The name change was made pursuant to the Wyoming Business Corporations Act, and an amendment to Article I of the Company’s Amended and Restated Articles of Incorporation was filed with the Wyoming Secretary of State on March 18, 2024 (Amendment ID: 2024-004669585).
Our common stock will continue to trade on the NASDAQ Stock Market under the ticker symbol “NXTT”. Outstanding stock certificates for shares of the company are not affected by the name change. They continue to be valid and need not be exchanged.
ITEM 7. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited financial statements for the years ended December 31, 2023, and 2022 are set forth on pages F-1 to F-17 immediately following the signature page to this annual report. See Item 15 for a list of the financial statements included herein.
ITEM 9. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure.
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Our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report. Based upon that evaluation, management has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to management and to the Board regarding the preparation and fair presentation of published financial statements.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and our directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. 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) lack of US GAAP expertise in finance team; (ii) lack of US GAAP expertise in finance team; (iii) 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 December 31, 2023, 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.
ITEM 9A. OTHER INFORMATION
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
Directors and Executive Officers
The following table sets forth information regarding each of our current directors and executive officers:
| Name: | Age: | Positions with the Company: | ||
| Liu Wei Hong | 30 | Chief Executive Officer (Principal Executive Officer) | ||
| Ding Nan | 44 | Chief Operating Officer | ||
| Ken Tsang | 43 | Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) | ||
| Dong Li Chen | 38 | Director, Chairman of the Board, and Chair of Nominating Committee | ||
| Lim Kian Wee | 43 | Director and Chair of Audit Committee | ||
| Mahesh Thapaliya | 39 | Director | ||
| Jianbo Sun | 38 | Director and Chair of Compensation Committee |
Background of Directors and Executive Officers
Mr. Weihong Liu, Chief Executive Officer
Mr. Weihong Liu has more than 10 years of investment and research experience in the fields of crypto assets and blockchain technology. Mr. Liu has conducted in-depth analysis and strategic layout of potential investment opportunities in crypto assets. In addition, Mr. Liu has innovative business plans in high-tech and rapidly growing artificial intelligence generated content businesses, and he has a deep understanding of compliance requirements, market insights, and product functionality. Mr. Liu has been equipped with abundant knowledge reserves and strong executive capability in the corporate culture construction field as well as relevant experience in building diverse corporate culture dissemination system. Mr.Liu holds a bachelor’s degree in Business Management from University of The West of England.
Mr. Nan Ding, Chief Operating Officer
Mr. Ding has over 24 years of operational management experience in industries such as cross-border investment, supply chain finance, equipment manufacturing, and international trade. From 2012 to 2023, Mr. Ding successively founded Japan Zhaoyuan Trading Co., Ltd. and Japan Toyo Trading Co., Ltd., specializing in cross-border investment and international trade of bulk commodities. From 2007 to 2012, Mr. Ding established Haimeng Tongshang Co., Ltd. and Haimeng New Energy Technology Co., Ltd., mainly engaged in the production and manufacturing of environmental protection industry and new energy equipment. Prior to this, Mr. Ding had 8 years of experience in municipal project engineering services. Mr. Ding holds a bachelor’s degree in International Economic Management from University of Science and Technology Beijing.
Mr. Ken Tsang, Chief Financial Officer
Mr. Tsang is a fellow member of Association of Chartered Certified Accountants (“ACCA”) and member of Hong Kong Institute of Certified Public Accountants (“HKICPA”) with more than 15 years experiences in accounting, audit and assurance services with several listed and private companies operating in USA, Hong Kong and Mainland China. He has wide variety of industries experiences, including property developer, hotel and property management, investment companies, licensed corporations, entertainment solution companies, finance lease, factoring, general trading and manufacturing. Mr. Tsang also has extensive experiences in the capital market work and was engaged in several transactions and initial public offering in Hong Kong and USA. Mr. Tsang graduated with a bachelor’s degree at University of Hull, United Kingdom.
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Lichen Dong, Director, Chairman of the Board
Mr. Lichen Dong has 15 years of work experience in the fields of investment, mergers and acquisitions, and finance, including corporate governance, fundraising, financial analysis, mergers and acquisitions, and complex international architecture construction. From 2022 to 2023, Mr. Dong served as a senior consultant for Future Dao Group, covering research and development of blockchain technology, clean energy application strategies, corporate governance, and capital restructuring and listing. Mr. Dong plays an indispensable role in formulating the company’s strategic decisions, leveraging his unique business model and business acumen. Mr. Dong worked at a confidential information research center from 2019 to 2021, dedicated to promoting the application of business models that combine digital assets with physical industries. Mr. Dong also worked at Hanergy Holding Group and Jinko Power Group, specializing in the development and management of renewable energy and power generation assets. Mr. Dong has established various innovative investment models in the new energy industry, making outstanding contributions to market expansion and risk control cost control in the company’s business management. Mr. Dong holds a bachelor’s degree from the School of Automation and Electrical Engineering at Beijing University of Aeronautics and Astronautics, and a master’s degree from the School of Electrical and Electronics Engineering at the University of Nottingham.
Lim Kian Wee, Director
Mr. Lim Kian Wee has over 15 years of experience in the research of block-chain and algae biomass field and he will serve as an independent director of the Company in Dec 2023. From June 2015 to present, he served as senior partner in Ethereum Dapp, a company that engaged in computer Science management and block-chain technical consultation of virtual currency central exchange. From April 2005 to October 2014, Mr. Lim has served as block-chain and computer scientific officer and cell biology lecturer in the several universities in USA and Singapore. From March 2008 to October 2013, Mr. Lim has served as founder of Algae Bioresource Centre SdnBhd, a company that engaged in providing R&D service and consultation related to algae biofuel and algae farm. Mr. Lim holds a bachelor’s degree in biotechnology from State University of New York in 2001 and Master degree in biotechnology from University of Pennsylvania in 2002. He was also PHD Candidate from National Taiwan University in February 2013 and withdrew his candidateship in September 2014. Mr. Lim has more than 10 professional publications and conference papers in the field of environmental sciences, Microalgae, biodiesel, new energy and block-chains.
