UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                   to                  

 

Commission File No. 001-38909

 

AGBA GROUP HOLDING LIMITED

(Exact name of registrant as specified in its charter)

 

British Virgin Islands		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

AGBA Tower 68 Johnston Road Wan Chai, Hong Kong SAR		N/A
(Address of Principal Executive Offices)		(Zip Code)

 

+852 3601 8000

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares		AGBA		NASDAQ Capital Market
Warrants		AGBAW		NASDAQ Capital Market

 

As of August 14, 2024, there were 81,810,429 ordinary shares, par value $0.001 per share, issued and outstanding.

 

 

 

AGBA GROUP HOLDING LIMITED

 

Quarterly Report on Form 10-Q

 

TABLE OF CONTENTS

 

		Page
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Consolidated Statements of Changes in Shareholders’ (Deficit) Equity	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4.	Control and Procedures	55
PART II – OTHER INFORMATION		56
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	57
SIGNATURES		58

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS

 

AGBA GROUP HOLDING LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

		As of
		June 30, 2024				December 31, 2023
		(Unaudited)				(Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,791,791			$	1,861,223
Restricted cash			13,831,663				16,816,842
Accounts receivable, net			1,491,055				2,970,636
Accounts receivable, net, related parties			975,388				1,094,225
Loans receivable, net			581,702				549,461
Notes receivable, net			—				557,003
Receivable from Yorkville			23,350,000				—
Promissory notes receivable from Triller LLC			8,073,425				—
Deposit, prepayments, and other receivables, net			1,664,132				1,769,582
Total current assets			51,759,156				25,618,972
Non-current assets:
Rental deposit, net			966,734				961,253
Loans receivable, net			1,036,934				1,054,841
Property and equipment, net			1,675,569				1,721,284
Right-of-use assets, net			10,589,205				11,508,153
Long-term investments, net			22,724,644				25,201,933
Long-term investments, net, related party			522,566				522,531
Total non-current assets			37,515,652				40,969,995
TOTAL ASSETS		$	89,274,808			$	66,588,967
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	18,646,334			$	19,754,041
Escrow liabilities			13,831,663				16,816,842
Borrowings			1,805,394				1,804,950
Borrowings, related party			5,000,000				5,000,000
Amount due to the holding company			11,311,473				2,906,261
Convertible promissory notes payable, net			31,671,722				—
Income tax payable			162,851				328,720
Lease liabilities, current			1,269,213				1,229,329
Warrant liabilities			3,649,404				—
Total current liabilities			87,348,054				47,840,143
Non-current liabilities:
Lease liabilities, non-current			10,002,032				10,646,053
Total non-current liabilities			10,002,032				10,646,053
TOTAL LIABILITIES			97,350,086				58,486,196
Commitments and contingencies
Shareholders’ (deficit) equity:
Ordinary shares, $0.001 par value; 200,000,000 shares authorized, 81,810,429 and 68,661,998 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively			81,810				68,662
Ordinary shares to be issued			958				4,854
Subscription receivable			(2,051,280	)			—
Additional paid-in capital			79,239,669				74,103,494
Accumulated other comprehensive loss			(315,439	)			(473,087	)
Accumulated deficit			(85,030,996	)			(65,601,152	)
Total shareholders’ (deficit) equity			(8,075,278	)			8,102,771
TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY		$	89,274,808			$	66,588,967

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

AGBA GROUP HOLDING LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

		For the three months ended June 30,								For the six months ended June 30,
		2024				2023				2024				2023
Revenues:
Loans interest income		$	21,869			$	38,175			$	63,186			$	76,333
Non-interest income:
Commissions			4,153,465				16,323,056				10,876,223				26,338,683
Recurring asset management service fees			503,207				768,014				1,153,293				1,548,976
Recurring asset management service fees, related party			242,220				241,688				484,350				480,621
Total non-interest income			4,898,892				17,332,758				12,513,866				28,368,280
Total revenues			4,920,761				17,370,933				12,577,052				28,444,613
Operating expenses:
Interest expense			(368,045	)			(247,680	)			(575,267	)			(412,776	)
Commission expense			(1,316,570	)			(11,984,437	)			(5,762,812	)			(19,279,929	)
Sales and marketing expense			(29,643	)			(514,984	)			(512,517	)			(2,371,887	)
Research and development expense			(495,062	)			(1,058,812	)			(953,400	)			(1,937,798	)
Personnel and benefit expense			(5,478,217	)			(5,302,270	)			(11,537,206	)			(14,907,460	)
Legal and professional fee			(1,487,984	)			(5,574,562	)			(2,113,096	)			(8,970,002	)
Legal and professional fee, related party			(249,999	)			—				(499,998	)			—
Office and operating fee, related party			(1,074,279	)			(1,742,332	)			(2,192,242	)			(3,772,045	)
Provision for allowance for expected credit losses			(751,356	)			(333,276	)			(1,742,694	)			(333,276	)
Other general and administrative expenses			(1,408,240	)			(1,005,714	)			(2,288,321	)			(1,436,382	)
Total operating expenses			(12,659,395	)			(27,764,067	)			(28,177,553	)			(53,421,555	)
Loss from operations			(7,738,634	)			(10,393,134	)			(15,600,501	)			(24,976,942	)
Other income (expense):
Interest income			74,616				197,255				87,213				367,781
Foreign exchange (loss) gain, net			(50,710	)			349,539				(278,051	)			905,850
Investment income (loss), net			52				(441,568	)			(37,304	)			1,281,496
Change in fair value of warrant liabilities			(3,649,404	)			1,695				(3,649,404	)			2,375
Change in fair value of forward share purchase liability			—				—				—				(82,182	)
Loss on settlement of forward share purchase agreement			—				(378,895	)			—				(378,895	)
Rental income			—				78,764				14,066				138,271
Sundry income			17,705				27,423				94,893				84,067
Total other (expense) income, net			(3,607,741	)			(165,787	)			(3,768,587	)			2,318,763
Loss before income taxes			(11,346,375	)			(10,558,921	)			(19,369,088	)			(22,658,179	)
Income tax (expense) benefit			(23,235	)			(26,368	)			(60,756	)			280
NET LOSS		$	(11,369,610	)		$	(10,585,289	)		$	(19,429,844	)		$	(22,657,899	)
Other comprehensive (loss) income:
Foreign currency translation adjustment			(33,612	)			33,235				157,648				(99,969	)
COMPREHENSIVE LOSS		$	(11,403,222	)		$	(10,552,054	)		$	(19,272,196	)		$	(22,757,868	)
Weighted average number of ordinary shares outstanding – basic and diluted			79,164,165				64,953,238				74,637,871				62,823,549
Net loss per ordinary share – basic and diluted		$	(0.14	)		$	(0.16	)		$	(0.26	)		$	(0.36	)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

AGBA GROUP HOLDING LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

				For the six months ended June 30, 2024
				Ordinary shares								Ordinary shares to be issued												Additional				Accumulated other comprehensive								Total shareholders’
		Note		No. of share				Amount				No. of share				Amount				Subscription receivable				paid-in capital				(loss) income				Accumulated deficit				equity (deficit)
Balance as of January 1, 2024					68,661,998			$	68,662				4,854,284			$	4,854			$	—			$	74,103,494			$	(473,087	)		$	(65,601,152	)		$	8,102,771
Issuance of ordinary shares to settle finder fee		(13)(iv)			1,000,000				1,000				—				—				—				402,000				—				—				403,000
Issuance of ordinary shares for private placement		(13)(v)			7,349,200				7,349				(4,418,800	)			(4,419	)			(2,051,280	)			2,048,350				—				—				—
Share-based compensation to consultants		(13) (iii)			1,505,615				1,506				—				—				—				572,898				—				—				574,404
Share-based compensation to a director and officers		(13) (i), (ii), (vi), (vii), (viii)			3,293,616				3,293				522,699				523				—				2,112,927				—				—				2,116,743
Foreign currency translation adjustment					—				—				—				—				—				—				157,648				—				157,648
Net loss for the period					—				—				—				—				—				—				—				(19,429,844	)			(19,429,844	)
Balance as of June 30, 2024					81,810,429			$	81,810				958,183			$	958			$	(2,051,280	)		$	79,239,669			$	(315,439	)		$	(85,030,996	)		$	(8,075,278	)

 

		For the six months ended June 30, 2023
		Ordinary shares								Ordinary shares to be issued								Additional				Accumulated other								Total
		No. of								No. of								paid-in				comprehensive				Accumulated				shareholders’
		shares				Amount				shares				Amount				capital				loss				deficit				equity
Balance as of January 1, 2023			58,376,985			$	58,377				1,665,000			$	1,665			$	43,870,308			$	(384,938	)		$	(16,395,133	)		$	27,150,279
Issuance of ordinary shares to settle finder fee			2,173,913				2,174				—				—				3,997,826				—				—				4,000,000
Issuance of holdback shares			1,665,000				1,665				(1,665,000	)			(1,665	)			—				—				—				—
Share-based compensation			5,246,100				5,246				—				—				8,505,674				—				—				8,510,920
Forgiveness of amount due to the holding company			—				—				—				—				8,600,000				—				—				8,600,000
Foreign currency translation adjustment			—				—				—				—				—				(99,969	)			—				(99,969	)
Net loss for the period			—				—				—				—				—				—				(22,657,899	)			(22,657,899	)
Balance as of June 30, 2023			67,461,998			$	67,462				—			$	—			$	64,973,808			$	(484,907	)		$	(39,053,032	)		$	25,503,331

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

AGBA GROUP HOLDING LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars (“US$”))

 

		For the six months ended June 30,
		2024				2023
Cash flows from operating activities:
Net loss		$	(19,429,844	)		$	(22,657,899	)
Adjustments to reconcile net loss to net cash used in operating activities
Share-based compensation expense			2,482,861				8,510,920
Non-cash lease expense			1,284,143				213,550
Depreciation on property and equipment			45,764				215,494
Interest income on notes receivable			—				(11,778	)
Interest income on promissory notes receivable			(73,425	)			—
Interest expense on convertible promissory notes payable			171,722				—
Interest expense on borrowings			403,545				—
Foreign exchange loss (gain), net			278,051				(905,850	)
Investment loss (income), net			37,304				(1,281,496	)
Gain on disposal of property and equipment			(15,345	)			—
Provision for allowance for expected credit losses			1,742,694				333,276
Change in fair value of warrant liabilities			3,649,404				(2,375	)
Change in fair value of forward share purchase liability			—				82,182
Loss on settlement of forward share purchase agreement			—				378,895
Reversal of annual bonus accrued in prior year			—				(3,763,847	)
Change in operating assets and liabilities:
Accounts receivable			1,004,560				(1,005,597	)
Loans receivable			(17,889	)			13,319
Deposits, prepayments, and other receivables			(581,700	)			(3,629,837	)
Accounts payable and accrued liabilities			(1,108,252	)			6,578,049
Escrow liabilities			(2,985,179	)			(2,032,965	)
Lease liabilities			(969,795	)			(161,274	)
Income tax payable			(165,869	)			(138,590	)
Net cash used in operating activities			(14,247,250	)			(19,265,823	)
Cash flows from investing activities:
Proceeds from sale of long-term investments			2,152,251				3,976,657
Purchase of notes receivable			—				(589,086	)
Dividends received from long-term investments			—				1,167,433
Proceeds from sale of convertible notes receivable			412,360				—
Proceeds from disposal of property and equipment			15,345				—
Purchase of property and equipment			—				(77,969	)
Net cash provided by investing activities			2,579,956				4,477,035
Cash flows from financing activities:
Advances from the holding company			8,454,941				6,849,425
Settlement of forward share purchase agreement			—				(13,952,683	)
Proceeds from borrowings			—				1,786,640
Net cash provided by (used in) financing activities			8,454,941				(5,316,618	)
Effect on exchange rate change on cash, cash equivalents and restricted cash			157,742				49,765
Net change in cash, cash equivalent and restricted cash			(3,054,611	)			(20,055,641	)
BEGINNING OF PERIOD			18,678,065				51,294,072
END OF PERIOD		$	15,623,454			$	31,238,431
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes		$	226,625			$	138,310
Cash paid for interest		$	113,679			$	412,776
Cash received for interest		$	50,972			$	356,003
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of ordinary shares to settle payables		$	403,000			$	4,000,000
Forgiveness of amount due to the holding company		$	—			$	8,600,000
Operating lease right-of-use assets obtained in exchange for operating lease liabilities		$	—			$	12,512,585

 

		As of June 30,
		2024				2023
Reconciliation to amounts on condensed consolidated balance sheets:
Cash and cash equivalents		$	1,791,791			$	3,783,780
Restricted cash			13,831,663				27,454,651
Total cash, cash equivalents and restricted cash		$	15,623,454			$	31,238,431

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

AGBA GROUP HOLDING LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

 

NOTE 1 － NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

AGBA Group Holding Limited (“AGBA” or the “Company”) was incorporated on October 8, 2018 in British Virgin Islands.

