Bitcoin Holdings and Strategy - As of December 31, 2024, the Company has accumulated Bitcoin holdings valued at $78,322,430, with a fair value gain of $53,332,430 since the original cost basis of $24,990,000[20]. - The Company purchased Bitcoin worth $24,990,000 during the year, resulting in a total of 833 Bitcoins held[20]. - The fair value of the Company's Bitcoin holdings increased by $10,147,576 from December 31, 2022, to December 31, 2023[20]. - The Company plans to continue its Bitcoin acquisition strategy using liquid assets exceeding working capital requirements and may issue debt or equity securities for additional purchases[17]. - The Company views its Bitcoin holdings as trading assets and has not set a specific target for the amount of Bitcoin to hold, indicating a flexible approach based on market conditions[18]. - The Company may periodically sell Bitcoin for corporate purposes, including treasury management and tax benefits[19]. - The company holds substantially all of its Bitcoin in custody accounts with institutional-grade custodians and views its Bitcoin holdings as held for trading[60]. - The total consideration for the acquisition of 5,000 Bitcoin was $158.08 million, with a market price of $0.34 per share at the transaction date[153]. - An Amended BTC Trading Contract allows the company to purchase up to 5,167 BTC at US$30,000 per BTC over a 12-month period, with an initial intent to acquire 5,000 BTC[197]. Regulatory Environment - The regulatory environment in Hong Kong currently does not impose significant restrictions on the Company's operations, but future changes in PRC laws could impact its business[21]. - The Company is not currently required to obtain regulatory approvals from PRC authorities for its operations in Hong Kong, but future changes in laws could necessitate compliance[31]. - The evolving regulatory landscape for digital assets poses risks, as governments worldwide are implementing varying degrees of regulation on Bitcoin and other digital assets[35]. - The company's business operations are not currently impacted by the PRC Crypto Restrictions, as it is not a PRC company and does not conduct any business activities within China[42]. - The People's Bank of China has issued multiple regulations since 2013, including prohibiting financial institutions from providing Bitcoin-related services and banning ICOs[43][44]. - The most recent regulatory measure from the PBoC on September 24, 2021, banned overseas cryptocurrency exchanges from providing services to residents in mainland China[45]. - The SEC has filed complaints against major digital asset platforms, including Binance and Coinbase, for operating without proper registration and engaging in unregistered securities activities[50]. - On November 21, 2023, Binance Holdings Ltd. agreed to pay $4.3 billion in penalties to resolve a multi-year investigation by U.S. regulatory agencies[50]. - The European Union's Markets in Crypto Assets Regulation (MiCA) became effective in June 2023, establishing a comprehensive regulatory framework for digital assets[50]. - The U.S. federal government is actively considering regulatory measures for digital assets, including the potential creation of a U.S. CBDC and amendments to existing laws[49]. - The SEC is evaluating the definition of "exchange" to encompass digital asset trading systems, which could significantly impact the digital asset trading landscape[49]. - The U.S. Treasury Department has issued advisories regarding the use of virtual currencies and has taken enforcement actions against several digital asset exchanges[41]. - The regulatory environment for cryptocurrency is rapidly evolving, with potential implications for the price of Bitcoin and the operations of companies involved in digital assets[49]. Financial Performance - For the fiscal year ended December 31, 2024, total revenue was $1.80 million, a decrease of 28% from $2.50 million in 2023[173]. - Gross profit for 2024 was $1.07 million, down from $1.43 million in 2023, reflecting a decline in service revenue[172]. - General and administrative expenses decreased significantly to $1.09 million in 2024 from $2.67 million in 2023, a reduction of approximately 59%[175]. - Other income surged to $43.19 million in 2024, compared to $4.39 million in 2023, primarily due to Bitcoin value appreciation[177]. - The company reported a net income from continuing operations of $21.54 million for 2024, a substantial increase from $3.02 million in 2023[172]. - An impairment of long-term investment of $13.40 million was recognized in 2024 following the acquisition of shares in an associate company[176]. - Total