Mahesh Thapaliya, Director
Mr. Mahesh Thapaliya has over 12 years of international business work experience. Since 2020, he has served as the Business Director of One World Corporations. The work involves conducting business cooperation around key international projects, including infrastructure, energy, industrial investment, art and culture, trade, investment, and other industries. From 2013 to 2020, Mr Mahesh works for Banner Electric Co. Ltd. and SINOPAK Electric Co. Ltd. He has extensive leadership experience in corporate technology brand marketing, internal control management, and corporate communication by providing services to multiple multinational corporations. Mr. Mahesh holds Master and Bachelor degree from Beihang University.
Jianbo Sun, Director
Mr. Jianbo Sun is an entrepreneur, venture capitalist, and philanthropist with 16 years of experience in establishing, investing in, and operating the intelligent manufacturing industry. Since February 2012, Mr. Sun has served as the President of Orejia Group Co Limited, responsible for strategic planning, industrial investment, and financial financing. Has successful experience in business trend judgment, enterprise management, and capital operation. Prior to this, Mr. Sun had 3 years of industry research experience at CITIC Securities, with a focus on investment portfolios in energy management, real estate, construction, and agriculture. Mr. Sun attaches great importance to corporate social responsibility in business operations, actively participates in charitable and public welfare activities, has supported thousands of impoverished children, and has donated multiple times in large-scale natural disaster events. Mr. Sun holds a Bachelor’s degree in Business Administration from the University of International Business and Economics.
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Family Relationships
None of the directors or executive officers at the Company have a family relationship as defined in Item 401 of Regulation S-K.
Election of Officers
Each of our directors is appointed to hold office until the next annual meeting of our shareholders, until his or her respective successor is elected and qualified, or until he or she resigns or is removed in accordance with the applicable provisions of Wyoming law. Our officers are appointed by our board of directors and hold office until removed by our board of directors or until their resignation.
Board of Directors
We currently have a board of directors consisting of six members, a majority of whom are “independent” as defined in Nasdaq Rule 5605. We expect that all current directors will continue to serve after this offering. The directors will be re-elected at our annual general meeting of shareholders.
A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company shall declare the nature of his interest at a meeting of the directors. A general notice given to the directors by any director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made. A director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the directors at which any such contract or proposed contract or arrangement shall come before the meeting for consideration.
Board Committees
We have established three committees under the board of directors: Audit Committee, Compensation Committee and Nominating Committee. Each committee is governed by a charter approved by our board of directors. Copies of the charters have been submitted as exhibits to the registration statement of which this prospectus is a part and will be available at our investor relations website.
Audit Committee
Our Audit Committee consists of Lim Kian Wee (Chair), Dong Li Chen, and Mahesh Thapaliya. Each member of the Audit Committee will satisfy the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and meet the independence standards under Rule 10A-3 under the Exchange Act. The Audit Committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The Audit Committee is responsible for, among other things:
| ● | selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm; | |
| ● | reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K; |
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| ● | discussing the annual audited financial statements with management and our independent registered public accounting firm; | |
| ● | annually reviewing and reassessing the adequacy of our Audit Committee charter; | |
| ● | meeting separately and periodically with the management and our independent registered public accounting firm; | |
| ● | regularly reporting to the full board of directors; | |
| ● | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposure; and | |
| ● | such other matters that are specifically delegated to our Audit Committee by our board of directors from time to time. |
Compensation Committee
Our Compensation Committee consists of Sun Jian Bo, (Chair), Dong Li Chen, and Lim Kian Wee. Each of the Compensation Committee members satisfies the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. Our Compensation Committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. No officer may be present at any committee meeting during which such officer’s compensation is deliberated upon. The Compensation Committee will be responsible for, among other things:
| ● | reviewing and approving to the board with respect to the total compensation package for our most senior executive officers; | |
| ● | approving and overseeing the total compensation package for our executives other than the most senior executive officers; | |
| ● | reviewing and recommending to the board with respect to the compensation of our directors; | |
| ● | periodically reviewing and approving any long-term incentive compensation or equity plans; | |
| ● | selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and | |
| ● | programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
Nominating Committee
Our Nominating Committee consists of Dong Li Chen (Chair), Lim Kian Wee and Mahesh Thapaliya. Each member of the Nominating Committee will satisfy the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. The nominating committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The Nominating Committee will be responsible for, among other things:
| ● | selecting and recommending to the board nominees for election by the shareholders or appointment by the board; | |
| ● | annually reviewing with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; |
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| ● | making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and | |
| ● | advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. |
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors and officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has been a party to any judicial or administrative proceeding during the past ten (10) years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Related Party Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics applicable to our directors, officers and employees.
Enforceability
Given that most of our executives officers and current directors are based in the People’s Republic of China and/or Hong Kong, it may be difficult, if not impossible, to acquire jurisdiction over these persons in the event that a lawsuit is initiated against us and/or our officers and directors by a stockholder or group of stockholders in the United States. Also, it may be difficult to enforce judgments obtained in the U.S. courts based on civil liability provisions of the U.S. federal securities laws against us and/or our officers and directors who do not currently reside in the U.S. or have substantial assets in the U.S. In addition, there is uncertainty as to whether the courts of the People’s Republic of China would recognize or enforce judgements of U.S. courts against us, or such officers and directors predicted upon the civil liability provisions of the securities laws of the U.S. or any state.
