F-1/A: NFT Limited Files F-1/A for 9.25M Share Resale by Investors

NFT Limited has filed an F-1/A amendment for the resale of up to 9.25 million Class A ordinary shares by selling shareholders, with no new proceeds to the company.

Summary

• The filing is Amendment No. 2 to Form F-1 Registration Statement, filed on September 4, 2025, for the resale of up to 9,253,262 Class A ordinary shares by Selling Shareholders.
• These shares are issuable upon conversion of amended and restated convertible notes, with an aggregate original principal amount of $20,000,000.00, issued on May 6, 2025, and amended on June 3, 2025.
• NFT Limited will not receive any proceeds from the sale of shares by the Selling Shareholders.
• The company is a holding company incorporated in the Cayman Islands, operating an electronic online platform for NFT artwork trading, NFT consulting, and exploring NFT gaming through subsidiaries in New York, Wyoming, and Hong Kong.
• Revenue from continuing operations significantly decreased from $2,153,515 in 2023 to $740,701 in 2024.
• Net profit from continuing operations was $6,296,515 in 2024, a substantial improvement from a loss of $1,704,994 in 2023, primarily driven by a $6,638,916 gain on the change of fair value of warrant liabilities.
• Cash and cash equivalents increased to $82,272,479 in 2024 from $61,750,809 in 2023.
• The company's auditor, Assentsure PAC, is headquartered in Singapore and is currently subject to PCAOB inspections, which mitigates some risks under the Holding Foreign Companies Accountable Act (HFCAA).
• Management believes the PRC Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies do not apply to the company as it has no operations in mainland China, but acknowledges risks if this interpretation changes.

Sentiment

Score: 3

Explanation: While the company reported a net profit in 2024, this was primarily due to a non-operating gain from warrant liabilities. Core revenue and gross profit declined significantly, indicating deteriorating operational performance. The business is in an early stage of development with substantial regulatory and operational risks, particularly concerning its Hong Kong operations and cash management in Djibouti. The significant dilution from the convertible note conversion also presents a negative outlook for existing shareholders.

Positives

• Net profit from continuing operations significantly improved to $6,296,515 in 2024, compared to a loss of $1,704,994 in 2023.
• Cash and cash equivalents increased by over $20 million, from $61,750,809 in 2023 to $82,272,479 in 2024.
• Total shareholders' equity increased from $60,803,638 in 2023 to $80,899,511 in 2024.
• The company's auditor, Assentsure PAC (PCAOB ID: 6783), is based in Singapore and is currently subject to PCAOB inspections, reducing immediate delisting risk under the HFCAA.
• Management believes the PRC Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies do not apply to the company due to no mainland China operations.
• The company has a clear strategic direction to create an original digital platform integrating games, artworks, domain names, insurance, collectibles, virtual assets, real assets, and identity.
• Identified competitive advantages include innate industry advantages in NFT technology, an experienced core management team, a stable and secure NFT platform, and a professional marketing team.

Negatives

• Revenue from continuing operations declined significantly by 65.6% from $2,153,515 in 2023 to $740,701 in 2024, indicating a substantial drop in core business activity.
• Gross profit from continuing operations decreased by 65.6% from $1,596,925 in 2023 to $548,653 in 2024.
• The reported net profit in 2024 was primarily driven by a non-operating gain of $6,638,916 on the change of fair value of warrant liabilities, masking underlying operational losses.
• Operating expenses from continuing operations remained high at $1,454,919 in 2024, exceeding gross profit.
• The company has $4,351,692 in restricted cash from client advance payments, which cannot be used for operations.
• A significant portion of cash ($86,623,643 as of December 31, 2024) is deposited with Silkroad International Bank in Djibouti, which has no formal deposit insurance system.
• Silkroad International Bank faces periodic foreign currency reserve shortages and stringent foreign exchange regulations, potentially restricting the company's ability to repatriate funds or settle cross-border transactions.
• The NFT market has undergone significant transformation since its 2021 peak, with overall trading volumes down 40% year-over-year despite stabilization.
• The company has never paid cash dividends and does not anticipate doing so in the foreseeable future.
• The offering of up to 9,253,262 Class A ordinary shares by Selling Shareholders represents approximately 182.68% of currently outstanding shares, potentially causing significant dilution and downward pressure on the stock price.
• The company's business plan for its NFT-related ventures is in its early stage of development, with no assurance of profitability.
• Uncertainties in the Chinese regulatory framework for internet payment and related financial systems may hinder services for mainland China clients.
• The company has insufficient insurance coverage for certain events, which could severely impact performance.
• Dependence on key personnel and the risk of losing them could have a material adverse effect on the business.
• The Hong Kong legal system embodies uncertainties, and PRC government intervention in Hong Kong operations remains a significant risk, potentially leading to a decline in security value or worthlessness.