 

The Company, through its subsidiaries, is operating a wealth and health platform, offering a wide range of financial service and products, covering life insurance, pensions, property-casualty insurance, stock brokerage, mutual funds, lending, and real estate in overseas. AGBA is also engaged in financial technology business and financial investments, managing an ensemble of fintech investments and healthcare investment and operating a health and wealth management platform with a broad spectrum of services and value-added information in health, insurance, investments and social sharing.

 

The Merger

 

On April 16, 2024, the Company entered into the Plan of Merger (the “Merger”) with Triller Corp., a Delaware corporation and its shareholders. The closing of the Merger is subject to regulatory approval. The details of the merger agreement are described in note 4.

 

NOTE 2 － SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

These accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying unaudited condensed consolidated financial statements and notes.

 

●

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of the Company are presented in United State dollars (“US$” or “$”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the Securities Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2023 derived from the audited consolidated financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed on March 28, 2024.

 

The unaudited condensed consolidated financial statements as of June 30, 2024 and December 31, 2023 and for the three and six months ended June 30, 2024 and 2023, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition, results of operations and cash flows. The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

 

 

●

Principal of Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the financial statements of AGBA and its subsidiaries. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All intercompany transactions and balances between AGBA and its subsidiaries are eliminated upon consolidation.

●

Use of Estimates and Assumptions

 

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include the useful lives of property and equipment, impairment of long-lived assets, allowance for expected credit losses, notes receivables, promissory notes receivable, share-based compensation, convertible promissory notes payable, warrant liabilities, provision for contingent liabilities, revenue recognition, income tax provision, deferred taxes and uncertain tax position, and allocation of expenses from the holding company.

 

The inputs into the management’s judgments and estimates consider the geopolitical tension, inflationary and high interest rate environment and other macroeconomic factors on the Company’s critical and significant accounting estimates. Actual results could differ from these estimates.

 

●

Foreign Currency Translation and Transaction

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited condensed consolidated statement of operations and comprehensive loss.

 

The reporting currency of the Company is US$ and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In addition, the Company and subsidiaries are operating in Hong Kong maintain their books and record in their local currency, Hong Kong dollars (“HK$”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, Translation of Financial Statement, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive loss within the unaudited condensed consolidated statements of changes in shareholders’ (deficit) equity.

 

Translation of amounts from HK$ into US$ has been made at the following exchange rates for the six months ended June 30, 2024 and 2023:

 

		June 30, 2024				June 30, 2023
Period-end HK$:US$ exchange rate			0.12808				0.12761
Period average HK$:US$ exchange rate			0.12790				0.12757

 

●

Cash and Cash Equivalents

 

Cash and cash equivalents consist primarily of cash in readily available checking and saving accounts. They consist of highly liquid investments that are readily convertible to cash and that mature within three months or less from the date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments. The Company maintains most of its bank accounts in Hong Kong and Hong Kong is not protected by Federal Deposit Insurance Corporation (“FDIC”) insurance. However, management does not believe there is a significant risk of loss.

 

 

●

Restricted Cash

 

Restricted cash consists of funds held in escrow accounts reflecting the restricted cash and cash equivalents maintained in certain bank accounts that are held for the exclusive interest of the Company’s customers. The Company currently acts as a custodian to manage the assets and investment portfolio on behalf of its customers under the terms of certain contractual agreements, which the Company does not have the right to use for any purposes, other than managing the portfolio.

 

The Company restricts the use of the assets underlying the funds held in escrow to meet with regulatory or contractual requirements and classifies the assets as current based on their purpose and availability to fulfill its direct obligation under current liabilities.

 

●

Accounts Receivable, net

 

Accounts receivable, net include trade accounts due from customers in insurance brokerage and asset management businesses, less the allowance for expected credit losses.

 

Accounts receivable, net are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms. The normal settlement terms of accounts receivable from insurance companies in the provision of brokerage agency services are within 30 days upon the execution of the insurance policies. Credit terms with the products providers of investment, unit and mutual funds and asset portfolio are mainly 90 days or a credit period mutually agreed between the contracting parties. The Company seeks to maintain strict control over its outstanding receivables to minimize credit risk. Overdue balances are reviewed regularly by senior management. Management reviews its receivables on a regular basis to determine if the allowance for expected credit losses is adequate, and provides allowance when necessary.

 

The Company does not hold any collateral or other credit enhancements over its accounts receivable balances.

 

●

Loans Receivable, net

 

Loans receivable, net are related to residential mortgage loan that are carried at unpaid principal and interest balances, less the allowance for expected credit losses on loans receivable and charge-offs.

 

Loans are placed on nonaccrual status when they are past due 180 days or more as to contractual obligations or when other circumstances indicate that collection is not probable. When a loan is placed on nonaccrual status, any interest accrued but not received is reversed against interest income. Payments received on a nonaccrual loan are either applied to protective advances, the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. A nonaccrual loan may be restored to accrual status when principal and interest payments have been brought current and the loan has performed in accordance with its contractual terms for a reasonable period (generally six months).

 

If the Company determines that a loan is impaired, the Company next determines the amount of the impairment. The amount of impairment on collateral dependent loans is charged off within the given fiscal quarter. Generally, the amount of the loan and negative escrow in excess of the appraised value less estimated selling costs, for the fair value of collateral valuation method, is charged off. For all other loans, impairment is measured as described below in “Allowance for Expected Credit Losses on Financial Instruments”.

 

●

Allowance for Expected Credit Losses on Financial Instruments

 

In accordance with ASC Topic 326 “Credit Losses – Measurement of Credit Losses on Financial Instruments” (ASC Topic 326), the Company utilizes the current expected credit losses (“CECL”) model to determine an allowance that reflects its best estimate of the expected credit losses on accounts receivable, loans receivable, notes receivable, and deposits and others receivable which is recorded as a liability to offset the receivables. The CECL model is prepared after considering historical experience, current conditions, and reasonable and supportable economic forecasts to estimate expected credit losses. Accounts receivable, loans receivable, notes receivable, and deposits and others receivable are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as a reduction of bad debt expense.

 

 

For the three months ended June 30, 2024 and 2023, the aggregated provision for allowance for expected credit losses on accounts receivable, loans receivable, notes receivable, and other receivables was $751,356 and $333,276, respectively.

 

For the six months ended June 30, 2024 and 2023, the aggregated provision for allowance for expected credit losses on accounts receivable, loans receivable, notes receivable, and other receivables was $1,742,694 and $333,276, respectively.

 

●

Promissory notes receivable from Triller LLC

 

Promissory notes receivable from Triller LLC is stated at carrying value and receivable in the next twelve months. Interest income is recognized on a fixed interest rate on the unaudited condensed consolidated statements of operations and comprehensive loss. Please refer to note 4 for the details.

 

●

Long-Term Investments, net

 

The Company invests in equity securities with readily determinable fair values and equity securities that do not have readily determinable fair values.

 

Equity securities with readily determinable fair values are carried at fair value with any unrealized gains or losses reported in earnings.

 

Equity securities that do not have readily determinable fair values mainly consist of investments in privately-held companies. They are accounted for, at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

 

At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

 

●

Property and Equipment, net

 

Property and equipment, net are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values, if any:

 

		Expected useful life
Land and building		Shorter of 50 years or lease term
Furniture, fixtures and equipment		5 years
Computer equipment		3 years
Motor vehicle		3 years

  

Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

●

Impairment of Long-Lived Assets

 

In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. No impairment losses were recognized for the three and six months ended June 30, 2024 and 2023.

 

 

●

Borrowings

 

Borrowings are recognized at fair value and repayable in the next twelve months. Interest expense is recognized on a fixed interest rate on the unaudited condensed consolidated statements of operations and comprehensive loss.

 

●

Convertible promissory notes payable

 

The Company accounts for its convertible promissory notes in accordance with ASC 470-20 Debt with Conversion and Other Options, whereby the convertible instrument is initially accounted for as a single unit of account, unless it contains a derivative that must be bifurcated from the host contract in accordance with ASC 815-15 Derivatives and Hedging – Embedded Derivatives or the substantial premium model in ASC 470-20 Debt – Debt with Conversion and Other Options applies. Where the substantial premium model applies, the premium is recorded in additional paid-in capital. The resulting debt discount is amortized over the period during which the convertible promissory notes are expected to be outstanding as additional non-cash interest expenses.

 

●

Warrant liabilities

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the fair value are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations and comprehensive loss. The Company accounts for its Public Warrants as equity and the (i) Private Warrants, (ii) Warrants – Class A, and (iii) Common Warrants as liabilities.

 

Warrants classified as liabilities are recorded at fair value and are remeasured at each reporting date until settlement. Changes in fair value is recognized as a component of change in fair value of warrant liability in the statements of operations and comprehensive loss. Transaction costs allocated to warrants that are presented as a liability are immediately expensed in the statements of operations and comprehensive loss. Warrants classified as equity instruments are initially recognized at fair value and are not subsequently remeasured.

 

●

Revenue Recognition

 

The Company receives certain portion of its non-interest income from contracts with customers, which are accounted for in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC Topic 606”).

 

ASC Topic 606 provided the following overview of how revenue is recognized from the Company’s contracts with customers. The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

 

 

Step 1: Identify the contract(s) with a customer.

 

Step 2: Identify the performance obligations in the contract.

 

Step 3: Determine the transaction price – The transaction price is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

 

Step 4: Allocate the transaction price to the performance obligations in the contract – Any entity typically allocates the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract.

 

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation – An entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer service to a customer).

 

Certain portion of the Company’s income is derived from contracts with customers, and as such, the revenue recognized depicts the transfer of promised goods or services to its customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. The Company’s revenue recognition policies are in compliance with ASC Topic 606, as follows:

 

Commissions

 

The Company earns commissions from the sale of investment products to customers. The Company enters into commission agreements with customers which specify the key terms and conditions of the arrangement. Commissions are separately negotiated for each transaction and generally do not include rights of return, credits or discounts, rebates, price protection or other similar privileges, and typically paid on or shortly after the transaction is completed. Upon the purchase of an investment product, the Company earns a commission from customers, calculated as a fixed percentage of the investment products acquired by its customers. The Company defines the “purchase of an investment product” for its revenue recognition purpose as the time when the customers referred by the Company has entered into a subscription contract with the relevant product provider and, if required, the customer has transferred a deposit to an escrow account designated by the Company to complete the purchase of the investment products. After the contract is established, there are no significant judgments made when determining the one-time commission price. Therefore, commissions are recorded at point in time when the investment product is purchased.

 

The Company also facilitates the arrangement between insurance providers and individuals or businesses by providing insurance placement services to the insureds, and is compensated in the form of one-time commissions from the respective insurance providers. The Company primarily facilitates the placement of life, general and MPF insurance products. The Company determines that insurance providers are the customers.