Board Diversity
The Board of Directors does not have a formal policy with respect to Board nominee diversity. In recommending proposed nominees to the Board of Directors, the Nominating Committee is charged with building and maintaining a board that has an ideal mix of talent and experience to achieve our business objectives in the current environment. In particular, the Nominating Committee is focused on relevant subject matter expertise, depth of knowledge in key areas that are important to us, and diversity of thought, background, perspective and experience so as to facilitate robust debate and broad thinking on strategies and tactics pursued by us.
The following table provides certain information regarding the diversity of our Board of Directors as of the date of this annual report.
| Board Diversity Matrix (As of the date of this annual report) | ||
| Country of Principal Executive Offices: | China | |
| Foreign Private Issuer | No | |
| Disclosure Prohibited Under Home Country Law | No | |
| Total Number of Directors | 4 | |
| Female | Male | Non-Binary | Did Not Disclose Gender | |||||||||||||
| Part I: Gender Identity | ||||||||||||||||
| Directors | 0 | 4 | 0 | 0 | ||||||||||||
| Part II: Demographic Background | ||||||||||||||||
| Underrepresented Individual in Home Country Jurisdiction | — | |||||||||||||||
| LGBTQ+ | — | |||||||||||||||
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to compensation for the years ended December 31, 2023 and 2022, earned by or paid to our chief executive officer and principal executive officer, our principal financial officer, and our other most highly compensated executive officers whose total compensation exceeded US$2,000 (the “named executive officers”).
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
| Hechun Wei | 2023 | 24,000 | - | - | - | 24,000 | |||||||||||||||||
| CEO (as of December 28, 2023) | 2022 | 2,000 | - | - | - | 2,000 | |||||||||||||||||
| Annie Huang | 2023 | 24,000 | - | - | - | 24,000 | |||||||||||||||||
| CFO and Secretary(as of December 13, 2023) | 2022 | 4,000 | - | - | - | 4,000 | |||||||||||||||||
| Ken Tsang | 2023 | 2,000 | - | - | - | 2,000 | (1) | ||||||||||||||||
| CFO and Secretary | 2022 | - | - | - | - | - | |||||||||||||||||
| (1) | Such amounts were accrued based on his appointment date in 2023. Mr. Ken Tsang was appointed as the CFO of the Company on December 13, 2023. |
Employment Agreements
Our employment agreements with our officers generally provide employment for a specific term and set annual salaries, health insurance, pension insurance, paid vacation, and family leave time. The agreement may be terminated by either party as permitted by law.
We have entered into an employment agreement with each of Dong Li Chen, our Chairman, Lim Kian Wee, Director, Mahesh Thapaliya, Director and Jianbo Sun, Director.
Under the terms of the agreements, Messrs. Ken Tsang is entitled to receive a monthly salary of $2,000, effective from December 13, 2023, plus one month’s additional salary by the end of each year. All of these are payable in the equivalent amount of either in Hong Kong Dollars or Chinese Renminbi. Any variances are mainly due to fluctuation of currency exchange.
Director Compensation
On December 11, 2023, we entered into a service contract with each of our directors. Mr. Dong Li Chen, Mr. Lim Kian Wee, Mr. Mahesh Thapaliya and Mr. Sun Jian Bo. The contract has a term of two years commencing January 1, 2024 and we agree to pay $2,000 per month commencing January 1, 2024 plus one month’s additional payment by the end of each year.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to beneficial ownership of our common stock as of the date of hereof by:
| ● | Each person who is known by us to beneficially own more than 5% our outstanding common stock; |
| ● | Each of our director, director nominees and named executive officers; and |
| ● | All directors and named executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of shares of common stock beneficially owned by a person listed below and the percentage ownership of such person, common stock underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this prospectus are deemed outstanding but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all common stock shown as beneficially owned by them. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of our Company at No. Room 519, 05/f Block T3, Qianhai Premier Finance Centre Unit 2, Guiwan Area, Nanshan District, Shenzhen, People’s Republic of China. As of the date hereof, we have approximately 3,200 shareholders of record.
| Executive Officers and Directors | Amount of Beneficial Ownership of Common Stock(1) | Percentage Ownership of Common Stock(2) | ||||||
| Directors and Named Executive Officers: | ||||||||
| Liu Wei Hong | - | - | ||||||
| Ken Tsang | - | - | ||||||
| Ding Nan | - | - | ||||||
| Dong Li Chen | - | - | ||||||
| Lim Kian Wee | - | - | ||||||
| Mahesh Thapaliya | - | - | ||||||
| Sun Jian Bo | - | - | ||||||
| All executive officers and directors as a group (7 persons) | - | |||||||
| 5% or Greater Shareholders | ||||||||
| Blue Rose Worldwide Limited | 231,164 | 8.81 | % | |||||
| Perfect Linkage Group Limited | 231,164 | 8.81 | % | |||||
| Golden Genius Development Limited | 245,012 | 9.33 | % | |||||
| Fubao Group Limited | 245,011 | 9.33 | % | |||||
| Huang Xiu Mei | 256,849 | 9.78 | % | |||||
| * | Less than 1%. |
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the common stock. All shares represent only common stock held by shareholders as no options are issued or outstanding. |
| (2) | Calculation based on 2,625,130 shares of common stock issued and outstanding as of December 31, 2023. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
RELATED PARTY TRANSACTIONS
Transactions with Related Persons
No director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction during the last two fiscal years in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
As reported on our Form 8-K filed April 4, 2024, we had a change of auditor from Assentsure PAC to JWF Assurance PAC for the fiscal year ended December 31, 2023.
The Audit Committee has ratified JWF Assurance PAC, Independent Registered Public Accounting Firm, to audit our books, records and accounting for the year ended December 31, 2023. The Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change will be in the best interests of us and our shareholders.
