F-1: NFT Limited Files F-1 for Resale of Shares, Reveals Steep Revenue Decline Amidst Strategic Shift to NFT Gaming and Consulting

NFT Limited, a Cayman Islands-based holding company, has filed an F-1 registration statement for the resale of up to 9.25 million Class A ordinary shares by existing shareholders, while its core commission revenue plummeted by over 65% in 2024, despite reporting a net profit driven by non-operational gains.

Summary

• NFT Limited is registering up to 9,253,262 Class A ordinary shares for resale by existing Selling Shareholders, which are issuable upon conversion of $20,000,000 in aggregate principal amount of convertible notes.
• The company will not receive any proceeds from the sale of shares by the Selling Shareholders in this offering, but previously received $20,000,000 from the sale of the Convertible Notes.
• Proceeds from the Convertible Notes are allocated for Technology Research and System Upgrades (35%), Market Expansion and User Acquisition (30%), Operations and Team Building (25%), and Compliance and Risk Control Construction (10%).
• The company's core commission revenue significantly declined from $3,403,536 in 2022 to $2,153,515 in 2023, and further to $740,701 in 2024.
• Despite the revenue decline, NFT Limited reported a net profit of $6,296,515 in 2024 and $5,203,564 in 2023, primarily due to a $6,638,916 gain on change of fair value of warrant liabilities in 2024 and a $6,930,504 gain on disposal of subsidiaries in 2023.
• Cash and cash equivalents increased to $82,272,479 as of December 31, 2024, from $61,750,809 in 2023.
• The company's total liabilities decreased significantly from $12,888,459 in 2023 to $5,724,660 in 2024, partly due to the exercise of warrant liabilities.
• NFT Limited operates an electronic online platform for NFT artwork trading and provides NFT consulting services, with plans to explore NFT gaming.
• The company is a holding company incorporated in the Cayman Islands, with subsidiaries in New York, Wyoming, and Hong Kong, and no operations in mainland China.
• As of June 20, 2025, the last reported sale price of the company's ordinary shares on NYSE American (symbol MI) was $2.2471 per share, with 5,065,150 ordinary shares outstanding.

Sentiment

Score: 3

Explanation: The sentiment is low due to a severe decline in core operational revenue, reliance on non-operational gains for net profit, and a high number of significant risks, particularly those related to regulatory uncertainty in Hong Kong/PRC and the concentration of cash in an uninsured, regulated foreign bank. While there's a strategic shift, its early stage and the competitive landscape present substantial challenges.

Positives

• The company reported a net profit of $6,296,515 in 2024, a significant improvement from a net loss of $10,353,512 in 2022.
• Cash and cash equivalents increased by over $20 million to $82,272,479 in 2024, indicating improved liquidity.
• Total liabilities decreased substantially from $12,888,459 in 2023 to $5,724,660 in 2024, improving the company's financial structure.
• The company has a clear strategic direction to diversify revenue streams by focusing on utility-driven NFT applications, including gaming, tokenized real-world assets (RWAs), and AI-generated dynamic NFTs.
• Management possesses experience in blockchain technology development and NFT trading platform operations, providing a competitive advantage.
• The company's NFT online trading platform supports multi-category product uploads and is designed for stable performance, high security, and improved user experience.
• Internal controls over financial reporting are being enhanced with independent directors, an audit committee, and a CFO with SEC and US GAAP expertise.

Negatives

• Core commission revenue from continuing operations experienced a steep decline, falling from $3,403,536 in 2022 to $740,701 in 2024, indicating a significant contraction in the primary business activity.
• The reported net profits in 2023 and 2024 were heavily influenced by non-operational gains, specifically a $6,930,504 gain on disposal of subsidiaries in 2023 and a $6,638,916 gain on change of fair value of warrant liabilities in 2024, rather than sustained operational profitability.
• Loss from continuing operations was $(906,266) in 2024 and $(1,704,994) in 2023, highlighting ongoing operational losses before non-recurring items.
• The NFT market faces challenges, including a 40% year-over-year decline in overall trading volumes, despite rising institutional participation.
• A substantial portion of the company's cash ($86,623,643 as of December 31, 2024) is deposited with Silkroad International Bank in Djibouti, which lacks formal deposit insurance and faces foreign currency reserve shortages and stringent regulations, posing significant liquidity and repatriation risks.
• The company has insufficient insurance coverage for certain events like physical damage, business interruption, and liability for legal responsibilities, which could severely impact performance in case of a significant loss.
• The business plan for the transition to internationally operated NFT and blockchain services is still in its early stages of development, with no assurance of profitability.