 

The Company primarily earns commission income arising from the facilitation of the placement of an effective insurance policy, which is recognized at a point in time when the performance obligation has been satisfied upon execution of the insurance policy as the Company has no future or ongoing obligation with respect to such policies. The commission fee rate, which is paid by the insurance providers, based on the terms specified in the service contract which are agreed between the Company and insurance providers for each insurance product being facilitated through the Company. The commission earned is equal to a percentage of the premium paid to the insurance provider. Commission from renewed policies is variable consideration and is recognized in subsequent periods when the uncertainty around variable consideration is subsequently resolved (e.g., when customer renews the policy).

 

 

In accordance with ASC Topic 606, Revenue Recognition: Principal Agent Considerations, the Company evaluates the terms in the agreements with its channels and independent contractors to determine whether or not the Company acts as the principal or as an agent in the arrangement with each party respectively. The determination of whether to record the revenue in a gross or net basis depends upon whether the Company has control over the services prior to transferring it. Control is demonstrated by the Company which is primarily responsible for fulfilling the provision of placement services through the Company’s licensed insurance brokers to provide agency services. The commissions from insurance providers are recorded on a gross basis and commission paid to independent contractors or channel costs are recorded as commission expense in the unaudited consolidated statements of operations and comprehensive loss.

 

The Company also offers the sale solicitation of real estate property to the final customers and is compensated in the form of commissions from the corresponding property developers pursuant to the service contracts. Commission income is recognized at a point of time upon the sale contracts of real estate property is signed and executed.

 

Recurring Asset Management Service Fees

 

The Company provides asset management services to investment funds or investment product providers in exchange for recurring asset management service fees. Recurring asset management service fees are determined based on the types of investment products the Company distributes and are calculated as a fixed percentage of the fair value of the total investment of the investment products, calculated daily. These customer contracts require the Company to provide investment management services, which represents a performance obligation that the Company satisfies over time. After the contract is established, there are no significant judgments made when determining the transaction price. As the Company provides these services throughout the contract term, for the method of calculating recurring service fees, revenue is calculated on a daily basis over the contract term, quarterly billed and recognized. Recurring service agreements do not include rights of return, credits or discounts, rebates, price protection, performance component or other similar privileges and the circumstances under which the fixed percentage fees, before determined, could be not subject to clawback. Payment of recurring asset management service fees are normally on a regular basis (typically monthly or quarterly).

 

Interest income

 

The Company offers money lending services from loan origination in form of mortgage and personal loans. Interest income is recognized monthly in accordance with their contractual terms and recorded as interest income in the unaudited condensed consolidated statement of operations and comprehensive loss. The Company does not charge prepayment penalties from its customers. Interest income on mortgage and personal loans is recognized as it accrued using the effective interest method. Accrual of interest income on mortgage loans is suspended at the earlier of the time at which collection of an account becomes doubtful or the account becomes 180 days delinquent.

 

Disaggregation of Revenue

 

The Company has disaggregated its revenue from contracts with customers into categories based on the nature of the revenue. The following table presents the revenue streams by segments, with the presentation revenue categories presented on the unaudited condensed consolidated statements of operations and comprehensive loss for the periods indicated:

 

		For the three months ended June 30, 2024
		Distribution Business				Platform Business
		Insurance brokerage service				Asset management service				Money lending service				Real estate agency service				Total
Interest income:
Loans		$	—			$	—			$	21,869			$	—			$	21,869
Non-interest income:
Commissions			4,094,894				58,571				—				—				4,153,465
Recurring asset management service fees			—				745,427				—				—				745,427
Total		$	4,094,894			$	803,998			$	21,869			$	—			$	4,920,761

 

 

		For the three months ended June 30, 2023
		Distribution Business				Platform Business
		Insurance brokerage service				Asset management service				Money lending service				Real estate agency service				Total
Interest income:
Loans		$	—			$	—			$	38,175			$	—			$	38,175
Non-interest income:
Commissions			16,005,608				277,960				—				39,488				16,323,056
Recurring asset management service fees			—				1,009,702				—				—				1,009,702
Total		$	16,005,608			$	1,287,662			$	38,175			$	39,488			$	17,370,933

 

		For the six months ended June 30, 2024
		Distribution Business				Platform Business
		Insurance brokerage service				Asset management service				Money lending service				Real estate agency service				Total
Interest income:
Loans		$	—			$	—			$	63,186			$	—			$	63,186
Non-interest income:
Commissions			10,509,914				366,309				—				—				10,876,223
Recurring asset management service fees			—				1,637,643				—				—				1,637,643
Total		$	10,509,914			$	2,003,952			$	63,186			$	—			$	12,577,052

 

 

		For the six months ended June 30, 2023
		Distribution Business				Platform Business
		Insurance brokerage service				Asset management service				Money lending service				Real estate agency service				Total
Interest income:
Loans		$	—			$	—			$	76,333			$	—			$	76,333
Non-interest income:
Commissions			25,693,427				601,722				—				43,534				26,338,683
Recurring asset management service fees			—				2,029,597				—				—				2,029,597
Total		$	25,693,427			$	2,631,319			$	76,333			$	43,534			$	28,444,613

 

 

●

Rental income

 

Rental income represents monthly rental received from the Company’s tenants. The Company recognizes rental income on a straight-line basis over the lease term in accordance with the lease agreement.

 

●

Comprehensive Loss

 

ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive (loss) income, its components and accumulated balances. Comprehensive (loss) income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive (loss) income, as presented in the accompanying unaudited condensed consolidated statements of changes in shareholders’ (deficit) equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive (loss) income is not included in the computation of income tax expense or benefit.

 

●

Employee Benefits

 

Full time employees of the Hong Kong subsidiaries participate in a defined contribution Mandatory Provident Fund retirement benefit scheme under the Hong Kong Mandatory Provident Fund Schemes Ordinance.

 

●

Income Taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, Income Taxes (“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC Topic 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC Topic 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

For the three and six months ended June 30, 2024 and 2023, the Company did not have any interest and penalties associated with tax positions. As of June 30, 2024 and December 31, 2023, the Company did not have any significant unrecognized uncertain tax positions.

 

The Company is subject to tax in local and foreign jurisdictions. As a result of its business activities, the Company files tax returns that are subject to examination by the relevant tax authorities.

 

●

Share-Based Compensation

 

The Company accounts for share-based compensation in accordance with the fair value recognition provision of ASC Topic 718, Stock Compensation. The Company grants share awards, including ordinary shares and restricted share units, to eligible participants. Share-based compensation expense for share awards is measured at fair value on the grant date. The fair value of restricted stock with either solely a service requirement or with the combination of service and performance requirements is based on the closing fair market value of the ordinary shares on the date of grant. Share-based compensation expense is recognized over the awards requisite service period. For awards with graded vesting that are subject only to a service condition, the expense is recognized on a straight-line basis over the service period for the entire award.

 

 

●

Net Loss Per Share

 

The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, Earnings per Share (“ASC Topic 260”). ASC Topic 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net (loss) income divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

●

Segment Reporting

 

ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments.

 

The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Company’s CODM has been identified as the CEO, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. Based on management’s assessment, the Company determined that it has the following operating segments:

 

Segments		Scope of Service		Business Activities
Distribution Business		Insurance Brokerage Business		- Facilitating the placement of insurance, investment, real estate and other financial products and services to our customers, through licensed brokers, in exchange for initial and ongoing commissions received from product providers, including insurance companies, fund houses and other product specialists.
Platform Business		- Asset Management Business		- Providing access to financial products and services to licensed brokers. - Providing operational support for the submission and processing of product applications. - Providing supporting tools for commission calculations, customer engagement, sales team management, customer conversion, etc. - Providing training resources and materials. - Facilitating the placement of investment products for the fund and/or product provider, in exchange for the fund management services.
		- Money Lending Service		- Providing the lending services whereby the Company makes secured and/or unsecured loans to creditworthy customers.
		- Real Estate Agency Service		- Solicitation of real estate sales for the developers, in exchange for commissions.
Fintech Business		Investment Holding		Managing an ensemble of fintech investments.
Healthcare Business		Investment Holding		Managing an ensemble of healthcare-related investments.

 

 

All of the Company’s revenues were generated in Hong Kong for the three and six months ended June 30, 2024 and 2023 and all of the Company’s long-lived assets were located in Hong Kong as of June 30, 2024 and December 31, 2023.

 

●

Leases

 

Under ASU 2016-02, Leases (Topic 842) (“Topic 842”), leases are categorized as operating or financing lease at inception. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease terms include options to renew or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company has recognized right of use (“ROU”) assets and corresponding lease liabilities on the Company’s condensed consolidated balance sheets for its operating lease agreements with contractual terms greater than 12 months. Lease liabilities are based on the present value of remaining lease payments over the lease term. As the discount rate implied in the Company’s leases is not readily determinable, the present value is calculated using the Company’s incremental borrowing rate, which is estimated to approximate the interest rate on a collateralized basis with similar terms.

 

Leases with a term of twelve months or less upon the commencement date are considered short-term leases, are not included on the condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term.

 

●

Related Parties

 

The Company follows the ASC Topic 850-10, Related Party (“ASC 850”) for the identification of related parties and disclosure of related party transactions.

 

Pursuant to ASC 850, the related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of ASC Topic 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

●

Commitments and Contingencies

 

The Company follows the ASC Topic 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

●

Fair Value Measurement

 

The Company follows the guidance of the ASC Topic 820-10, Fair Value Measurements and Disclosures (“ASC Topic 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC Topic 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

●	Level 1 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

 

●

Level 2 : Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and

 

●

Level 3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, restricted cash, accounts receivable, loans receivable, notes receivable, deposits, prepayments and other receivables, amount due to the holding company, accounts payable, escrow liabilities, borrowings and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.

 

Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of loans receivable approximates the carrying amount. The Company accounts for loans receivable at cost, subject to expected credit losses assessment.

 

The following table presents information about the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

 

		As of				Quoted Prices In				Significant Other Observable				Significant Other Unobservable
Description		June 30, 2024				Active Markets (Level 1)				Inputs (Level 2)				Inputs (Level 3)
Assets:
Marketable equity securities		$	969			$	969			$	—			$	—
Liabilities:
Warrant liabilities		$	3,649,404			$	—			$	—			$	3,649,404

 

 

		As of December, 31,				Quoted Prices In Active Markets				Significant Other Observable Inputs				Significant Other Unobservable Inputs
Description		2023				(Level 1)				(Level 2)				(Level 3)
Assets:
Marketable equity securities		$	595			$	595			$	—			$	—

 

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

●

Recently Issued Accounting Pronouncements

 

As of June 30, 2024, the Company has implemented all applicable new accounting standards and updates issued by the FASB that were in effect. There were no new standards or updates during the three and six months ended June 30, 2024 that had a material impact on the unaudited condensed consolidated financial statements.

 

Recently Accounting Pronouncements Not Yet Adopted

 

In November 2023, the FASB amended guidance in ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The revised guidance requires that a public entity disclose significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public entities with a single reportable segment. The amended guidance is effective for fiscal years beginning in January 2024 and interim periods beginning January 2025 on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-07 will have on its unaudited condensed consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning in January 2025. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-09 will have on its unaudited condensed consolidated financial statements.

 

NOTE 3 － LIQUIDITY AND GOING CONCERN

 

The accompanying unaudited condensed consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. They do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

For the six months ended June 30, 2024, the Company reported net loss of $19,429,844 and net cash outflows from operating activities of $14,247,250. As of June 30, 2024, the Company had a working capital deficit of $35,588,898 and a shareholders’ deficit of $8,075,278.