assets as of December 31, 2024, amounted to US$92.92 million, up from US$48.93 million in 2023, with digital assets increasing from US$35.14 million to US$78.32 million[182][183]. - The company reported total liabilities of US$11.29 million in 2024, compared to US$4.22 million in 2023, with deferred tax liabilities of US$8.24 million recorded in 2024[182][183]. - Cash and cash equivalents remained stable at US$668,387 for both 2024 and 2023, despite fluctuations in cash flows from operating activities[184]. - The company had net cash flows used in continued operating activities of US$0 in 2024, a recovery from US$12.70 million in 2023[185][186]. - Cash flows used in continued investing activities were nil in 2024, contrasting with US$37.12 million in 2023, which included the acquisition of 833 Bitcoin[188]. - The company generated US$13.05 million from financing activities in 2023, primarily from issuing shares and borrowing from former executives[189]. Corporate Governance and Legal Matters - The company currently has 6 full-time employees across various functions, including 2 in technology and 2 in the financial department[73]. - The company intends to retain all available funds and future earnings for business operations and expansion, with no anticipated dividends in the foreseeable future[54]. - The company has not declared any cash dividends during the last two fiscal years and does not anticipate doing so in the foreseeable future[146]. - The company has not distributed any dividends or assets among the holding company or subsidiaries as of the date of the annual report[53]. - The company has faced legal proceedings regarding unauthorized representation and control attempts, with a temporary restraining order granted against certain individuals[79]. - The Company remains under the control of its current board of directors, consisting of Lichen Dong (Chairman), Tian Yang, Mahesh Thapaliya, and Jianbo Sun[82]. - On April 8, 2024, the Chancery Court dismissed the plaintiffs' case with prejudice, allowing the Company to reserve its right to seek fees[82]. - The Company faced a new lawsuit on September 6, 2024, in the Wyoming State District Court, seeking inspection of certain corporate records[83]. - As of the reporting date, the Company's motion to dismiss a case in the New York County Supreme Court remains pending[86]. - The Company opposed a motion for a preliminary injunction regarding future share issuances, asserting it was without merit[84]. - A derivative lawsuit was filed against the company by purported shareholders seeking control, which was dismissed without prejudice[131]. - A temporary restraining order was granted to prevent unauthorized individuals from claiming to act on behalf of the company[133]. - The company demonstrated that claims made by unauthorized individuals were based on forged signatures, leading to the withdrawal of opposition to its request for an injunction[133]. Taxation and Compliance - The Enterprise Income Tax Law mandates a 25% tax rate for resident enterprises on income obtained in and outside the PRC[104]. - The VAT rate is set at 17% for taxpayers selling goods, with reduced rates for specific services and goods[106]. - The applicable VAT rate for the company is currently 6%, and the income tax rate is 25%[107]. - The company is eligible for tax refunds under certain favorable government policies starting from 2021[107]. - The withholding tax on dividends for non-PRC resident investors is generally 10%, but can be reduced to 5% under specific conditions[110]. - The company has not applied for a Hong Kong tax resident certificate, which may affect its ability to enjoy the reduced withholding tax rate[111]. - The company has complied with local regulations regarding social security and employee insurance, including basic pension and medical insurance[113]. Management and Operations - Weihong Liu, the CEO, has over 10 years of experience in crypto assets and blockchain technology, focusing on strategic investment opportunities[214]. - Nan Ding, the COO, has over 24 years of operational management experience in cross-border investment and international trade[215]. - The principal executive office is located in Shenzhen, with a lease term from January 1, 2023, to December 31, 2025[128]. - Management identified material weaknesses in internal controls over financial reporting, including a lack of US GAAP expertise and segregation of duties[206]. - No changes in internal control over financial reporting that materially affected the company during the most recently completed fiscal quarter[209].
Next Technology Holding Inc.(NXTT) - 2024 Q4 - Annual Report