Risks

• The Hong Kong legal system embodies uncertainties which could limit the legal protections available to the company and investors.
• It will be difficult to acquire jurisdiction and enforce liabilities against officers, directors, and assets based in Hong Kong.
• The company may have difficulty establishing adequate management, legal, and financial controls in Hong Kong.
• The PRC government may intervene or influence current and future operations in Hong Kong at any time, or may exert more control over overseas offerings and listings and/or foreign investment in issuers like the company, potentially causing a material adverse change in operations or value decline.
• There remain some uncertainties as to whether the company will be required to obtain approvals from Chinese authorities to list on U.S. exchanges and offer securities in the future, and if required, there is no assurance such approval will be obtained.
• Trading in the company's securities may be prohibited under the Holding Foreign Companies Accountable Act (HFCA Act) if the SEC subsequently determines the audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, potentially leading to delisting.
• The enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the Hong Kong National Security Law) could impact Hong Kong subsidiaries.
• There are political risks associated with conducting business in Hong Kong.
• The company may be affected by the currency peg system in Hong Kong.
• The company may rely on dividends and other distributions on equity paid by its subsidiaries to fund cash and financing requirements, and any limitation on the ability of subsidiaries to make payments could have a material adverse effect.
• The company is transitioning its business from a PRC-based business to being internationally operated, and its business plan is at an early stage of development.
• There are uncertainties in the Chinese regulatory framework of internet payment and related financial systems which may cause obstacles for services to clients based in mainland China.
• Restricted cash from client advance payments ($4,351,692 as of December 31, 2024) cannot be used for operations, and the timing of lifting restrictions is unpredictable.
• Risks associated with cash deposited at Silkroad International Bank in Djibouti, including the absence of a formal deposit insurance system and potential foreign currency reserve shortages and stringent foreign exchange regulations.
• The global economy and financial markets may negatively affect the business and clients, as well as the supply of and demand for works of art.
• A decline in trading volumes will decrease trading revenues.
• The NFT platform may not be successful and may expose the company to legal, regulatory, and other risks, including intellectual property rights, privacy, cybersecurity, fraud, anti-money laundering, sanctions, and potential classification as a security or commodity.
• Facilitation of transactions in digital works on the NFT platform exposes the company to risks under U.S. and foreign tax laws, including reporting obligations and potential non-compliance penalties.
• System limitations or failures could harm the business, leading to service disruptions, slower response times, and delays in new services.
• The company has insufficient insurance coverage for certain events, which may severely impact performance or continuation as a going concern.
• The success of the business depends on the ability to market and advertise services effectively and the receptiveness of artwork traders to the platform.
• Inability to renew the lease of property on reasonable terms could adversely affect operations.
• Failure to manage growth effectively could have an adverse effect on employee efficiency, working capital levels, and results of operations.
• If additional capital is needed to fund growing operations, the company may not be able to obtain sufficient capital and may be forced to limit the scope of operations.
• The company is dependent on certain key personnel, and the loss of these individuals could have a material adverse effect on the business.
• Financial results may fluctuate due to many factors, and historical financial data should not be relied on as indicative of future results.
• Failure to establish and maintain effective internal control over financial reporting could materially and adversely affect the ability to accurately and timely report financial results.
• Security breaches and attacks against systems and network, and any resulting breach or failure to protect confidential information, could damage reputation and negatively impact the business.
• Future inflation may inhibit the ability to conduct business profitably.
• The growth of aging receivables and a deterioration in their collectability could adversely affect results of operations.
• The annual effective income tax rate can change significantly due to changes in U.S. and foreign earnings, tax laws, or regulatory authority changes.
• The conversion of the Convertible Notes or future sales of ordinary shares may further dilute the ordinary shares and adversely impact the price.
• An active public market for ordinary shares may not develop or be sustained.
• The trading price of ordinary shares is likely to be volatile.
• Techniques employed by short sellers may drive down the market price of the ordinary shares.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research, the market price for the ordinary shares and trading volume could decline.
• The company's memorandum and articles of association contain anti-takeover provisions that could materially adversely affect the rights of holders of ordinary shares.
• There can be no assurance the company will not be a passive foreign investment company (PFIC) for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors.
• The Financial Action Task Force's increased monitoring of the Cayman Islands (FATF grey list) adds uncertainty regarding potential ramifications for the company.

