F-1/A: NetClass Technology Inc. Files Amendment No. 2 to Form F-1 for Initial Public Offering

NetClass Technology Inc. is proceeding with its IPO, offering 1,800,000 Class A ordinary shares with a price range of $4.00 to $6.00, while also registering shares for potential resale by existing shareholders.

Summary

• NetClass Technology Inc., a Cayman Islands holding company, has filed Amendment No. 2 to its Form F-1 registration statement for an initial public offering.
• The company plans to offer 1,800,000 Class A ordinary shares to the public, with an expected offering price between $4.00 and $6.00 per share.
• The filing also includes a resale prospectus for existing shareholders to potentially resell 2,025,000 Class A ordinary shares.
• The company has applied to list its Class A ordinary shares on the Nasdaq Capital Market under the symbol NTCL.
• NetClass is an emerging growth company and a foreign private issuer, which allows it to take advantage of reduced reporting requirements.
• The company conducts a substantial majority of its operations through subsidiaries in the PRC and Hong Kong, which exposes it to certain legal and operational risks.
• The company's largest customers accounted for 43.1% and 10.6% of total revenues for the year ended September 30, 2023.
• The company's B2B business revenues were $11,089,528 and $9,257,607 during the fiscal years ended September 30, 2023 and 2022, respectively.

Sentiment

Score: 6

Explanation: The document presents a mix of positive and negative factors. While revenue has increased, there are also risks associated with operating in China and weaknesses in internal controls. The sentiment is neutral to slightly positive.

Positives

• The company's B2B business revenues increased from $9,257,607 in 2022 to $11,089,528 in 2023.
• The company is expanding its business in Hong Kong, which contributed $5.6 million in revenue from application development services for the year ended September 30, 2023.
• The company owns 4 patents and 67 software copyrights in related technologies, and has been rated as a high-tech enterprise in Shanghai.

Negatives

• The company is subject to legal and operational risks associated with its operations in the PRC and Hong Kong.
• The company's SaaS subscription services revenue decreased from $5,877,323 in 2022 to $2,776,175 in 2023.
• The company has identified material weaknesses in its internal control over financial reporting.

Risks

• The company's operations are subject to influence from the PRC government.
• The company may face difficulties enforcing judgments against its directors and officers located outside the United States.
• The company's auditor may be subject to inspection limitations by the PCAOB, potentially leading to delisting under the HFCAA.
• The company may be classified as a PRC resident enterprise, leading to unfavorable tax consequences.
• The company's dual-class share structure concentrates voting control with the CEO.
• The company may experience extreme stock price volatility.
• The company may not be able to effectively expand its sales and marketing capabilities.
• The company may be subject to additional reporting requirements if it is deemed a reporting company under section 15(d) of the Exchange Act.

Future Outlook

The Company intends to use the earnings for research and development, to develop new products and to expand its operations and does not expect to pay any cash dividends in the foreseeable future.

Industry Context

The document references the growth of the online education market in China and the increasing acceptance of online education, which supports the company's business model.

Comparison to Industry Standards

• The document mentions that NetClass believes it is one of the leading online education brands in China's online education software industry.
• The document mentions that NetClass believes it is the pioneer in applying blockchain technology to online education and related area.
• The document mentions that the Company's technical team won the Excellent Solution Award of Shanghai smart city construction in 2020.

Legal Proceedings

• NetClass China was involved in a contract dispute with Shenzhen Guotaian Education Technology Co., Ltd., which was resolved in favor of NetClass China.

Related Party Transactions

• The company has related party transactions with Dragonsoft Holding Limited, Shanghai Youfu Network Co., Ltd., Shanghai Longruan Electronics Group Co., Ltd, Shanghai Yiyun Information Service Co., Ltd and Shanghai Chuangbo Enterprise Development Co., Ltd.
• On September 20, 2023, the Company entered into a private placement subscription agreement with Dragonsoft Holding Limited, a company wholly owned by Mr. Jianbiao Dai (Chief Executive Officer and Chairman of the Company), pursuant to which we issued 760,000 Class A ordinary shares of the Company to Dragonsoft Holding Limited, for an aggregate purchase price of $1,900,000.

Stakeholder Impact

• Shareholders may face difficulties enforcing their legal rights under United States securities laws against our directors and officers who are located outside of the United States.
• The dual class share structure will concentrate a majority of voting power in our Chief Executive Officer, who will beneficially own 79.83% of the aggregate power of our total issued and outstanding share capital following the completion of this offering and will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares may view as beneficial.

Next Steps

• The company will seek approval for listing on the Nasdaq Capital Market.
• The company will proceed with the initial public offering and potential resale of shares by existing shareholders.

Key Dates

Keywords

initial public offering, Class A ordinary shares, NetClass Technology, resale prospectus, emerging growth company, PRC regulations, Hong Kong, China, SaaS, B2B