The aggregate fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| Year | Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | Total Fees | |||||||||||||||
| 2022 | $ | 235,000 | $ | 43,500 | $ | 12,000 | $ | 0 | $ | 290,500 | ||||||||||
| 2023 | $ | 170,000 | $ | 57,500 | $ | 12,000 | $ | 1,430,000 | $ | 1,669,500 | ||||||||||
Audit Fees: The aggregate fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K and other services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit-Related Fees: The aggregate fees billed for assurance and related services rendered by the former principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under the previous item, Audit Fees.
Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning.
All Other Fees: The aggregate fees billed for legal fee and services provided by the lawyers and other parties other than those disclosed above.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this annual report:
| (1) | Financial Statements |
| ● | Consolidated Balance Sheets at December 31, 2023 and 2022 | |
| ● | Consolidated Statements of Operations and Comprehensive loss for the year ended December 31, 2023 and 2022 | |
| ● | Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2023 and 2022 | |
| ● | Consolidated Statements of Cash Flows for the year ended December 31, 2023 and 2022 | |
| ● | Notes to the Consolidated Financial Statements |
| (2) | Financial Statement Schedules |
| All schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto. |
| (3) | Exhibits |
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| * | Filed herein. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 HOLDING INC | ||
| Dated: September 9, 2024 | By: | /s/ Weihong Liu |
Liu Wei Hong Chief Executive Officer |
||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: September 9, 2024 | By: | /s/ Ken Tsang |
| Ken Tsang | ||
Chief Financial Officer, (Principal financial officer and |
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FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Next Technology Holding Inc (Formerly known as “WeTrade Group, Inc.”)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Next Technology Holding Inc. and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, consolidated statement of changes in stockholders’ equity, and consolidated statement of cash flows for the year ended December 31, 2023 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
We also audited adjustments to the 2022 consolidated financial statements relating to discontinued operations as described in Note 11. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the Company’s 2022 consolidated financial statements other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2022 consolidated financial statements as a whole.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ JWF Assurance PAC
We have served as the Company’s auditor since 2024.
JWF Assurance PAC
Singapore
June 21, 2024
PCAOB ID Number 7095
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
WeTrade Group, Inc.
Opinion on the Financial Statements
We have audited, before the effects of the adjustments relating to discontinued operations described in Note 11, the accompanying consolidated balance sheets of WeTrade Group, Inc. and subsidiaries (the “Company”) as of December 31, 2022, the related statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2022 and the related notes (collectively referred to as the “consolidated financial statements”) (the consolidated financial statements before the effects of the adjustments discussed in Note 11 are not presented herein). In our opinion, the consolidated financial statements, before the effects of the adjustments relating to discontinued operations described in Note 11, present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review or apply any procedures to the adjustments relating to discontinued operations described in Note 11, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by JWF Assurance PAC.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ Assenture PAC
We have served as the Company’s auditor in 2023.
July 14, 2023
PCAOB
ID Number
F-3
NEXT TECHNOLOGY HOLDING INC
CONSOLIDATED BALANCE SHEETS
| (All amounts shown in U.S. Dollars) | As of December 31, 2023 | As of December 31, 2022 | ||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Digital assets | ||||||||
| Accounts receivable- non related parties, net | ||||||||
| Other receivables- related parties | ||||||||
| Prepayments | ||||||||
| Assets related to discontinued operation | ||||||||
| Total Current Assets | ||||||||
| Total Assets: | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Tax payables | ||||||||
| Amount due to related parties | ||||||||
| Other payables | ||||||||
| Liabilities related to discontinued operation | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity: | ||||||||
| Common Stock; no par value; | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
F-4
NEXT TECHNOLOGY HOLDING INC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the year ended December 31, 2023 | For the year ended December 31, 2022 | |||||||
| Revenue: | ||||||||
| Service revenue | $ | $ | ||||||
| Cost of Revenue | ( | ) | ||||||
| Gross Profit | ||||||||
| Operating Income/ (Expenses): | ||||||||
| General and Administrative | ( | ) | ( | ) | ||||
| Fair value gain on digital asset | - | |||||||
| Profit from operations | ( | ) | ||||||
| Other income | ||||||||
| Other expenses | ( | ) | ||||||
| Profit/(Loss) before income tax | ( | ) | ||||||
| Income tax expenses | ( | ) | ||||||
| Net profit/(loss) from continuing operation | $ | $ | ( | ) | ||||
| Net loss from discontinued operation | ( | ( | ) | |||||
| Comprehensive income | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||
| Net Income/(loss) per share | ||||||||
| $ | $ | ( | ) | |||||
| ( | ) | ( | ) | |||||
| * |
The accompanying notes are an integral part of these financial statements.
F-5
NEXT TECHNOLOGY HOLDING INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Common Share | Additional Paid in Capital | Retained Earnings/ (Accumulated | Accumulated Other comprehensive | Total Shareholder | ||||||||||||||||||||
| Shares* | Amount | Amount | Deficit) | income | Equity | |||||||||||||||||||
| Balance as of December 31, 2021 | ||||||||||||||||||||||||
| Share cancellation | ( | ) | ||||||||||||||||||||||
| Sale of common shares, net of fees | ||||||||||||||||||||||||
| Stock compensation | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Loss from discontinued operation | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss for the year | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of December 31, 2022 | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Sale of common shares, net of fees | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ||||||||||||||||||||
| Loss from discontinued operation | - | - | - | ( | ) | ( | ) | |||||||||||||||||
| Net profit for the year | - | |||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | ( | ) | ( | ) | $ | |||||||||||||||||
| * |
The accompanying notes are an integral part of these financial statements.