 

The Company has determined that the prevailing conditions and ongoing liquidity risks encountered by the Company raise substantial doubt about the ability to continue as a going concern for at least one year following the date these unaudited condensed consolidated financial statements are issued. The ability to continue as a going concern is dependent on the Company’s ability to successfully implement its current operating plan and fund-raising exercises. The Company believes that it will be able to grow its revenue base and control expenditures. In parallel, the Company will monitor its capital structure and operating plans and search for potential funding alternatives in order to finance the development activities and operating expenses. The Company is continuing its plan to further grow and expand operations and seek sources of capital to pay the contractual obligations as they come due. To access capital to fund operations or provide growth capital, the Company will need to raise capital in one or more debt and/or equity offerings.

 

 

However, the Company cannot predict the exact amount or timing of the alternatives, or guarantee those alternatives will be favorable to its shareholders. Any failure to obtain financing when required will have a material adverse impact on the Company’s business, operation and financial result. Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed on March 28, 2024, for further information about the liquidity and going concern.

 

NOTE 4 － MERGER TRANSACTIONS

 

On April 16, 2024, the Company entered into certain Agreement and Plan of Merger (the “Merger Agreement”), among Triller Corp., a Delaware corporation (“Triller”) and Bobby Sarnevesht, solely as representative of the Triller stockholders. Pursuant to the Merger Agreement, (a) Triller will complete its reorganization (the “Triller Reorganization”) with Triller Hold Co LLC (“Triller LLC”), (b) the Company will domesticate to the United States as a Delaware corporation (the “AGBA Domestication”), pursuant to which, among other things, all AGBA ordinary shares, par value $0.001 per share will automatically convert into the same number of shares Delaware Parent Common Stock, as defined below (AGBA, when domesticated as a Delaware corporation, is sometimes referred to as “Delaware Parent”) and (c) after giving effect to the Triller Reorganization and the AGBA Domestication, Merger Sub will be merged into Triller (the “Merger), with Triller surviving the Merger and becoming a wholly owned subsidiary of Delaware Parent. The Company and Triller have agreed that the closing of the Merger shall occur as soon as possible, subject to regulatory clearance, approval by AGBA’s shareholders and the other closing conditions provided for in the Merger Agreement.

 

Merger Consideration

 

The consideration will be an aggregate of 406,907,038 shares of Delaware Parent common stock, par value $0.001 per share (“Delaware Parent Common Stock”). Delaware Parent (i) will issue 313,157,015 shares of Delaware Parent Common Stock to the current common stockholders of Triller, (ii) will issue 35,328,888 shares of preferred stock to the current preferred stockholders of Triller and (iii) will convert all existing Triller restricted stock units into 58,421,134 Delaware Parent restricted stock units; and Delaware Parent also will reserve an aggregate of 58,421,134 shares of Delaware Parent Common Stock for future issuance upon the vesting of such restricted stock units.

 

Financing Arrangements with Triller and Yorkville

 

On April 25, 2024, the Company entered into the Amended and Restated Standby Equity Purchase Agreement (“A&R SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”), and Triller. Pursuant to the A&R SEPA, Triller, or AGBA after the transactions contemplated by the Merger Agreement are closed, has the right to sell to Yorkville up to $500 million of ordinary shares, par value $0.001 per share, of the Company, (“Common Shares”), subject to certain limitations and conditions set forth in the A&R SEPA, from time to time during the term of the SEPA. Sales of the shares of Common Shares to Yorkville under the A&R SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Shares to Yorkville under the A&R SEPA except in connection with notices that may be submitted by Yorkville.

 

In connection with the A&R SEPA, Yorkville agreed to an advance to the Triller in the form of convertible promissory notes in principal amount up to $8.51 million (the “First Pre-Paid Advance”). The First Pre-Paid Advance is amounted to 94.0% of the principal amount to be drawn down. Interest shall accrue on the outstanding balance of First Pre-Paid Advance at an annual rate of 5%, subject to an increase to 18% upon an event of default as described in the definitive agreement. The maturity date of the First Pre-Paid Advance will be 12 months after its issuance date. Yorkville may convert the First Pre-Paid Advance into shares of the Common Shares at any time after the Merger at a fixed conversion price equal to (i) the principal mount and interests, divided by (ii) the determination of the lower of (a) 100% of the VWAP during the ten trading days preceding the closing date of the Merger (the “Fixed Price”), or (b) 92.5% of the lowest daily VWAP during the 10 consecutive trading days immediately preceding the conversion date or other date of determination (the “Variable Price”), provided that the Variable Price shall not be lower than the Floor Price. The “Floor Price”, solely with respect to the Variable Price, shall be equal to (i) a price equal to 20% of the average of the daily VWAPs during the ten (10) trading days immediately preceding the closing date of the Merger, and (ii) from and after the date of effectiveness of the initial registration statement, 20% of the VWAP of the trading day immediately prior to the date of effectiveness of the initial registration statement, if such price is lower than the price in part (i) of this sentence.

 

 

Second Pre-Paid Advance

 

On June 28, 2024, the Company, Triller and Yorkville entered into the Second Amended and Restated Standby Equity Purchase Agreement (the “Second A&R SEPA”) to modify the A&R SEPA dated April 25, 2024. Pursuant to the Second A&R SEPA, Yorkville will (i) provide for the assignment by Triller and assumption by the Company of the rights and obligations of Triller under the A&R SEPA and the promissory note of the First Pre-Paid Advance of $8.51 million from Triller dated April 25, 2024 and (ii) provide to the Company financing in the principal amount of $25 million (the “Second Pre-Paid Advance”) in the form of an additional convertible promissory note, subject to the same terms in interest charge and maturity under the First Pre-Paid Advance.

 

In connection with the Second A&R SEPA, the Company issued convertible promissory notes in an aggregate of $33.51 million to Yorkville. The First Pre-Paid Advances of $8 million was received by Triller and the Company recorded a receivable from Triller. The Second Pre-Paid Advances of $23.51 million was recorded as a receivable from Yorkville. The Company subsequently received $23.35 million, net of $150,000 direct legal fee incurred in arranging the Second A&R SEPA, from Yorkville on July 2, 2024.

 

Common Warrants to Yorkville

 

Also, pursuant to the Second A&R SEPA, the Company issued a warrant (the “Common Warrant”) to Yorkville to purchase up to a number of shares of Class A common stock, par value $0.0001 per share of Triller equal to 25% of the principal amount of the aggregated pre-paid advances divided by a price equal to the Fixed Price, each such Common Warrant with an exercise price equal to the Fixed Price. On June 28, 2024, the Company issued a warrant to Yorkville covering 2,957,008 ordinary shares of the Company (representing $8,377,500 or 25% of the $33,510,000 the aggregated principal amount of the First Pre-Paid Advance and the Second Pre-Paid Advance) at a fixed price of $2.8331.

 

Promissory Notes Receivable from Triller

 

In connection with the First and Second Pre-Paid Advances issued by Yorkville under A&R SEPA and the Second A&R SEPA, Yorkville advanced $8 million to Triller and Triller issued promissory note to the Company on April 25, 2024. The promissory notes receivable from Triller included interest receivables from Triller.

 

Subsequently in July and August 2024, the Company further advanced an aggregate amount of $15.7 million to Triller for its business operation purpose.

 

Convertible Promissory Notes Payable, net

 

As of June 30, 2024, the aggregate principal amount of the First and Second Pre-Paid Advances are $33.51 million and the convertible promissory notes payable to Yorkville are recorded at $31.67 million, net of discount, as current liabilities on the condensed consolidated balance sheets. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own shares and is therefore not afforded equity treatment.

 

The Company recorded amortization of debt discount of convertible promissory notes payable as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss of $93,616 and $93,616 for the three and six months ended June 30, 2024 respectively.

 

The Company recorded accrued interest of convertible promissory notes payable as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss of $78,106 and $78,106 for the three and six months ended June 30, 2024, respectively. 

 

 

NOTE 5 － RESTRICTED CASH

 

As of June 30, 2024 and December 31, 2023, the Company has $13,831,663 and $16,816,842 fund held in escrow, respectively. Fund held in escrow primarily comprised of escrow funds held in bank accounts on behalf of the Company’s customers. The Company is currently acted as a custodian to manage the assets and investment portfolio on behalf of its customers under the terms of certain contractual agreements, which the Company does not have the right to use for any purposes, other than managing the portfolio. Upon receiving escrow funds, the Company records a corresponding escrow liability.

 

NOTE 6 － ACCOUNTS RECEIVABLE, NET

 

Accounts receivable, net consisted of the following:

 

		As of
		June 30, 2024				December 31, 2023
Accounts receivable		$	1,794,310			$	3,283,118
Accounts receivable – related parties			1,579,325				1,094,225
Less: allowance for expected credit losses			(907,192	)			(312,482	)
Accounts receivable, net		$	2,466,443			$	4,064,861

 

The accounts receivable due from related parties represented the management service rendered to the portfolio assets of a related companies, which are controlled by the holding company, for a compensation of asset management service fee income at the predetermined rate based on the respective portfolio of asset values invested by the final customers. The amount is unsecured, interest-free and with a credit term mutually agreed.

 

The following table presents the activity in the allowance for expected credit losses:

 

		As of
		June 30, 2024				December 31, 2023
Balance at beginning of period/year		$	312,482			$	94,447
Provision for allowance for expected credit losses			593,858				217,475
Foreign translation adjustment			852				560
Balance at end of period/year		$	907,192			$	312,482

 

The Company generally conducts its business with creditworthy third parties. The Company determines, on a quarterly basis, the probable losses and an allowance for expected credit losses determined in accordance with the CECL model, based on historical losses, current economic conditions, forecasted future economic and market considerations, and in some cases, evaluating specific customer accounts for risk of loss. Accounts receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. In addition, receivable balances are monitored on an ongoing basis and its exposure to bad debts is not significant.

 

For the three and six months ended June 30, 2024, the Company has evaluated the probable losses on the accounts receivable and made a provision for allowance for expected credit losses of $351,403 and $593,858, respectively.

 

For the three and six months ended June 30, 2023, the Company has evaluated the probable losses on the accounts receivable and made a provision for allowance for expected credit losses of $67,949 and $67,949, respectively.

 

 

NOTE 7 － LOANS RECEIVABLE, NET

 

The Company’s loans receivable, net was as follows:

 

		As of
		June 30, 2024				December 31, 2023
Residential mortgage loans		$	1,623,424			$	1,605,531
Less: allowance for expected credit losses			(4,788	)			(1,229	)
Loans receivable, net			1,618,636				1,604,302
Classifying as:
Current portion		$	581,702			$	549,461
Non-current portion			1,036,934				1,054,841
Loans receivable, net		$	1,618,636			$	1,604,302

 

The interest rates on loans issued ranged between 9.00% and 10.50% (for the six months ended June 30, 2023: 9.00% to 10.50%) per annum for the six months ended June 30, 2024. Mortgage loans are secured by collateral in the pledge of the underlying real estate properties owned by the borrowers. As of June 30, 2024, the net carrying amount of the loans receivable was $1,618,636, which included an interest receivable of $63,300.

 

Mortgage loans are made to either business or individual customers in Hong Kong for a period of 1 to 25 years, which are fully collateralized and closely monitored for counterparty creditworthiness, with such collateral having a fair value in excess of the carrying amount of the loans as of June 30, 2024 and December 31, 2023.

 

Estimated allowance for expected credit losses is determined on quarterly basis, in accordance with the CECL model, for general credit risk of the overall portfolio, which is relied on an assessment of specific evidence indicating doubtful collection, historical loss experience, loan balance aging and prevailing economic conditions. If there is an unexpected deterioration of a customer’s financial condition or an unexpected change in economic conditions, including macroeconomic events, the Company will assess the need to adjust the allowance for expected credit losses. Any such resulting adjustments would affect earnings in the period that adjustments are made.