Risks

• Uncertainties in the Hong Kong legal system could limit legal protections for the company and investors.
• Difficulty in acquiring jurisdiction and enforcing liabilities against officers, directors, and assets based in Hong Kong.
• Challenges in establishing adequate management, legal, and financial controls in Hong Kong, potentially impairing planning and accurate reporting.
• Risk of PRC government intervention or influence over Hong Kong operations, which could materially affect business, limit ability to offer securities, and cause value decline.
• Uncertainties regarding future requirements for approvals from Chinese authorities for U.S. listing and securities offerings.
• Potential delisting from U.S. exchanges under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB is unable to inspect the company's auditor, despite the current auditor being Singapore-based and subject to PCAOB inspections.
• Impact of the Hong Kong National Security Law on Hong Kong subsidiaries.
• Political risks associated with conducting business in Hong Kong, including social unrest and changes in economic, social, and political conditions.
• Vulnerability to changes in the Hong Kong currency peg system to the U.S. dollar, which could lead to devaluation and increased expenditures.
• Reliance on dividends and other distributions from subsidiaries for funding, with potential limitations on their ability to make payments.
• The early stage of the business transition from PRC-based to internationally operated, with no assurance of achieving profitability.
• Uncertainties in the Chinese regulatory framework of internet payment and related financial systems, potentially creating obstacles for services to mainland China clients.
• Restricted cash from client advance payments ($4,351,692 as of Dec 31, 2024) cannot be used for operations, and restrictions may not be lifted.
• Significant concentration of cash ($86,623,643 as of Dec 31, 2024) in Silkroad International Bank in Djibouti, which lacks formal deposit insurance and faces foreign currency reserve shortages and stringent regulations, posing risks to cash flow and fund repatriation.
• Negative effects of the global economy and financial markets on the company's business, clients, and the supply/demand for works of art.
• Risk of decline in trading volumes, which would decrease trading revenues.
• The nascent and evolving nature of cryptocurrencies and NFTs exposes the NFT platform to legal, regulatory (intellectual property, privacy, cybersecurity, fraud, anti-money laundering, sanctions, commodity, and securities law implications), and other risks.
• Vulnerability to cybersecurity attacks, which could damage reputation and negatively impact business.
• Insufficient insurance coverage for certain events, potentially leading to severe financial impact.
• Dependence on effective marketing and advertising to attract and retain traders.
• Success is dependent on the receptiveness of artwork traders to the company's platform.
• Risk of inability to renew property leases, adversely affecting operations.
• Failure to manage growth effectively could impact employee efficiency, working capital, and results of operations.
• Need for additional capital to fund growing operations, with no assurance of obtaining sufficient financing on reasonable terms.
• Dependence on certain key personnel, and loss of these individuals could materially affect the business.
• Inability to attract and retain a trained workforce, particularly technical and marketing personnel.
• Fluctuations in financial results due to various factors, making historical data unreliable for future predictions.
• Risk of failing to establish and maintain effective internal control over financial reporting, affecting accuracy and timeliness of financial results.
• Increased expenses and diversion of management time due to compliance with changing corporate governance and public disclosure regulations.
• Potential adverse U.S. federal income tax consequences to U.S. investors if the company is deemed a Passive Foreign Investment Company (PFIC).
• Increased monitoring of the Cayman Islands by the Financial Action Task Force (FATF) could have ramifications for the company.
• Conversion of convertible notes or future sales of ordinary shares may further dilute existing shareholders and adversely impact share price.
• Volatility of the trading price of ordinary shares due to broad market factors, industry-specific factors, and company-specific events.
• Techniques employed by short sellers could drive down the market price of ordinary shares.
• Lack of research or inaccurate/unfavorable research by securities or industry analysts could cause share price and trading volume to decline.
• Anti-takeover provisions in the company's memorandum and articles of association could adversely affect shareholder rights.
• As a foreign private issuer, the company is exempt from certain U.S. securities rules, potentially providing less protection or information to U.S. investors.

