Next Technology Holding Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed elsewhere in this report. Business 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 included developing, designing, and implementing various SAAS software solutions for businesses of all types, including industrial and other businesses. 18 Bitcoin Acquisition Strategy Our bitcoin acquisition strategy generally involves acquiring bitcoin with our liquid assets that exceed working capital requirements, and from time to time, subject to market conditions, issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase bitcoin. We view our bitcoin holdings as long-term holdings and expect to continue to accumulate bitcoin. We have not set any specific target for the amount of bitcoin we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional 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. 19 Results of Operations Results of Operations for the Nine months period Ended September 30, 2023 and 2022 The following tables provide a comparison of a summary of our results of operations for the nine months period ended September 30, 2023 and 2022. For the period September 30, 2023 From the period September 30, 2022 Revenue: Service revenue- related parties $ 36,096 $ 689,039 Service revenue- non related parties 2,193,903 8,508,642 2,238,029 9,197,681 Cost of Revenue (1,391,665 ) (7,670,836 ) Gross profit 838,334 1,526,845 Operating Expenses: Impairment losses on digital assets 2,591,490 — General and Administrative 12,537,426 (10,419,873 ) Operation loss (15,128,916 ) (8,893,028 Other (expenses) /income 4,867,137 308,360 Net loss before income tax (9,423,445 ) (8,584,668 ) Income tax expense (31,859 ) 45,795 Net loss (9,455,304 ) (8,538,873 ) Revenue from Operations For the nine-month period ended September 30, 2023 and 2022, total revenue was $2,238,029 and $9,197,681 respectively, the decrease was mainly due to the decrease in Gross Merchandise Volume (“GMV”) in YCloud system as a result of the adjusting of Company business plan in 2023. There were no income generated from YCloud system in Q2 2023 and Q3 2023, however the decrease is offset by the increase in revenue of AI SAAS business $1.6 million in Q3 2023. 20 Cost of revenue Cost of revenue mainly consists of staff payroll, PRC central provident fund (“CPF”), staff benefits, system development costs and outsourcing staff cost for system development, the decrease is in line with the decrease in revenue during the period. General and Administrative Expenses For the nine months period ended September 30, 2023 and 2022, general and administrative expenses were $15,128,916 and $10,419,873 respectively. The increase is mainly due to increase in system development expenses were incurred during the period. Net Loss As a result of the factors described above, there was a net loss of $9,455,304 and net income of $8,538,873 for the period ended September 30, 2023 and 2022, respectively. The increase in net loss is mainly due to decrease in Gross Merchandise Volume (“GMV”) as a result of the adjusting of Company business plan in 2023 and no income were generated from Y-Cloud system in Q2 2023 and Q3 2023 respectively. Results of Operations for the three months period Ended September 30, 2023 and 2022 The following tables provide a comparison of a summary of our results of operations for the three months period ended September 30, 2023 and 2022. For the period September 30, 2023 From the period September 30, 2022 Revenue: Service revenue- related parties $ — $ 400,702 Service revenue- non related parties 1,633,836 5,206,568 1,633,836 5,607,270 Cost of Revenue (398,537 ) (6,902,250 ) Gross Profit/ (Loss) 1,235,299 (1,294,980 ) Operating Expenses: Impairment losses on digital assets 2,591,489 — General and Administrative 11,030,660 7,799,979 Operation Loss (13,622,149 ) (7,799,979 ) Other income 3,889,924 235,418 Net Loss before income tax (8,496,926 ) (8,859,541 ) Income tax expense 383 202,450 Net Loss (8,496,543 ) (8,657,091 ) Revenue from Operations For the three-month period ended September 30, 2023 and 2022, total revenue was $1,633,836 and $5,607,270 respectively, the decrease was mainly due to the Company has changed its business strategy and intends to shift its SAAS services from PRC to overseas market. There were no revenue were generated from Y-Cloud system in Q2 2023 and Q3 2023. The decrease is mitigated by the increase in revenue of our new AI-enabled SAAS business in Q3 2023. Cost of revenue It is mainly consists of staff payroll, PRC central provident fund (“CPF”), staff benefits, system development costs and outsourcing staff cost for system development, the decrease is in line with the decrease in revenue during the period. General and Administrative Expenses For the three months period ended September 30, 2023 and 2022, general and administrative expenses were $11,030,660 and $7,799,979 respectively. The increase is mainly due to increase in system development expenses were incurred during the period. 21 Net Loss As a result of the factors described above, there was a net loss of $8,496,926 and net income of $8,859,541 for the period ended September 30, 2023 and 2022, respectively. The increase in net loss is mainly due to decrease in Gross Merchandise Volume (“GMV”) as a result of the adjusting of Company business plan in 2023. There were no income were generated from Y-Cloud system in Q2 2023 and Q3 2023 respectively. The decrease in losses were mitigated by the increase in revenue of our new AI-enabled SAAS business of $1.6 million in Q3 2023. Liquidity and Capital Resources As of September 30, 2023, we had cash on hand of $1,419,807. The decrease is mainly due to the company is strategy to acquire and hold BTC during the period. There were 833 BTC were acquired for approximately $25 million in cash, at a locked-in price of $30,000 per bitcoin. We view our bitcoin holdings as long-term holdings and expect to continue to accumulate bitcoin. The Company has option to purchase 6000 bitcoin over 12 months at the lock-in price of $30,000 per bitcoin. Operating activities As of September 30, 2023, our cash flow provided by operating activities is $8,530,677 for the period ended September 30, 2023 as compared to the cash flow provided by operating activities of $18,924,761 in prior period, which decreased by approximately of $10.4 million. The decrease was mainly due to decrease in revenue and decrease in Y-cloud SAAS services fee received from the customers during the period. Investing activities As of September 30, 2023, cash used in investing activities is $23,375,159 for the period ended September 30, 2023 as compared to the cash flow used in investing activities of $846,023 in prior period. The increase was mainly due to acquire of 833 BTC for the approximately $25 million in cash during the period. Financing activities Cash provided by our financing activities was $12,998,841 for the period ended September 30, 2023 as compared to cash provided by financing activities of $37,865,508. There were only share placement of approximately $12.6 million as compare to the share placement of $37.5 million in prior period. Inflation Inflation does not materially affect our business or the results of our operations. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Critical Accounting Policies We prepare our financial statements in accordance with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. We use historical data to assist in the forecast of our future results. Deviations from our projections are addressed when our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather than having to make assumptions regarding our estimates. Recent Accounting Pronouncements We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company financial statements. 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to Item 305 of Regulation S-K.