F-1/A: Mercurity Fintech Files Amendment for Resale of 46.3 Million Ordinary Shares

Mercurity Fintech Holding Inc. has filed an amendment to its registration statement for the resale of up to 46,338,911 ordinary shares by selling shareholders.

Summary

• Mercurity Fintech Holding Inc., a Cayman Islands holding company, has filed an amendment to its Form F-1 registration statement.
• The filing pertains to the resale of up to 46,338,911 ordinary shares by existing selling shareholders.
• The company will not receive any proceeds from the sale of these shares.
• The selling shareholders aim to enhance liquidity in the public trading market for the company's equity securities.
• The ordinary shares are currently traded on The Nasdaq Capital Market under the symbol MFH, with the last reported closing price on January 16, 2024, at $2.29.
• The company's operations are conducted through subsidiaries in the U.S., Hong Kong, and PRC.
• The company is subject to legal and operational risks associated with having part of its operations in mainland China, including risks related to the legal, political, and economic policies of the Chinese government.
• The company is also subject to the Holding Foreign Companies Accountable Act (HFCA Act) if the Public Company Accounting Oversight Board (PCAOB) is unable to inspect its auditors for two consecutive years.
• The company's auditor, Onestop Assurance PAC, is headquartered in Singapore and has been inspected by the PCAOB on a regular basis.
• As of January 10, 2024, the number of ordinary shares currently issued and outstanding was 60,819,897.
• The company has been focusing on digital consultation services, financial advisory services, brokerage services, and distributed computing and storage services.
• The company is in the process of acquiring J.V. Delaney & Associates, an investment advisory firm and FINRA licensed broker dealer, with FINRA approval expected in the first half of 2024.
• The company is also pursuing a Money Service Business (MSB) license and Broker-Dealer license.
• The company has been involved in cryptocurrency mining, including Bitcoin and Filecoin mining, but has reduced its investment in the crypto mining field due to increasing difficulty and general losses by top crypto mining enterprises.
• The company has entered into private placements with investors, including Hexin Global Limited, Ms. Hanqi Li, Huangtong International Co., Ltd., and Apollo Multi-Asset Growth Fund.
• The company is subject to a wide variety of complex laws and regulations in the United States, PRC and other jurisdictions in which it operates.
• The company is closely monitoring the changes and trends in prices of cryptocurrencies, and may make changes to its business focus and strategies in the future should the need arise.

Sentiment

Score: 5

Explanation: The document presents a neutral outlook. While it highlights growth opportunities and strategic shifts, it also acknowledges significant risks and uncertainties related to regulatory changes, market volatility, and operational challenges. The sentiment is balanced, reflecting both potential and challenges.

Positives

• The selling shareholders are offering their securities to further enhance liquidity in the public trading market for the company's equity securities.
• The company is expanding its business into financial advisory and brokerage services through the acquisition of J.V. Delaney & Associates.
• The company is pursuing MSB and Broker-Dealer licenses.
• The company's auditor, Onestop Assurance PAC, is headquartered in Singapore and has been inspected by the PCAOB on a regular basis.
• The company is adopting new technologies to improve the mining output efficiency of filecoin, and its Filecoin mining business is expected to be profitable commencing in 2024.

Negatives

• The company will not receive any proceeds from the sale of shares by the selling shareholders.
• The company is subject to legal and operational risks associated with having part of its operations in mainland China, including risks related to the legal, political, and economic policies of the Chinese government.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act) if the Public Company Accounting Oversight Board (PCAOB) is unable to inspect its auditors for two consecutive years.
• The company has reduced its investment in Bitcoin mining due to increasing difficulty and general losses in the industry.
• The company is subject to a wide variety of complex laws and regulations in the United States, PRC and other jurisdictions in which it operates.