F-6
NEXT TECHNOLOGY HOLDING INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the year ended December 31, 2023 | For the year ended December 31, 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net profit/(loss) | $ | $ | ( | ) | ||||
| Loss from discontinued operation | ( | ) | ( | ) | ||||
| Fair value gain on digital asset | ( | ) | ||||||
| Loss on amount due from a related party | - | |||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Tax payables | ||||||||
| Director fee payable | ||||||||
| Other payables | ||||||||
| Net cash flows used in continued operating activities: | ( | ) | ( | ) | ||||
| Net cash flows provided by/(used in) discontinued operating activities: | ( | ) | ||||||
| Net cash flows provided by/(used in) operating activities: | ( | ) | ||||||
| Cash flow from Investing activity: | ||||||||
| Prepayment for digital assets | ( | ) | ||||||
| Digital assets | ( | ) | ||||||
| Net cash flow used in continued investing activity: | ( | ) | ||||||
| Net cash flows provided by discontinued investing activities: | ||||||||
| Net cash flows used in investing activities: | ( | ) | ||||||
| Cash flow from financing activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Related party loan | ||||||||
| Net cash provided by continued financing activities | ||||||||
| Net cash provided by discontinued financing activities: | ||||||||
| Net cash provided by continued financing activities: | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Change in Cash and Cash Equivalents: | ( | ) | ||||||
| Cash and Cash Equivalents, Beginning of Year | ||||||||
| Cash and Cash Equivalents, End of Year | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
F-7
Next Technology Holding Inc
(Formerly known as WeTrade Group Inc)
Notes to Consolidated Financial Statements
December 31, 2023
NOTE 1 – NATURE OF BUSINESS
Next Technology Holding Inc (Formerly known as “WeTrade Group, Inc”) (the “Company”) was incorporated in the State of Wyoming on March 28, 2019. As of December 31, 2023, the Company 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 includes 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 held for trading and expect to continue to accumulate Bitcoin, when its price is low and expect to sell when its price is high. We have not set any specific target for the amount of Bitcoin we seek to hold and sell, and we will continue to monitor market conditions in determining whether to engage in additional financings to purchase additional Bitcoin if the company expect its price will be continue to rise.
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.
| Digital asset original cost basis | Fair value change in Digital asset | Digital asset fair value | Number of Bitcoin held | |||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||
| Digital asset purchase | ||||||||||||||||
| Fair value gain on Digital asset | ||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||
F-8
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Issued and Adopted Financial Accounting Standards
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 this criteria. The amendments require crypto assets meeting 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 year.
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current U.S. GAAP. ASU 2016-02 requires a lessee to recognize a lease liability and a right-of-use asset for each lease with a term longer than twelve months. The new guidance also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The Company adopted the new standard effective January 1, 2022, using a modified retrospective approach and electing to use the package of practical expedients permitted under the transition guidance, which allows for the carry forward of historical lease classification for existing leases on the adoption date and does not require the assessment of existing lease contracts to determine whether the contracts contain a lease or initial direct costs. Prior periods were not retrospectively adjusted.
There was no cumulative effect adjustment to the opening balance of accumulated deficit as of January 1, 2022. Adoption of this new guidance did not have a material impact on the consolidated statements of operations or cash flows.
Financial Instruments—Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-03”)”, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
F-9
Basis of Presentation
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated on consolidation.
Consolidation
The Company’s 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 and Assumptions
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 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.
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 nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring 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.
F-10
Concentrations of Credit Risk, Significant Customers
The Company’s financial instruments
that are exposed to concentrations of credit risk consist primarily of accounts receivable. The Company does not require collateral for
accounts receivables. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. Receivables
are written off and charged against the recorded allowance when the Company has exhausted collection efforts without success. As of December
31, 2023 and 2022, accounts receivable from customers amounted to $
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.
Software development revenue recognition
Revenue recognition for software development are recognized based on the completion method. The Company recognize revenue of software development when software development services are completed and rendered to our customers in an amount that reflect in the contract we expect to be entitled to for the software development services.
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 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 protected by Bank Deposit Insurance Corporation insurance.
Foreign Currency
The
accompanying consolidated financial statements are presented in US$. The functional currency of the Company is US$, and the functional
currency of the Company’s subsidiaries is RMB. The consolidated financial statements are translated into US$ from RMB at year-end
exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at
their historical exchange rates when the capital transactions occurred. The resulting translation adjustments are recorded as a component
of shareholders’ equity included in other comprehensive income. Gains and losses from foreign currency transactions are included
in profit or loss.
| Year ended December 31, | ||||||||
| 2022 | 2022 | |||||||
| RMB: US$ exchange rate | ||||||||
The
balance sheet amounts, with the exception of equity, as of December 31, 2023 and December 31, 2022 were translated at
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.
F-11
Digital Assets
The Company determines the fair value of its Bitcoin on a recurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted (unadjusted) prices on the Coinbase exchange, the active exchange that the Company has determined is its principal market for Bitcoin (Level 1 inputs).
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 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
The Company has a subsidiary 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 Authority of Hong Kong and Tax Department of PRC.
Capital Structure
The
Company currently has unlimited authorized shares of $
Profit/ (Loss) Per Share
Basic net income 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 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 loss periods as their effect would be anti-dilutive.
Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Statement of Operations Summary Information: | ||||||||
| Net profit/ (loss) from continued operation | $ | $ | ( | ) | ||||
| $ | $ | ( | ) | |||||
| Net profit/ (loss) from discontinued operation | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
NOTE 3. REVENUE
The Company is in the business of providing AI-enabled software development services for industrial and other customers.
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| AI Software development and industrial SAAS business | ||||||||
| Total: | ||||||||
F-12
NOTE 4 – CASH AND CASH EQUIVALENTS
| December 31, 2023 | December 31, 2022 | |||||||
| Bank Deposits-USA | $ | |||||||
| Bank Deposits- Outside USA | ||||||||
NOTE 5 – DIGITAL ASSETS
| December 31, 2023 | December 31, 2022 | |||||||
| Opening balance | $ | $ | ||||||
| Purchase of BTC | ||||||||
| Fair value gain on digital assets | ||||||||
| Ending balance | $ | $ | ||||||
As
of December 31, 2023, the Company has purchased 833 BTC at the total cost of $
The Company recognized unrealized gain of $10,147,576 on digital assets which is included in fair value gain on digital asset. The Company computed gains and losses on BTC based on specific identification measurement, which is based on the difference between the cost of BTC held in end of each reporting period and the lowest bid quoted (unadjusted) prices in end of each reporting period.