 

For the three and six months ended June 30, 2024, the Company has evaluated the probable losses on loans receivable and made a provision for allowance for expected credit losses of $3,555 and $3,555, respectively.

 

For the three and six months ended June 30, 2023, the Company has evaluated the probable losses are minimal and there were no provision for allowance for expected credit losses on loans receivable.

 

NOTE 8 － NOTES RECEIVABLE, NET

 

On February 24, 2023, the Company entered into a subscription agreement and a convertible loan note instrument (collectively the “Agreements”) with Investment A. Pursuant to the Agreements, the Company agrees to subscribe an aggregate amount of $1,673,525 notes, in batches, which are payable on or before January 31, 2024 and bears a fixed interest rate of 8% per annum. On April 30, 2024, the Company entered into a purchase and sale agreement with an independent third party to sell all its convertible loan notes on Investment A for a purchase price of $412,360. The transaction was completed on April 30, 2024. For the three and six months ended June 30, 2024, the Company has evaluated the probable losses on notes receivable and made a provision for allowance for expected credit losses of nil and $155,026, respectively.

 

 

NOTE 9 － LONG-TERM INVESTMENTS, NET

 

Long-term investments, net consisted of the following:

		As of
		Ownership interest				June 30, 2024				Ownership interest				December 31, 2023
Marketable equity securities:
Investment C			0.00	%*		$	969				0.00	%*		$	595
Non-marketable equity securities:
Investment A			8.37	%			5,652,382				8.37	%			5,826,703
Investment B			3.63	%			304,648				3.63	%			342,000
Investment D			4.47	%			16,766,645				4.47	%			16,880,384
Investment E, related party			4.00	%			522,566				4.00	%			522,531
Investment F			—				—				4.00	%			2,152,251
Total							23,246,241								25,723,869
Net carrying value						$	23,247,210							$	25,724,464

 

*

Less than 0.001%

 

Investments in Marketable Equity Securities

 

Investments in equity securities, such as, marketable securities, are accounted for at its current market value with the changes in fair value recognized in net gain (loss). Investment C was listed and publicly traded on Nasdaq Stock Exchange.

 

As of June 30, 2024 and December 31, 2023, Investment C was recorded at fair value of $969 and $595, which were traded at a closing price of $15.82 and $9.15 per share, respectively.

 

Investments in Non-Marketable Equity Securities

 

Investments in non-marketable equity securities consist of investments in limited liability companies in which the Company’s interests are deemed minor and long-term, strategic investments in companies that are in various stages of development, and investments in a close-ended partnership funds which concentrated in the healthcare sector. These investments do not have readily determinable fair values and, therefore, are reported at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

 

Management assesses each of these investments on an individual basis, subject to a periodic impairment review and considers qualitative and quantitative factors including the investee’s financial condition, the business outlook for its products and technology, its projected results and cash flow, financing transactions subsequent to the acquisition of the investment, the likelihood of obtaining subsequent rounds of financing and cash usage. The Company is not required to determine the fair value of these investments unless impairment indicators existed. When an impairment exists, the investment will be written down to its fair value by recording the corresponding charge as a component of other income (expense), net. Fair value is estimated using the best information available, which may include cash flow projections or other available market data.

 

On February 5, 2024, the Company entered into a purchase and sale agreement with an independent third party to sell all its equity interest in Investment F for a purchase price of $2.15 million and the transaction was completed on February 19, 2024.

 

 

The following table presents the movement of non-marketable equity securities as of June 30, 2024 and December 31, 2023:

 

		As of
		June 30, 2024				December 31, 2023
Balance at beginning of period/year		$	25,723,869			$	34,589,767
Additions			—				288,581
Disposal			(2,152,251	)			—
Adjustments:
Downward adjustments			(37,678	)			(10,092,729	)
Foreign exchange adjustment			(287,699	)			938,250
Balance at end of period/year		$	23,246,241			$	25,723,869

 

Cumulative unrealized gains and losses, included in the carrying value of the Company’s non-marketable equity securities:

 

		As of
		June 30, 2024				December 31, 2023
Downward adjustments (including impairment)		$	(37,385,007	)		$	(37,347,329	)
Upward adjustments			6,209,357				6,209,357
		$	(31,175,650	)		$	(31,137,972	)

 

Investment (loss) income, net is recorded as other income (expense) in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss, and consisted of the following:

 

		For the three months ended June 30,
		2024				2023
Marketable equity securities:
Unrealized gain (loss) from the changes in fair value – Investment C		$	3			$	(168	)
Non-marketable equity securities:
Unrealized gain (including impairment) – Investment B			49				—
Unrealized loss (including impairment) – Investment F			—				(1,000,119	)
Dividend income			—				558,719
Investment income (loss), net		$	52			$	(441,568	)

 

		For the six months ended June 30,
		2024				2023
Marketable equity securities:
Unrealized gain from the changes in fair value – Investment C		$	374			$	98
Realized gain from sale of Investment C			—				1,541,736
Non-marketable equity securities:
Unrealized loss (including impairment) – Investment B			(37,678	)			—
Unrealized loss (including impairment) – Investment F			—				(1,427,771	)
Dividend income			—				1,167,433
Investment (loss) income, net		$	(37,304	)		$	1,281,496

 

NOTE 10 － BORROWINGS

 

		As of
		June 30, 2024				December 31, 2023
Mortgage borrowings		$	1,805,394			$	1,804,950
Short-term borrowings, related party			5,000,000				5,000,000
Total		$	6,805,394			$	6,804,950

 

 

Mortgage Borrowings

 

In February 2023, the Company obtained a mortgage loan of $1,793,001 (equivalent to HK$14,000,000) from a finance company in Hong Kong, which bears an average interest rate at 13.75% per annum and becomes repayable in February 2024. The loan was pledged by a fixed charge on an office premises owned by the Company.

 

Subsequent in July 2024, the Company partially settled $787,157, including $18,678 interest expense (equivalent to principal and interest of HK$6,000,000 and HK$145,833, respectively). The remaining principal and accrued interest is expected to settle in November 2024.

 

Short-term Borrowings

 

In September 2023, the Company obtained a short-term borrowing of $5,000,000 from the Company’s major shareholder’s ultimate holding company, which bears interest at a fixed rate of 12.00% per annum, repayable in October 2023. The borrowing is secured by a lien on the partial equity interest in Investment D owned by the Company. The Company entered into certain supplementary agreements to renew and extend the maturity to August 2024.

 

NOTE 11 － LEASES

 

The Company has entered into commercial operating lease with an independent third party for the use of an office in Hong Kong. The lease has original terms exceeding 1 year, but not more than 3 years with an option to renew for a further term of 3 years. The operating lease is included in “Right-of-use assets, net” on the condensed consolidated balance sheets and represented the Company’s right to use the underlying assets during the lease term. The Company’s obligation to make lease payments are included in “Lease liabilities” on the condensed consolidated balance sheets.

 

Supplemental balance sheet information related to operating leases was as follows:

 

		As of
		June 30, 2024				December 31, 2023
Operating lease:
Right-of-use asset		$	12,557,955			$	12,512,585
Less: accumulated amortization			(1,968,750	)			(1,004,432	)
Right-of-use asset, net		$	10,589,205			$	11,508,153
Lease liabilities:
Current lease liabilities		$	1,269,213			$	1,229,329
Non-current lease liabilities			10,002,032				10,646,053
Total lease liabilities:		$	11,271,245			$	11,875,382

 

Operating lease expense for the three months ended June 30, 2024 and 2023 was $642,191 and $213,550, respectively, is included in other general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

Operating lease expense for the six months ended June 30, 2024 and 2023 was $1,284,143 and $213,550, respectively, is included in other general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

Other supplemental information about the Company’s operating lease as of June 30, 2024 and December 31, 2023 are as follow:

 

		As of
		June 30, 2024				December 31, 2023
Weighted average discount rate			6.58	%			6.58	%
Weighted average remaining lease term (years)			4.92				5.42

 

 

Maturities of operating lease liabilities as of June 30, 2024 were as follows:

 

For the year ending June 30,		Operating lease
2025		$	1,942,308
2026			2,047,237
2027			3,201,459
2028			3,201,459
2029			2,934,671
Total minimum lease payments			13,327,134
Less: imputed interest			(2,055,889	)
Future minimum lease payments		$	11,271,245

 

NOTE 12 － WARRANT LIABILITIES

 

In accordance with ASC 480, the warrants are accounted for and presented as liabilities on the condensed consolidated balance sheets. The fair value of the warrant liabilities is valued by an independent valuer using a Binominal pricing model. The warrant liabilities were classified as Level 3 due to the use of unobservable inputs.

 

Private Warrants

 

The private warrants are identical to the public warrants, except that the private warrants and the ordinary shares issuable upon the exercise of the private warrants were not transferable, assignable or salable until after the completion of the Business Combination, subject to certain limited exceptions. Additionally, the private warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the private warrants are held by someone other than the initial purchasers or their permitted transferees, the private warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants at a price of $11.50 per full share.

 

As of June 30, 2024 and December 31, 2023, there were 225,000 private warrants outstanding, with aggregate value of $9,083 and nil, respectively.

 

The changes in fair value for the three and six months ended June 30, 2024 were $9,083 and $9,083, respectively.

 

The changes in fair value for the three and six months ended June 30, 2023 were $1,695 and $2,375, respectively.

 

Warrants – Class A

 

On May 2, 2024, the Company issued 7,349,200 ordinary shares and the associated warrants to purchase up to 1,469,840 ordinary shares at a purchase price of $0.70 per ordinary share under the private placement, to an institutional investor, a director and officers of the Company. The subscribers in private placement will receive one warrant – class A for every five ordinary shares subscribed. Each warrant – class A entitles the holder to purchase one ordinary share at an exercise price of $1.00 per share and shall be exercised with more than $500,000 per tranche. The warrants will be exercisable six months after the issuance date for a period of five years after the exercise date.

 

These warrants have an exercise price of $1.00 per share and shall be exercised with more than $500,000 per tranche.

 

As of June 30, 2024 and December 31, 2023, there were 1,469,840 and nil warrants - class A outstanding, respectively, with aggregate value of $1,739,793 and nil, respectively.

 

The changes in fair value for the three and six months ended June 30, 2024 were $1,739,793 and $1,739,793, respectively.

 

 

Common Warrants

 

One June 28, 2024, the Company issued 2,957,008 shares of common warrants to Yorkville, in connection with the Second A&R SEPA, representing $8,377,500 or 25% of the $33,510,000 the aggregate principal amount of the First Pre-Paid Advance and the Second Pre-Paid Advance (see note 4). Each common warrant entitles the holder to purchase one ordinary share with an exercise price of $2.8331 per share.

 

As of June 30, 2024 and December 31, 2023, there were 2,957,008 and nil common warrants outstanding, respectively, with aggregate value of $1,900,528 and nil, respectively.

 

The changes in fair value for the three and six months ended June 30, 2024 were $1,900,528 and $1,900,528, respectively.

 

The key inputs into the Binominal pricing model were as follows at their measurement dates:

 

		As of												As of
		June 30, 2024												December 31, 2023
		Common Warrants				Warrants – Class A				Private Warrants				Private Warrants
Input
Share price		$	3.06			$	3.06			$	3.06			$	0.49
Risk-free interest rate			4.38	%			4.38	%			4.76	%			4.04	%
Volatility			50.89	%			50.89	%			50.96	%			48.66	%
Exercise price		$	2.8331			$	1.00			$	11.50			$	11.50
Warrant remaining life			4.99 years				5.34 years				2.13 years				2.63 years

  

NOTE 13 － SHAREHOLDERS’ (DEFICIT) EQUITY

 

Ordinary Shares

 

As of June 30, 2024 and December 31, 2023, the Company has authorized share of 200,000,000 ordinary shares with a par value $0.001.