Risks

• The company is subject to legal and operational risks associated with having part of its operations in mainland China, including risks related to the legal, political, and economic policies of the Chinese government.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act) if the Public Company Accounting Oversight Board (PCAOB) is unable to inspect its auditors for two consecutive years.
• The company's future performance is subject to various risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify.
• The company is subject to an extensive, highly evolving and uncertain regulatory landscape and any adverse changes to, or its failure to comply with, any laws and regulations could adversely affect its brand, reputation, business, operating results and financial condition.
• The company's operating results may fluctuate and continue to fluctuate, including due to the highly volatile nature of crypto.
• The company's revenue is partially dependent on the prices of crypto assets.
• Any failure to safeguard and manage the company's crypto assets could adversely impact its business, operating results and financial condition.
• Crypto assets deposited with third party custodians are subject to risks attendant with such custody arrangements.
• The assertion of jurisdiction by U.S. and foreign regulators and other government entities over crypto assets and crypto asset markets could adversely impact the company's business, operating results and financial condition.
• If the company were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for the company to continue its business as contemplated and could have a material adverse effect on its business.

Future Outlook

The company anticipates that its main source of revenue in 2023 will come from the Filecoin mining business, but with the continuous expansion of its business consulting services business in 2024, as well as the development of its new financial advisory services, securities underwriting services and other brokerage services business after its acquisition of J.V. Delaney Association, it expects the Filecoin mining business to gradually become a side line of its business as opposed to the primary focus.

Management Comments

• Management believes that the company's technical capabilities, experience and resources in the cryptocurrency industry, the potential of the cryptocurrency market and the increasingly clear regulatory policy of the US government on cryptocurrency, support its entry into the field of cryptocurrency mining.
• Management reassessed the potential adverse effects of changes in the Company's business environment and readjusted the Company's business structure and the future development plan.
• Management is confident in making profits in its future Filecoin mining business.
• Management is closely monitoring the changes and trends in prices of cryptocurrencies, and may make changes to its business focus and strategies in the future should the need arise.

Industry Context

The document highlights the company's shift in focus from blockchain technical services to digital consultation, financial advisory, and distributed computing, reflecting a broader trend in the fintech industry towards diversification and adaptation to regulatory changes. The company's involvement in cryptocurrency mining and its response to regulatory developments in the crypto space are indicative of the challenges and opportunities facing businesses in this evolving sector.

Comparison to Industry Standards

• The document mentions the increasing difficulty of crypto mining and the general losses by top crypto mining enterprises, suggesting that the company's decision to reduce its investment in Bitcoin mining is in line with industry trends.
• The company's pursuit of MSB and Broker-Dealer licenses is a common strategy for fintech companies seeking to expand their service offerings and comply with regulatory requirements.
• The company's reliance on third-party custodians like Coinbase for storing crypto assets is a common practice in the industry, but it also exposes the company to risks associated with such custody arrangements.
• The document does not provide specific comparisons to industry benchmarks or competitors in terms of financial performance or operational efficiency.

Legal Proceedings

• In late February 2022, Wei Zhu, our former acting Chief Financial Officer, former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, and Minghao Li, a former member of the Board, were suspected of certain criminal offenses unrelated to our company's operations and had been detained by the Economic Crime Investigation Detachment of Sheyang County Public Security Bureau, Yancheng City, Jiangsu Province, Peoples Republic of China.
• At the same time, Sheyang Public Security Bureau wrongly seized the digital assets hardware cold wallet which belonged to the Company, along with the cryptocurrencies stored therein.

Stakeholder Impact

• Shareholders may experience fluctuations in the value of their investment due to market volatility and regulatory changes.
• Employees may be affected by changes in business strategy and operational structure.
• Customers may benefit from the company's expanded service offerings in financial advisory and brokerage services.
• Suppliers and creditors may be impacted by the company's financial performance and ability to meet its obligations.

Next Steps

• The company expects to receive Financial Industry Regulatory Authority (FINRA) approval in the first half of 2024.
• The company is targeting to submit the MSB License application in the first half 2024.
• The company expects its Filecoin mining output to reach the stable level in June 2024.

Key Dates

Keywords

ordinary shares, resale, selling shareholders, Mercurity Fintech, HFCA Act, PCAOB, China, cryptocurrency, Bitcoin, Filecoin, mining, regulation, private placement, MSB license, Broker-Dealer license, financial advisory, brokerage services