Digital assets are available for sales and there is no term of maturity, it will be held for trading and can be sold at any time. We expect to continue to accumulate Bitcoin, when its price is low and expect to sell when its price is high.
NOTE 6 – ACCOUNTS RECEIVABLE, NET
| December 31, 2023 | December 31, 2022 | |||||||
| Accounts Receivable | $ | $ | ||||||
| $ | $ | |||||||
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 expected credit loss expense through the 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.
F-13
NOTE 7 – PREPAYMENTS
| December 31, 2023 | December 31, 2022 | |||||||
| Digital assets | $ | $ | ||||||
| Others | ||||||||
| $ | $ | |||||||
As of December 31, 2023, a prepayment of approximately
$
Despite that the Company expects to issue
shares in the BTC Transaction that will represent approximately
The existing shareholders of the Company are expected to experience significant dilution in their ownership percentage of the Company as a result of the BTC Transaction.
NOTE 8 – ACCOUNTS PAYABLE, NET
| December 31, 2023 | December 31, 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| $ | $ | |||||||
NOTE 9 – AMOUNT DUE TO RELATED PARTIES
| As of December 31, 2023 | As of December 31, 2022 | |||||||
| Director fee payable | $ | $ | ||||||
| Related parties payable | ||||||||
| Amount due to shareholders | ||||||||
| Total amount due to related parties | $ | $ | ||||||
The
related party balance of $
As
of December 31, 2023, the amount due to shareholders of $
As
of December 31, 2023, the director fee payable of $
The amount due to related parties are interest free and have no fixed terms of repayment.
F-14
NOTE 10 – OTHER PAYABLES
| December 31, 2023 | December 31, 2022 | |||||||
| Professional fees | $ | $ | ||||||
The
professional fees balance of $
NOTE 11 – DISCONTINUED OPERATIONS
On September 29, 2023, the Company’s
Board of Directors passed a resolution to dispose WeTrade Information System Limited and its wholly owned subsidiaries for total consideration
of $
| For the year ended December 31 2023 | For the year ended December 31 2022 | |||||||
| Revenue: | ||||||||
| Service revenue | $ | $ | ||||||
| Cost of revenue | ( | ) | ( | ) | ||||
| Gross (loss)/profit | ( | ) | ||||||
| Operating expenses: | ||||||||
| General and Administrative | ||||||||
| Operations Loss | ( | ) | ( | ) | ||||
| Other expenses | ( | ) | ||||||
| Loss from discontinued operations before income tax | ( | ) | ( | ) | ||||
| Income tax (expense)/income | ( | ) | ||||||
| Loss from discontinued operation after tax | ( | ) | ( | ) | ||||
| Loss from discontinued operation | $ | ( | ) | $ | ( | ) | ||
| Total consideration, net of transaction costs | $ | |||
| Total net assets value of discontinued business | ( | ) | ||
| Disposal of discontinued operation | ( | ) |
F-15
| December 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | - | $ | |||||
| Accounts receivable | ||||||||
| Loan receivables | ||||||||
| Prepayments | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset | ||||||||
| Other receivables | ||||||||
| Total assets related to discontinued operations | ||||||||
| Accounts payable | $ | - | $ | |||||
| Other payables | ||||||||
| Total liabilities related to discontinued operations | $ | - | $ | |||||
NOTE 12 – EQUITY
The
Company has an unlimited number of ordinary shares authorized, and has issued
On
March 29, 2019, the Company has issued
In
February 2020, there are
On
September 15, 2020, the Wyoming Secretary of State approved the Company’s certificate of amendment to amend its Articles of Incorporation
to effect
On
September 21, 2020, there are
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
F-16
On
July 21, 2022, the Company has uplisted its common stock to the Nasdaq Capital Market, and the closing of its public offering of
On
July 22, 2022, the Company issued
On
June 9, 2023, the Wyoming Secretary of State approved the Company’s certificate of amendment to amend its Articles of Incorporation
to effect
In
September 2023,
NOTE 13 – 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.
The
Company is currently conducting its major operations in the Hong Kong and PRC through its subsidiaries, which are subject to tax
from
NOTE 14 – CONTINGENCIES AND COMMITMENT
There is no contingencies and commitment during the year.
NOTE 15 – SUBSEQUENT EVENT
Acquisition of Company
On
March 1,2024, the Company entered into a share purchase agreement (the “Purchase Agreement”) with certain existing shareholders
(the “Sellers”) of Future Dao Group Holding Limited, an exempted company incorporated and existing under the laws of the
Cayman Islands (the “Target”), pursuant to which the Company agrees to purchase from the Sellers indirectly through Next
Investment Group Limited, a wholly-owned subsidiary of the Company (“Next Investment”), and the Sellers agree to sell to
Next Investment, an aggregate of
Change of Company name
Effective April 2, 2024, Wetrade Group Inc. (the “Company”) changed its name to Next Technology Holding Inc. The name change was made pursuant to the Wyoming Business Corporations Act, and an amendment to Article I of the Company’s Amended and Restated Articles of Incorporation was filed with the Wyoming Secretary of State on March 18, 2024 (Amendment ID: 2024-004669585).
Our common stock will continue to trade on the NASDAQ Stock Market under the ticker symbol “NXTT”. Outstanding stock certificates for shares of the company are not affected by the name change. They continue to be valid and need not be exchanged.