 

(i)

On January 22, 2024 and June 18, 2024, the Company issued 334,160 and 12,002 ordinary shares, respectively, to the directors and officers of the Company under the Share Award Scheme (the “Scheme”), whose shares were vested in 2023.

 

(ii)

During the six months ended June 30, 2024, the Company issued 2,454,100 ordinary shares to the employees of the Company to compensate the contributions of their services and performance.

 

(iii)

During the six months ended June 30, 2024, the Company issued 1,505,615 ordinary shares to certain consultants to compensate their services rendered.

 

(iv)

On March 12, 2024, the Company issued 1,000,000 ordinary shares to Apex Twinkle Limited to partially settle the finder fee payable.

 

(v)

On May 2, 2024, the Company issued 7,349,200 ordinary shares and the associated warrants to purchase 1,469,840 ordinary shares at a purchase price of $0.70 per ordinary share under the private placement, to an institutional investor, a director and officers of the Company.

 

Among 7,349,200 ordinary shares, in December 2023, the Company received gross proceeds of $1,850,314 from an institutional investor in exchange of 2,643,300 ordinary shares and settled the accrued salaries of $1,242,850 with an aggregate of 1,775,500 ordinary shares to a director and officers of the Company. The remaining 2,930,400 ordinary shares were issued to a director of the Company.

 

 

As of June 30, 2024 and December 31, 2023, there were 81,810,429 and 68,661,998 ordinary shares issued and outstanding, respectively.

 

Ordinary Shares To Be Issued

 

(vi)

On February 22, 2024 and May 2, 2024, the Company issued 435,484 and 57,870 ordinary shares, respectively, for the settlement of the accrued salaries to the directors and officers.

 

(vii)

In March 2024, the Company settled the accrued salaries of $0.4 million with an aggregate of 900,899 ordinary shares to be issued to the directors and officers of the Company at the current market price of $0.447 per share.

 

(viii)

In June 2024, the Company settled the accrued salaries of $0.3 million with an aggregate of 115,154 ordinary shares to be issued to the directors and officers of the Company at the current market price of $2.9 per share.

 

As of June 30, 2024 and December 31, 2023, there were 958,183 and 4,854,284 ordinary shares to be issued, respectively.

 

Public Warrants

 

Each public warrant entitles the holder thereof to purchase one-half (1/2) of one ordinary share at a price of $11.50 per full share, subject to adjustment as discussed herein. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only an even number of warrants may be exercised at any given time by a warrant holder.

 

Once the warrants become exercisable, the Company may call the outstanding warrants (including any outstanding warrants issued upon exercise of the unit purchase option issued to Maxim Group LLC) for redemption:

 

●

in whole and not in part;

 

●

at a price of $0.01 per warrant;

 

●

upon a minimum of 30 days’ prior written notice of redemption,

 

●

if, and only if, the last sales price of the ordinary shares equals or exceeds $16.50 per share for any 20 trading days within a 30 trading day period ending three business days before the Company send the notice of redemption, and

 

●

if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

 

If the Company calls the warrants for redemption as described above, the management of the Company will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether the Company will exercise our option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of our ordinary shares at the time the warrants are called for redemption, the Company’s cash needs at such time and concerns regarding dilutive share issuances.

 

As of June 30, 2024 and December 31, 2023, there were 4,600,000 public warrants outstanding.

 

 

Subscription Receivable

 

Subscription receivable is related to the private placement commenced in November 2023, with ordinary shares were issued on May 2, 2024 to a director of the Company. 2,930,400 ordinary shares with gross proceeds of $2,051,280 is expected to be settled by the director of the Company on or before December 31, 2024.

 

Forgiveness of Amount Due to the Holding Company

 

During the six months ended June 30, 2024 and 2023, the holding company of the Company agreed to forgive a debt of nil and $8,600,000, in aggregate, respectively, representing certain amount due to it and treat as additional paid-in capital.

 

2023 Share Award Scheme

 

Pursuant to the Share Award Scheme, the Company filed S-8 registration statement to register 11,675,397 ordinary shares on February 24, 2023.

 

The fair value of the ordinary shares granted during the period is measured based on the closing price of the Company’s ordinary shares as reported by Nasdaq Exchange on the date of grant. For those vested immediately on the date of grant, the fair value is recognized as share-based compensation expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

Restricted Share Units (“RSUs”)

 

In December 2022, the Company approved and granted 5,000,000 ordinary shares as RSUs to employees and consultants as additional compensation under the Scheme. These RSUs typically will be vested over one to four years period from 2023 to 2026.

 

For the RSUs, the fair value is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis. The valuations assume no dividends will be paid. The Company has assumed 10% forfeitures.

 

On January 22, 2024 and June 18, 2024, the Company issued 334,160 and 12,002 ordinary shares, respectively, to the directors and officers of the Company under the Scheme, whose shares were vested in 2023.

 

During the three months ended June 30, 2024 and 2023, the Company recorded $250,567 and $4,604,320 share-based compensation expense, respectively which is included in the personal and benefit expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

During the six months ended June 30, 2024 and 2023, the Company recorded $501,134 and $8,510,920 share-based compensation expense, respectively which is included in the personal and benefit expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.

 

As of June 30, 2024 and December 31, 2023, total unrecognized compensation remaining to be recognized in future periods for RSUs totaled $1.4 million and $1.9 million, respectively. They are expected to be recognized over the weighted average period of 1.28 years.

 

A summary of the activities for the Company’s RSUs as of June 30, 2024 and December 31, 2023 is as follow:

 

		As of
		June 30, 2024								December 31, 2023
		Number of RSUs				Weighted Average Grant Price				Number of RSUs				Weighted Average Grant Price
Outstanding, beginning of period/year			1,309,728			$	2.47				5,000,000			$	2.47
Vested			—			$	—				(346,542	)		$	2.47
Forfeited			(152,080	)		$	(2.47	)			(3,343,730	)		$	(2.47	)
Outstanding, end of period/year			1,157,648			$	2.47				1,309,728			$	2.47

 

 

NOTE 14 － OPERATING EXPENSES

 

Commission Expense

 

Pursuant to the terms of respective contracts, commission expense represents certain premiums from insurance or investment products paid to agents. Commission rates vary by market due to local practice, competition, and regulations. The Company charged commission expense on a systematic basis that is consistent with the revenue recognition.

 

During the three months ended June 30, 2024 and 2023, the Company recorded $1,316,570 and $11,984,437 commission expenses, respectively.

 

During the six months ended June 30, 2024 and 2023, the Company recorded $5,762,812 and $19,279,929 commission expenses, respectively.

 

Personnel and Benefit Expense

 

Personnel and benefit expense mainly consisted of salaries and bonus paid and payable to the employees of the Company.

 

During the three months ended June 30, 2024 and 2023, the Company recorded $5,478,217 and $5,302,270 personnel and benefit expense, respectively.

 

During the six months ended June 30, 2024 and 2023, the Company recorded $11,537,206 and $14,907,460 personnel and benefit expense, respectively.

 

Legal and Professional Fees

 

Legal and professional fees mainly consisted of certain professional consulting services in legal, audit, accounting and taxation, and others.

 

During the three months ended June 30, 2024 and 2023, the Company recorded $1,737,983 and $5,574,562 legal and professional fees, respectively.

 

During the six months ended June 30, 2024 and 2023, the Company recorded $2,613,094 and $8,970,002 legal and professional fees, respectively.

 

Other General and Administrative Expenses

 

The Company incurred different types of expenditures under other general and administrative expenses. They primarily consist of depreciation of property and equipment and management fee expenses which are allocated for certain corporate office expenses.

 

During the three months ended June 30, 2024 and 2023, the Company recorded $2,482,519 and $2,748,046 other general and administrative expenses, respectively.

 

During the six months ended June 30, 2024 and 2023, the Company recorded $4,480,563 and $5,208,427 other general and administrative expenses, respectively.

 

 

NOTE 15 － INCOME TAXES

 

The provision for income taxes consisted of the following:

 

		For the three months ended June 30,								For the six months ended June 30,
		2024				2023				2024				2023
Income tax expense (benefit)		$	23,235			$	26,368			$	60,756			$	(280	)

 

The Company’s subsidiaries mainly operate in Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:

 

British Virgin Islands

 

The Company is incorporated in the British Virgin Islands and is not subject to taxation. In addition, upon payments of dividends by these entities to their shareholder, no British Virgin Islands withholding tax will be imposed.

 

Hong Kong

 

The Company’s subsidiaries operating in Hong Kong is subject to the Hong Kong Profits Tax at the income tax rates ranging from 8.25% to 16.5% on the assessable income arising in Hong Kong during its tax year.

 

The following table sets forth the significant components of the deferred tax assets of the Company as of June 30, 2024 and December 31, 2023:

 

		As of
		June 30, 2024				December 31, 2023
Deferred tax assets, net:
Net operating loss carryforwards		$	12,734,458			$	8,909,692
Less: valuation allowance			(12,734,458	)			(8,909,692	)
Deferred tax assets, net		$	—			$	—

 

The movement of valuation allowance is as follows:

 

		As of
		June 30, 2024				December 31, 2023
Balance as of beginning of the period/year		$	(8,909,692	)		$	(5,461,370	)
Addition			(3,824,766	)			(3,448,322	)
Balance as of end of the period/year		$	(12,734,458	)		$	(8,909,692	)

 

As of June 30, 2024 and December 31, 2023, the operations incurred $77.2 million and $54.0 million, respectively of cumulative net operating losses which can be carried forward to offset future taxable income. Net operating loss can be carried forward indefinitely but cannot be carried back to prior years. There are no group relief provisions for losses or transfers of assets under Hong Kong tax regime. Each company within a corporate group is taxed as a separate entity. The Company has provided for a full valuation allowance against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes that it is more likely than not that these assets will not be realized in the future. The valuation allowance is reviewed annually.

 

Uncertain tax positions

 

The Company evaluates the uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2024 and December 31, 2023, the Company did not have any significant unrecognized uncertain tax positions. The Company incurred and settled minimal interest related to potential underpaid income tax expenses for the six months ended June 30, 2024 and did not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from June 30, 2024.

 

 

NOTE 16 － SEGMENT INFORMATION

 

ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial statements for detailing the Company’s business segments.

 

Currently, the Company has four business segments comprised of the related products and services, as follows:

 

Segments		Scope of Business Activities
Distribution Business		Facilitating the placement of insurance, investment, real estate and other financial products and services to our customers, through licensed brokers, in exchange for initial and ongoing commissions received from product providers, including insurance companies, fund houses and other product specialists.
Platform Business		- Providing access to financial products and services to licensed brokers;
		- Providing operational support for the submission and processing of product applications;
		- Providing supporting tools for commission calculations, customer engagement, sales team management, customer conversion, etc.;
		- Providing training resources and materials;
		- Facilitating the placement of investment products for the fund and/or product provider, in exchange for the fund management services;
		- Providing the lending services whereby the Company makes secured and/or unsecured loans to creditworthy customers; and
		- Solicitation of real estate sales for the developers, in exchange for commissions.
Fintech Business		Managing an ensemble of fintech investments.
Healthcare Business		Managing an ensemble of healthcare-related investments.

 

The four business segments were determined based primarily on how the chief operating decision maker views and evaluates the operations. Operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and services are considered in determining the formation of these operating segments.