Future Outlook

The company is committed to creating an original digital platform that integrates games, artworks, domain names, insurance, collectibles, virtual assets, real assets, and identity, aiming to change the market status of traditional industries. Strategic goals include basic platform building, targeted population entry, providing consulting, transaction, and advertising services, and optimizing the platform for full service expansion. The company is also exploring NFT gaming business, including sales of in-game characters NFTs and membership packs.

Management Comments

• "Our management believes that our current business strategy has significant potential, our Company may never attain profitable operations and our management may not succeed in realizing its business objectives."
• "We believe that Messrs. Li, Wang, Qian, Lu, Buerger and Zhang possess valuable business development and marketing knowledge, experience and leadership abilities that would be difficult in the short term to replicate."
• "We and our subsidiaries 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."

Industry Context

The NFT market is evolving beyond speculative trading, with a growing emphasis on utility-driven applications in gaming (play-to-earn 3.0 models), tokenized real-world assets (RWAs), and AI-generated dynamic NFTs. Ethereum remains dominant but faces scaling competition from Solana and Layer 2 solutions. Regulatory scrutiny, particularly from the SEC regarding NFT fractionalization as potential securities, is intensifying. Blue-chip collections have stabilized at 60% below 2022 peaks, while niche sectors like music royalties and decentralized physical infrastructure (DePIN) NFTs are gaining traction. Brands are shifting from one-off drops to subscription-based NFT memberships. Overall trading volumes are down 40% year-over-year despite rising institutional participation. The global NFT market size was $15.2 billion in 2023, projected to reach $21.6 billion by 2025 (CAGR of 19.3%).

Comparison to Industry Standards

• OpenSea, a major NFT market exchange, has more than 20,000 users and a monthly transaction volume exceeding $5 million, notably offering no gas fees for NFT minting.
• Coinbase's new NFT platform has attracted 1.4 million signups and maintains an active user base of 50,000.
• Rarible's minting fees are borne by creators, who also set royalties (defaulting to 10%, 20%, or 30%), and the platform charges a 2.5% service fee on first sales.
• VIV3 collects a 12.5% service fee on both first and second sales.
• SuperRare charges a 15% commission on first sales and a 3% fee (paid by the buyer) on second sales.

Corporate Governance

Stakeholder Impact

• Shareholders face potential significant dilution from the conversion of 9,253,262 convertible notes, representing approximately 182.68% of currently outstanding shares, which is highly likely to exert downward pressure on the stock price.
• Shareholders are exposed to risks of market volatility, short selling, and lack of analyst coverage, which could adversely affect the market price of ordinary shares.
• U.S. investors may face difficulties in enforcing legal rights and judgments against the company or its directors and officers due to its Cayman Islands incorporation and assets/personnel located outside the U.S.
• The company does not anticipate paying any cash dividends in the foreseeable future, meaning investors must rely on price appreciation for returns.
• Employees may be impacted by the company's ability to manage growth effectively, requiring expansion, training, and management of the employee base, and the company's dependence on key personnel poses a risk if they are lost.
• Customers and traders on the NFT platform are exposed to risks related to system limitations or failures, cybersecurity attacks, and the overall success and market acceptance of the platform.
• Creditors may be affected by the company's ability to obtain additional capital and manage cash flow, particularly given the restricted cash and risks associated with the Silkroad International Bank, which lacks deposit insurance and has foreign exchange restrictions.

Next Steps

• File a further amendment to the registration statement to specifically state its effectiveness or await SEC determination.
• Selling Shareholders may offer all or part of the 9,253,262 shares for resale from time to time.
• Continue to develop and expand the NFT platform, including the NFT gaming business.
• Optimize the platform and expand the scope of services.
• Evaluate the impact of ASU No. 2024-03 on financial statements, with planned adoption effective January 1, 2027.

Key Dates

Recommendation

The company's core business revenue and gross profit have declined significantly, indicating operational weakness. The reported net profit is largely due to a non-operating gain from warrant liabilities, masking underlying issues. There are substantial regulatory and geopolitical risks associated with its Hong Kong operations and the evolving NFT market. Furthermore, a significant portion of its cash is held in a bank without deposit insurance and subject to foreign exchange restrictions. The impending conversion of convertible notes will lead to substantial dilution (over 180% of current outstanding shares), which is highly likely to exert significant downward pressure on the stock price. Given these factors, the investment carries a high degree of risk with limited clear upside from core operations.

Keywords

NFT, blockchain, digital art, convertible notes, SEC filing, F-1/A, Hong Kong, Cayman Islands, financial technology, art trading, digital payment, corporate governance, risk management, capital markets, NYSE American, securities offering, dilution