F-17
Exhibit 21.1
Next Technology Holding Inc
(Formerly known as WeTrade Group Inc.)
List of Subsidiaries
| Name of Subsidiary | Jurisdiction of Incorporation or Organization | |
| VDao Technology Limited | Hong Kong | |
| WeiYi Technology (Shanghai) Co Limited | People’s Republic of China |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED
I, Liu Wei Hong, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K/A for the year ended December 31, 2023 of Next Technology Holding Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 9, 2024
| /s/ Liu Wei Hong | |
| Liu Wei Hong | |
| Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED
I, Ken Tsang, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K/A for the year ended December 31, 2023 of Next Technology Holding Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 9, 2024
| /s/ Ken Tsang | |
| Ken Tsang | |
| Chief Financial Officer (principal financial officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Liu Wei Hong, Chief Executive Officer of Next Technology Holding Inc. (the “Company”), do hereby certify, in connection with Annual Report on Form 10-K/A for the year ended December 31, 2023 (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:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 9, 2024
| /s/ Wei Hong Liu | |
| Liu Wei Hong | |
| Chief Executive Officer | |
| (principal executive officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Ken Tsang, Chief Financial Officer of Next Technology Holding Inc. (the “Company”), do hereby certify, in connection with Annual Report on Form 10-K/A for the year ended December 31, 2023 (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:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 9, 2024
| /s/ Ken Tsang | |
| Ken Tsang | |
| Chief Financial Officer | |
| (principal financial officer) |
Exhibit 97
Next Technology Holding, Inc. (the “Company”)
Incentive Compensation Recovery Policy
1. Introduction
The Board of Directors of the Company (the “Board”) has adopted this Incentive Compensation Recovery Policy (this “Policy”) to comply with the Nasdaq Listing Rule 5608, which provides for the recovery of certain executive compensation in the event of an Accounting Restatement resulting from material noncompliance with financial reporting requirements under the U.S. federal securities laws.
2. Administration
This Policy shall be administered by the Compensation Committee of the Board (the “Committee”). Any determinations made by the Committee shall be final and binding on all affected individuals.
3. Definitions
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below:
(a) “Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the U.S. federal securities laws, including any required accounting restatement (i) to correct an error in previously issued financial statements that is material to the previously issued financial statements (a “Big R” restatement), or (ii) that corrects an error that is not material to previously issued financial statements, but would result in a material misstatement if the error were not corrected the current period or left uncorrected in the current period (a “little r” restatement).
(b) “Covered Executives” means the Company’s current and former Executive Officers, as determined by the Committee in accordance with Section 10D of the Exchange Act and the listing standards of Nasdaq.
(c) “Effective Date” means February 1, 2024.
(d) “Erroneously Awarded Compensation” means, with respect to each Covered Executive in connection with an Accounting Restatement, the amount of Recovery Eligible Incentive-based Compensation that exceeds the amount of Recovery Eligible Incentive-based Compensation that otherwise would have been Received had it been determined based on the restated amounts, computed without regard to any taxes paid.
(e) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(f) “Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company. Executive officers of the Company’s parent(s) or subsidiaries are deemed Executive Officers of the Company if they perform such policy-making functions for the Company. Policy-making function is not intended to include policy-making functions that are not significant. Identification of an Executive Officer for purposes of this Policy would include at a minimum executive officers identified pursuant to Item 401(b) of Regulation S-K promulgated under the Exchange Act.
(g) “Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall for purposes of this Policy be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
(h) “Incentive-based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
(i) “Nasdaq” means The Nasdaq Stock Market.
(j) “Received” – Incentive-based Compensation shall be deemed “Received” in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained, even if payment or grant of the Incentive-based Compensation occurs after the end of that period.
(k) “Recovery Eligible Incentive-based Compensation” means, in connection with an Accounting Restatement and with respect to each individual who served as a Covered Executive at any time during the applicable performance period for any Incentive-based Compensation (whether or not such Covered Executive is serving at the time the Erroneously Awarded Compensation is required to be repaid to the Company), all Incentive-based Compensation Received by such Covered Executive (i) on or after the October 2, 2023, (ii) after beginning service as a Covered Executive, (iii) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (iv) during the applicable Recovery Period.
(l) “Recovery Period” means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years (except that a transition period of at least nine months shall count as a completed fiscal year). Notwithstanding the foregoing, the Recovery Period shall not include fiscal years completed prior to the October 2, 2023. For the avoidance of doubt, the Company’s obligation to recover erroneously awarded compensation is not dependent on if or when the Accounting Restatement is filed.
(m) “Restatement Date” means the earlier to occur of (i) (A) the date the Board, or (B) the date a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, and (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.
(n) “SEC” means the U.S. Securities and Exchange Commission.
4. Recovery of Erroneously Awarded Compensation
(a) Recovery Generally. In the event of an Accounting Restatement, the Committee shall take reasonably prompt action after the Restatement Date to recover any Erroneously Awarded Compensation from each Covered Executive in connection with such Accounting Restatement, unless the conditions of one or more subsections of Section 4(e) of this Policy are met. This obligation of the Company is not dependent on whether or when any Accounting Restatement is filed. Repayment of the Covered Executive is required regardless of whether the Covered Executive engaged in any misconduct and regardless of fault.
(b) Estimate of the Recovery Amount. For Incentive-based Compensation based on (or derived from) stock price or total shareholder return where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement, the amount shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-based Compensation was Received (in which case the Company shall maintain documentation of such determination of that reasonable estimate and provide such documentation to Nasdaq).