 

The following tables present the summary information by segment for the three and six months ended June 30, 2024 and 2023:

 

		For the three months ended June 30, 2024
		Distribution Business				Platform Business				Fintech Business				Healthcare Business				Total
Revenue, net
- Interest income		$	—			$	21,869			$	—			$	—			$	21,869
- Non-interest income			4,094,894				803,998				—				—				4,898,892
			4,094,894				825,867				—				—				4,920,761
Commission expense			1,185,507				131,063				—				—				1,316,570
Depreciation			262				15,408				7,216				—				22,886
Income (loss) from operations			1,458,925				(2,599,393	)			(6,598,166	)			—				(7,738,634	)
Investment income, net			—				—				52				—				52
Total assets as of June 30, 2024		$	13,907,839			$	49,793,604			$	25,050,800			$	522,565			$	89,274,808

 

 

		For the three months ended June 30, 2023
		Distribution Business				Platform Business				Fintech Business				Healthcare Business				Total
Revenue, net
- Interest income		$	—			$	38,175			$	—			$	—			$	38,175
- Non-interest income			16,005,608				1,327,150				—				—				17,332,758
			16,005,608				1,365,325				—				—				17,370,933
Commission expense			11,628,412				356,025				—				—				11,984,437
Depreciation			261				105,892				8,169				—				114,322
Income (loss) from operations			2,734,753				6,785,460				(19,913,347	)			—				(10,393,134	)
Investment loss, net			—				—				(441,568	)			—				(441,568	)
Total assets as of June 30, 2023		$	18,065,731			$	42,202,217			$	34,513,786			$	520,523			$	95,302,257

 

		For the six months ended June 30, 2024
		Distribution Business				Platform Business				Fintech Business				Healthcare Business				Total
Revenue, net
- Interest income		$	—			$	63,186			$	—			$	—			$	63,186
- Non-interest income			10,509,914				2,003,952				—				—				12,513,866
			10,509,914				2,067,138				—				—				12,577,052
Commission expense			5,280,823				481,989				—				—				5,762,812
Depreciation			523				30,810				14,431				—				45,764
Income (loss) from operations			1,802,603				(5,100,521	)			(12,302,583	)			—				(15,600,501	)
Investment loss, net			—				—				(37,304	)			—				(37,304	)
Total assets as of June 30, 2024		$	13,907,839			$	49,793,604			$	25,050,800			$	522,565			$	89,274,808

 

		For the six months ended June 30, 2023
		Distribution Business				Platform Business				Fintech Business				Healthcare Business				Total
Revenue, net
- Interest income		$	—			$	76,333			$	—			$	—			$	76,333
- Non-interest income			25,693,427				2,674,853				—				—				28,368,280
			25,693,427				2,751,186				—				—				28,444,613
Commission expense			18,540,477				739,452				—				—				19,279,929
Depreciation			522				201,514				13,458				—				215,494
Income (loss) from operations			3,187,190				(4,401,856	)			(23,762,276	)			—				(24,976,942	)
Investment income, net			—				—				1,281,496				—				1,281,496
Total assets as of June 30, 2023		$	18,065,731			$	42,202,217			$	34,513,786			$	520,523			$	95,302,257

 

All of the Company’s customers and operations are based in Hong Kong.

 

 

NOTE 17 － RELATED PARTY BALANCES AND TRANSACTIONS

 

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by the holding company. Amounts represent advances or amounts paid in satisfaction of liabilities.

 

Related party balances consisted of the following:

 

				As of
				June 30, 2024				December 31, 2023
Balance with related parties:
Accounts receivable		(a)		$	975,388			$	1,094,225
Subscription receivable		(b)		$	2,051,280			$	—
Borrowings		(c)		$	5,000,000			$	5,000,000
Amount due to the holding company		(d)		$	11,311,473			$	2,906,261
Long-term investment – Investment E		(e)		$	522,566			$	522,531

 

(a)

Accounts receivable due from related parties represented the management service rendered to two individual close-ended investment private funds registered in the Cayman Islands, which is controlled by the holding company.

 

(b)

Subscription receivable is related to the private placement, with gross proceeds is expected to be settled by the director of the Company on or before December 31, 2024 (see note 13).

 

(c)

Borrowing is obtained from the Company’s major shareholder of ultimate holding company. The amount was secured, interest-bearing and repayable by the end of August 2024, as extended (see note 10).

 

(d)

Amounts due to the holding company are those nontrade payables arising from transactions between the Company and the holding company, such as advances made by the holding company on behalf of the Company, advances made by the Company on behalf of the holding company, and allocated shared expenses paid by the holding company. During the six months ended June 30, 2024 and 2023, amounts due to the holding company of nil and $8,600,000, respectively, were forgiven (see note 13).

 

(e)

The Company purchased 4% equity interest in Investment E from a related party in May 2021, based on historical cost. The Company has a common director with Investment E.

 

In the ordinary course of business, during the three and six months ended June 30, 2024 and 2023, the Company involved with transactions, either at cost or current market prices and on the normal commercial terms among related parties. The following table provides the transactions with these parties for the periods as presented (for the portion of such period that they were considered related):

 

				For the three months ended June 30,								For the six months ended June 30,
				2024				2023				2024				2023
Nature of transactions
Asset management service income		(f)		$	242,220			$	241,688			$	484,350			$	480,621
Office and operating fee charge		(g)		$	1,074,279			$	1,742,332			$	2,192,242			$	3,772,045
General and administrative expense allocated		(h)		$	—			$	1,722			$	—			$	1,722
Legal and professional fees		(i)		$	249,999			$	—			$	499,998			$	—

 

(f)

Under the management agreement, the Company shall provide management service to the portfolio assets held by two individual close-ended investment private funds in the Cayman Islands, which is controlled by the holding company, for a compensation of asset management service fee income at the predetermined rate based on the respective portfolio of asset values invested by the final customers.

 

(g)

Pursuant to the service agreement, the Company agreed to pay the office and administrative expenses to the holding company for the use of office premises, including, among other things, building management fees, government rates and rent, office rent, and lease-related interest and depreciation that were actually incurred by the holding company.

 

 

(h)

Certain amounts of general and administrative expenses were allocated by the holding company.

 

(i)

On September 19, 2023, the Company entered into an advisory services agreement with a related company, which owned by the Chairman of the Company, for a monthly fee of $83,333. The service will be terminated by either party upon 90 days prior written notice.

 

Apart from the transactions and balances detailed elsewhere in these accompanying unaudited condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.

 

NOTE 18 － RISK AND UNCERTAINTIES

 

The Company is exposed to the following risk and uncertainties:

 

(a)	Concentration risk

 

For the three and six months ended June 30, 2024 and 2023, the customers who accounted for 10% or more of the Company’s revenues are presented as follows:

 

		For the three months ended June 30,
		2024								2023
Customer		Revenues				Percentage  of revenues				Revenues				Percentage  of revenues
Customer A		$	672,733				14	%		$	3,849,161				22	%
Customer B		$	586,963				12	%		$	3,055,295				18	%
Customer C		$	*				*	%		$	1,874,473				11	%
Customer D		$	1,126,597				23	%		$	2,029,613				12	%

  

		For the six months ended June 30,
		2024								2023
Customer		Revenues				Percentage  of revenues				Revenues				Percentage  of revenues
Customer A		$	3,732,832				30	%		$	6,566,059				23	%
Customer B		$	*				*	%		$	4,425,921				16	%
Customer C		$	*				*	%		$	3,105,629				11	%
Customer D		$	2,362,961				19	%		$	3,051,903				11	%
Customer E		$	1,549,113				12	%		$	*				*	%

  

*

Customers who accounted for less than 10% of the total revenue during the periods.

 

As of June 30, 2024 and December 31, 2023, the customers who accounted for 10% or more of the Company’s outstanding receivable balances are presented as follows:

 

		As of
Customer		June 30, 2024				December 31, 2023
Customer A		$	*			$	1,092,414
Customer C		$	*			$	61,455
Customer D		$	*			$	1,634

 

*

Customers who accounted for less than 10% of the total accounts receivable as of period end.

 

 

All of the Company’s major customers are located in Hong Kong.

 

(b)	Credit risk

 

Financial instruments that potentially subject the Company to credit risk consist of cash equivalents, restricted cash, accounts receivable, loans receivable, and notes receivables. Cash equivalents are maintained with high credit quality institutions, the composition and maturities of which are regularly monitored by management. The Hong Kong Deposit Protection Board pays compensation up to a limit of HK$500,000 (approximately $64,050) if the bank with which an individual/a company hold its eligible deposit fails. As of June 30, 2024, cash balance of $1,791,791 and fund held in escrow of $13,831,663 were maintained at financial institutions in Hong Kong, of which approximately $15,118,121 was subject to credit risk. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

For accounts receivable, loans receivable, and notes receivables, the Company determines, on a continuing basis, the probable losses and sets up an allowance for expected credit losses based on the estimated realizable value. Credit of money lending business is controlled by the application of credit approvals, limits and monitoring procedures.

 

The Company uses internally-assigned risk grades to estimate the capability of borrowers to repay the contractual obligations of their loan agreements as scheduled or at all. The Company’s internal risk grade system is based on experiences with similarly graded loans and the assessment of borrower credit quality, such as, credit risk scores, collateral and collection history. Individual credit scores are assessed by credit bureau, such as TransUnion. Internal risk grade ratings reflect the credit quality of the borrower, as well as the value of collateral held as security. To minimize credit risk, the Company requires collateral arrangements to all mortgage loans and has policies and procedures for validating the reasonableness of the collateral valuations on a regular basis. Management believes that these policies effectively manage the credit risk from advances.

 

The Company’s third-party customers that represent more than 10% of total loans receivable, and their related net loans receivable balance as a percentage of total loans receivable, as of June 30, 2024 and December 31, 2023 were as follows:

 

		As of
		June 30, 2024				December 31, 2023
Customer F			37.7	%			37.3	%
Customer G			30.3	%			30.9	%
Customer H			32.0	%			31.8	%

 

(c)

Economic and political risk

 

The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.

 

(d)

Exchange rate risk

 

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ and Sterling on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

 

(e)

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases.

 

 

NOTE 19 － COMMITMENTS AND CONTINGENCIES

 

Litigation — From time to time, the Company is involved in various legal proceedings and claims in the ordinary course of business. The Company currently is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition, operating results, or cash flows.

 

As at June 30, 2024, the Company involved with various legal proceedings:

 

Action Case: HCA702/2018 On March 27, 2018, the writ of summons was issued against the Company and seven related companies of the former shareholder by the Plaintiff. This action alleged the infringement of certain registered trademarks currently registered under the Plaintiff. On February 23, 2023, the Court granted leave for this action be set down for trial of 13 days, and the trial will commence on November 25, 2024. Legal counsel of the Company will continue to handle in this matter. At this stage in the proceedings, it is unable to determine the probability of the outcome of the matter or the range of reasonably possible loss, if any.

 

Action Case: HCA765/2019 On April 30, 2019, the writ of summons was issued against the Company’s subsidiary, three related companies and the former directors, shareholders and financial consultant by the Plaintiff. This action alleged the deceit and misrepresentation from an inducement of the fund subscription and claimed for compensatory damage of approximately $2 million (equal to HK$17.1 million). On April 18, 2024, the court made an order that the plantiff shall set the case down for trial on or before July 6, 2024 for a 7 days trial before a judge and there shall be a pre-trial review before the trial judge on a date 12 weeks before the trial. The plantiff and the defendants agreed on a time extension until August 8, 2024 to set the case down for trial. The case is on-going and parties have yet to attempt mediation. Legal counsel of the Company will continue to handle this matter. At this stage in the proceedings, it is unable to determine the probability of the outcome of the matter or the range of reasonably possible loss, if any.

 

Action Case: HCA2097 and 2098/2020 On December 15, 2020, the writs of summons were issued against the Company and the former consultant by the Plaintiff. This action alleged the misrepresentation and conspiracy causing the loss from the investment in corporate bond and claimed for compensatory damage of approximately $1.67 million (equal to HK$13 million). The Company previously made $0.84 million as contingency loss for the year ended December 31, 2021. Parties participated in a mediation held on March 25, 2022 and negotiated for settlement through without prejudice correspondence, no settlement was reached. The case is on-going and legal counsel of the Company will continue to handle this matter. At this stage in the proceedings, it is unable to determine the probability of the outcome of the matter or the range of reasonably possible loss, if any.