Future Outlook

The company's NFT business outlook emphasizes evolving beyond speculative trading to utility-driven applications, including play-to-earn 3.0 models in gaming, tokenized real-world assets (RWAs), and AI-generated dynamic NFTs. The company is building a fully functional NFT trading platform and exploring NFT gaming business, including sales of in-game characters NFTs and membership packs. Strategic goals include basic platform building, targeted population entry, providing consulting, transaction, and advertising services, and optimizing/expanding the scope of services to achieve full service. The company intends to retain all available funds and future earnings for business operation and expansion, not anticipating declaring or paying any dividends in the foreseeable future.

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 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."
• "Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments."

Industry Context

The NFT market is evolving beyond speculative trading towards utility-driven applications in gaming, tokenized real-world assets (RWAs), and AI-generated dynamic NFTs. While Ethereum remains dominant, Layer 2 solutions like Arbitrum are gaining traction, hosting 35% of new NFT projects. Regulatory scrutiny, particularly from the SEC regarding NFT fractionalization as potential securities, is intensifying. Blue-chip collections have stabilized, but overall trading volumes are down 40% year-over-year, indicating ongoing liquidity challenges. Brands are shifting towards subscription-based NFT memberships, exemplified by Starbucks Odyssey and Nike's .Swoosh. NFT Limited's strategic shift towards consulting, a multi-category trading platform, and NFT gaming aligns with these utility-driven trends, but it faces intense competition from established players like OpenSea and Coinbase's new NFT platform, which have significantly larger user bases and transaction volumes.

Comparison to Industry Standards

• OpenSea, a major NFT market exchange, has over 20,000 users and monthly transaction volumes exceeding $5 million, significantly larger than NFT Limited's current scale.
• Coinbase's new NFT platform has attracted 1.4 million sign-ups and has an active population of 50,000 users, indicating a much broader reach compared to NFT Limited.
• Competitor fee structures vary: Rarible charges minting fees to creators and royalties (10-30%), VIV3 collects a 12.5% service fee on first and second sales, OpenSea does not charge gas fees for minting, and SuperRare charges a 15% commission on first sales and a 3% buyer fee on second sales. NFT Limited generates revenue primarily from trading commissions on NFT projects, but specific rates are not detailed for direct comparison to these benchmarks.

Corporate Governance

Stakeholder Impact

• **Shareholders**: Potential significant dilution from the conversion of 9,253,262 shares (182.68% of currently outstanding shares) by Selling Shareholders. Risk of substantial decline in share value due to operational challenges, regulatory uncertainties, and potential delisting.
• **Employees**: Growth management challenges due to the need for expansion and recruitment of qualified personnel, potentially impacting efficiency and requiring significant training.
• **Customers (Traders)**: Impacted by the success and security of the NFT platform, including cybersecurity risks and the company's ability to maintain stable operations and attract diverse artwork listings.
• **Creditors**: Affected by the company's financial health, particularly its reliance on non-operational gains for profitability and the risks associated with cash concentration in an uninsured foreign bank, which could affect liquidity and ability to meet obligations.
• **Regulatory Authorities**: The company is subject to increasing scrutiny from U.S. (SEC, PCAOB) and Chinese (CSRC, CAC) regulatory bodies, with potential for new requirements, penalties, or delisting if compliance is not maintained.

Next Steps

• Promptly after the effective date of this registration statement, the proposed sale to the public of Class A Ordinary Shares by Selling Shareholders is expected to commence.
• The company will continue to develop its NFT online trading platform, supporting multi-category product uploads and continuously improving operability and user experience.
• The company plans to expand its NFT gaming business, including sales of in-game characters NFTs and membership packs.
• Management will continue efforts to streamline operations and improve internal controls over financial reporting.
• The company intends to retain all available funds and future earnings for the operation and expansion of its business.

Key Dates

Recommendation

Keywords

NFT, Non-Fungible Token, Digital Art, Blockchain, Cryptocurrency, SEC Filing, F-1 Registration, Convertible Notes, Cayman Islands, Hong Kong, Metaverse, Digital Payment, Art Trading Platform, Financial Reporting, Risk Factors, Corporate Governance, NYSE American, MI Stock, Financial Performance, Marketplace, Gaming NFTs, Tokenized Real-World Assets, AI-Generated NFTs