(c) Method of Recovery. The Committee shall have broad discretion to determine the appropriate means of recovery of Erroneously Awarded Compensation based on all applicable facts and circumstances and taking into account the time value of money and the cost to shareholders of delaying recovery, including without limitation (i) requiring reimbursement of cash Incentive-based Compensation previously paid; (ii) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards; (iii) offsetting the amount of any Erroneously Awarded Compensation from any compensation otherwise owed by the Company or any affiliate of the Company to the Covered Executive; (iv) cancelling outstanding vested or unvested equity awards; and/or (v) taking any other remedial and recovery action permitted by law. For the avoidance of doubt, except as set forth in Section 4(e) below, in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of a Covered Executive’s obligations hereunder.
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(d) Remedies for the Failure of Recovery. To the extent that a Covered Executive fails to repay all Erroneously Awarded Compensation to the Company when due (as determined in accordance with Section 4(c) above), the Company shall take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Covered Executive. The applicable Covered Executive shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence.
(e) Impracticability of Recovery. Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section 4(c) above if the following conditions are met and the Committee, or, if such Committee does not consist solely of independent directors, a majority of the independent directors serving on the Board, determines that recovery would be impracticable:
(i) the direct expenses paid to a third party to assist in enforcing this Policy against a Covered Executive would exceed the amount to be recovered, after the Company has made a reasonable attempt to recover the applicable Erroneously Awarded Compensation, documented such attempts and provided such documentation to Nasdaq;
(ii) recovery would violate home country law where that law was adopted prior to November 28, 2022; provided that, before determining that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Company has obtained an opinion of home country counsel (acceptable to Nasdaq) that recovery would result in such a violation and a copy of such opinion is provided to Nasdaq; or
(iii) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the U.S. Internal Revenue Code of 1986 and the regulations thereunder.
5. Acknowledgement by Covered Executives
The Committee shall provide notice of this Policy to, and seek written acknowledgement of this Policy from, each Covered Executive in the form attached hereto as Exhibit A; provided that the failure to provide such notice or obtain such acknowledgement shall have no impact on the applicability or enforceability of this Policy.
6. Reporting and Disclosure
The Company shall make all disclosures with respect to this Policy in accordance with the requirements of the U.S. federal securities laws, including the disclosure required by applicable SEC filings.
7. No Indemnification
Notwithstanding the terms of any of the Company’s organizational documents, any corporate policy or any contract, the Company shall not indemnify any Covered Executive against the loss of any Erroneously Awarded Compensation or any claims relating to the Company’s enforcement of its rights under this Policy nor shall the Company pay or reimburse any Covered Executive for any insurance premium to cover the loss of any Erroneously Awarded Compensation.
8. No “Good Reason” for Covered Executives
Any action by the Company to recover any Erroneously Awarded Compensation under this Policy from a Covered Executive shall not be deemed (i) “good reason” for resignation or to serve as a basis for a claim of constructive termination under any benefits or compensation arrangement applicable to such Covered Executive, or (ii) to constitute a breach of a contract or other arrangement to which such Covered Executive is a party.
9. Interpretation
The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the SEC or any national securities exchange or national securities association on which the Company’s securities are listed.
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10. Effective Date
This Policy shall be effective as of the Effective Date.
11. Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted by the SEC under Section 10D of the Exchange Act and to comply with any rules or standards adopted by any national securities exchange or national securities association on which the Company’s securities are listed. The Board may terminate this Policy at any time. Notwithstanding the foregoing, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any U.S. federal securities laws, SEC rule or the rules of any national securities exchange or national securities association on which the Company’s securities are listed.
12. Severability
If any provision of this Policy or the application of any such provision to a Covered Executive shall be adjudicated to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Policy, and the invalid, illegal or unenforceable provisions shall be deemed amended to the minimum extent necessary to render any such provision or application enforceable.
13. No Impairment of Other Remedies
Nothing contained in this Policy, and no recovery as contemplated herein, shall limit any claims, damages or other legal remedies the Company or any of its affiliates may have against a Covered Executive arising out of or resulting from any actions or omissions by the Covered Executive. This Policy does not preclude the Company from taking any other action to enforce a Covered Executive’s obligations to the Company, including, without limitation, termination of employment and/or institution of civil proceedings. This Policy is in addition to the requirements of Section 304 of the Sarbanes-Oxley Act of 2002 (the “SOX 304”) that are applicable to the Company’s Chief Executive Officer and Chief Financial Officer and to any other compensation recovery policy and/or similar provisions in any employment, equity plan, equity award, or other individual agreement, to which the Company is a party or which the Company has adopted or may adopt and maintain from time to time; provided, however, that compensation recovered pursuant to this Policy shall not be duplicative of compensation recouped pursuant to SOX 304 or any such compensation recovery policy and/or similar provisions in any such employment, equity plan, equity award, or other individual agreement except as may be required by law.
14. Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
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Exhibit A
NEXT TECHNOLOGY HOLDING, INC. (the “Company”)
INCENTIVE COMPENSATION RECOVERY POLICY ACKNOWLEDGEMENT FORM
By signing below, the undersigned (i) acknowledges and confirms that the undersigned has received and reviewed a copy of the Company’s Incentive Compensation Recovery Policy (the “Policy”) and (ii) acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the Policy will apply both during and after the undersigned’s employment with the Company. In the event of any inconsistency between the Policy and the terms of any employment agreement, offer letter or other individual agreement with the Company to which the undersigned is a party, or the terms of any compensation plan, program or agreement, whether or not written, under which any compensation has been granted, awarded, earned or paid to the undersigned, the terms of the Policy shall govern.
Further, by signing below, the undersigned agrees to abide by the terms of the Policy, including, without limitation, by promptly returning any Erroneously Awarded Compensation (as defined in the Policy) to the Company to the extent required by, and in a manner permitted by, the Policy. The undersigned agrees and acknowledges that the undersigned is not entitled to indemnification, and hereby waive any right to advancement of expenses, in connection with any enforcement of the Policy by the Company.
| Signature | ||
| Print Name: | ||
| Date: |
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