 

The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each fiscal quarter and adjusted to reflect the impacts of negotiations, estimate settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal fees are expensed in the period in which they are incurred.

 

Sale and Purchase Agreement — Pursuant to the agreement dated April 5, 2023, entered with Sony Life Singapore Pte. Ltd. (“SLS”), an independent third party, the Company is committed to purchase 100% equity interest in Sony Life Financial Advisers Pte. Ltd. for a cash consideration of SGD2,500,000 (equivalent to $1,882,000). On December 28, 2023, the Company and SLS entered into a second supplementary agreement to extend the closing date of the transaction from December 31, 2023 to March 31, 2024. On March 29, 2024, the Company and SLS entered into a third supplementary agreement to extend the closing date of the transaction from March 31, 2024 to May 9, 2024. Pursuant to the third supplementary agreement, the Company paid SGD250,000 (equivalent to $188,200) to SLS as the partial payment to cash consideration on April 12, 2024. On May 9, 2024, the Company and SLS entered into a fourth supplementary agreement to extend the closing date of the transaction from May 9, 2024 to May 20, 2024. On June 18, 2024, the Company and SLS entered into a fifth supplementary agreement to extend the closing date of the transaction from May 20, 2024 to July 31, 2024. Pursuant to the fifth supplementary agreement, the Company paid an aggregate of SGD150,000 (equivalent to $112,920) as the extension fee and indemnification fee in July 2024. Up to the date of the unaudited condensed consolidated financial statements available to be issued, further extension on the closing date of the transaction is under negotiation between SLS and the Company.

 

Nasdaq Compliance — On March 20, 2024, Nasdaq granted an additional 180 calendar days period or until September 16, 2024, to the Company to regain the compliance. On May 3, 2024, the closing bid price of the ordinary shares of the Company has been over $1.00 per share for a minimum of 10 consecutive trading days. Accordingly, Nasdaq confirmed that the Company regained compliance with Rule 5550(a)(2) and that this matter is now closed.

 

NOTE 20 － SUBSEQUENT EVENTS

 

In July and August 2024, the Company further advanced an aggregate amount of $15.7 million to Triller in the form of promissory note.

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2024, up to August 14, 2024 that the unaudited condensed consolidated financial statements were available to be issued.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

References in this report (the “Quarterly Report”) to “we,” “us”, “the Group” or the “Company” refer to AGBA Group Holding Limited. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section included in our 2023 Annual Report filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

 

Business Overview

 

We are a leading one-stop financial supermarket based in Hong Kong servicing over 400,000 individual and corporate customers. We offer the broadest set of financial services and healthcare products in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) through a tech-led ecosystem, enabling clients to unlock the choices that best suit their needs.

 

We currently operate four major areas of businesses, comprising of:

 

1.

Distribution Business: The Group’s powerful financial advisor business is the largest in the market, it engages in the personal financial advisory business (including advising and sales of a full range of financial services products including long-term life insurance, savings and mortgages), with additional internal and external channels being developed and added.

 

2.

Platform Business: The Group operates as a “financial supermarket” offering over 1,800 financial products to a large universe of retail and corporate customers.

 

3.

Healthcare Business: Through the Group’s 4% stake in and a strategic partnership with HCMPS, operating as one of the largest healthcare management organizations in the Hong Kong and Macau region, with over 800 doctors in its network. Established in 1979, it is one of the most reputed healthcare brands in Hong Kong.

 

4.

Fintech Business: The Group has an ensemble of leading FinTech assets and businesses in Europe and Hong Kong. In addition to financial gains, the Group also derives substantial knowledge transfers from its investee companies, supporting the development and growth of the Group’s new business models.

 

 

Distribution Business

 

The Distribution Business comprises a variety of captive financial services distribution channels. We have built a market leading financial advisors distribution channel in Hong Kong. We have also built other distribution channels alongside our market leading financial advisors business.

 

Our combined captive distribution channels enable us to directly access one of the largest pools of customers accessible to independent financial services providers in Hong Kong.

 

Channel		Description
Financial Advisors Business (“FA Business”)		“Focus” is engaged in the distribution of life insurance, asset management, property-casualty and Mandatory Provident Fund products through its teams of independent financial advisors (brokers).
Alternative Distribution Business		A collection of distribution channels, including salaried financial planners targeting HNWI, development teams pursuing corporate partnerships and incubating financial advisors teams.
Digital Business		AGBA Money is a direct-to-consumer digital app that provides various financial products and services to retail customers.

 

Our largest distribution channel is the FA Business, operating under the brand name Focus. With its large salesforce of financial advisors, “Focus” provides a wide range of financial products and independent advisory services to individual and corporate customers, primarily in connection with life insurance products. Our FA Business has been the clear market leader in the insurance brokerage industry in Hong Kong for decades, building up a large and highly productive salesforce. As of June 30, 2024, there were around 670 financial advisors at “Focus”, organized into 15 sales teams. Each team is led by a “tree head”, responsible for managing the financial advisors within their teams.

 

In addition to the FA Business, we continued to expand our distribution footprint with the establishment and expansion of a number of additional distribution channels, collectively known as our Alternative Distribution Business. These distribution channels are targeted at specific customer segments and/or capturing specific distribution opportunities.

 

Combined with our Digital Business, we now have a well-diversified range of distribution channels and capabilities.

 

During 2024, we continued to make significant investments into developing and expanding our financial advisors salesforce, broadening and deepening the product range, as well as upgrading the supporting infrastructure. Our infrastructure not only supports the financial consultants in engaging with their customers, it also provides extensive operational support in relation to the processing of transactions, associated payment flows, as well as after-sales services. Building our infrastructure required substantial investments into technological, operational and financial systems, as well as the development of comprehensive operational and support teams (operations support, customer services, payments, etc.). Since many of the financial products offered to our customers are regulated, on top of the various operational requirements, we have built significant internal capabilities in the areas of risk and internal control, as well as legal and compliance to ensure an appropriate level of regulatory compliance and supervision.

 

 

As a result of our efforts to expand our distribution capabilities and improve our supporting infrastructure, we have successfully developed these inter-related strategic assets:

 

●

Vast customer base in Hong Kong and growing customer base in Mainland China.

 

●

State-of-the-art supporting infrastructure.

 

●

Relationships with and access to a broad range of leading global financial product providers.

 

●

Deep market knowledge and understanding.

 

●

Highly productive and well-trained salesforce.

 

We will continue to capitalize on these core strategic assets and match them with the emerging opportunities in our three core industries (life insurance, wealth management and healthcare).

 

For the six months ended June 30, 2024, the Company made $10.5 million from commission in the Distribution Business. The revenue attributed to the Company during the first half year of 2024 only captured an insignificant portion of the revenues actually generated by the financial advisors currently associated with Focus.

 

We will continue to widen our distribution footprint and actively explore further opportunities to develop partnerships and generate customer leads on the ground in Mainland China, as well as refining our abilities to service our customer base. We expect sales volumes to return to the levels previously recorded, prior to the pandemic period, especially with the re-opening of the Mainland border and the ongoing integration of Hong Kong into the Greater Bay area.

 

Platform Business

 

The Platform business, through OPH and its subsidiaries, is a one-stop financial supermarket with a breadth of products and services that is unrivaled in Hong Kong sourced from leading global product providers.

 

The Platform Business was set up to take advantage of the decades-long experience we built up in supporting the largest financial advisors salesforce in Hong Kong. We were already servicing a large pool of customers and in the process, built up a wide library of world class financial products and constructed a state-of-the-art technological and operational infrastructure.

 

The Platform Business now operates this full-service platform under its “OnePlatform” brand and has opened it up to banks, other financial institutions, family offices, brokers, and individual independent financial advisors that are looking for support in advising and serving their retail clients.

 

Our technology-enabled Platform Business offers a wide range of financial products, covering life insurance, pensions, property-casualty insurance, stock brokerage, mutual funds, money lending and real estate agency.

 

In addition to its unrivaled product-shelf, the Platform Business offers digital-enabled sales management and support solutions, business operations support, comprehensive customer services, and training support.

 

Currently, our platform financial services and investment products mainly comprise mutual fund distributions, portfolio management, money lending, insurance and Mandatory Provident Fund (MPF) products, and international real estate referral and brokerage services, as discussed below:-

 

The OnePlatform brand currently covers 95 insurance providers selling 1,204 products, and 54 asset management fund houses with over 1,151 products.

 

 

Fintech Business

 

The Fintech Business has collected an ensemble of valuable fintech assets in its investment portfolio. Fintech Business’ management team has strived to establish the business as a leading name in the fintech investment sector.

 

Core Fintech investments held under the Fintech Business as of June 30, 2024 include:

 

1.	An investment in Tandem Money Limited, a UK digital bank.

 

2.	An investment in CurrencyFair Limited, a B2B and B2C payments company.

 

3.	An investment in Oscar Health Inc., a US direct-to-consumer digital health insurer.

 

4.	An investment in Goxip Inc., a fashion media platform based in Hong Kong.

 

		Carrying amount in
		US$ thousands (1)
		June 30,				December 31,
		2024				2023
Tandem Money Limited			16,767				16,880
CurrencyFair Limited			5,652				5,827
Oscar Health Inc.(2)			—				—
Goxip Inc.			305				342
LC Healthcare Fund I, L.P. (3)			—				2,152

 

Notes:

 

(1)	Carrying amount represents Fintech’s attributable interest in the investment portfolio asset.
(2)	The Company partially sold 993,108 shares of Oscar Health Inc. on Nasdaq Stock Exchange with an average current market price of $4.01 per share in 2023.
(3)	On February 5, 2024, the Company sold all its equity interest in LC Healthcare Fund I, L.P. to an independent third party for a consideration of $2.15 million.

 

Healthcare Business

 

We currently hold a 4% equity stake in HCMPS, one of the leading healthcare management organizations in Hong Kong.

 

Founded in 1979 and currently operating under the Dr. Jones Fok & Associates Medical Scheme Management Limited (“JFA”) brand, JFA is one of the most reputed healthcare brands in Hong Kong. It has four self-operated medical centres and a network of over 700 healthcare service providers – providing healthcare schemes for more than 500 corporate clients with over 300,000 scheme members. JFA’s clients include blue chip companies from various industry and leading insurers. Apart from Hong Kong, JFA is the largest operator in Macau with around 70 clinics.

 

 

JFA operates a city-wide medical network that includes 340 general practitioners (“GP”), 11 laboratories and imaging centers, 273 specialist doctors, 25 physiotherapy centers, 12 Chinese medicine practitioner clinics, all based in Hong Kong, and 69 GP clinics in Macau. Over 380,000 out-patient and in-patient visits are recorded annually through HCMPS’s medical network. JFA offers its patients a full range of medical services, including general services, specialist services, physiotherapy, Chinese medicine, dental, vaccination, X-ray, laboratories and imaging services.

 

We believe that the future of healthcare is in “Smart Health” – technology that offers improved patient-care management and leverages data as the new tool for solving complex healthcare challenges with reduced operating costs. We will focus on technology/digitalization and consumerization of healthcare to create an ecosystem empowering customers to proactively manage their health and well-being and to improve their access to healthcare at a lower cost – with connectivity across the care continuum. We believe that JFA has the captive customer base, infrastructure and product/service offerings to optimize customer experience to further grab market share.

 

We are currently working to transform JFA into the best medical care institution in Asia by 2025, redefining industry standards in the Greater Bay Area and offering market-leading customer care and best-in-class infrastructure empowered by data analytics.

 

Results of Operations

 

Comparison of the Three Months Ended June 30, 2024 and 2023:

 

The following tables set forth our results of operations for the periods presented in U.S. dollars (in thousands):

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Revenues:
Interest income:
Loans		$	22			$	38				(16	)			(42.11	)
Total interest income			22				38				(16	)			(42.11	)
Non-interest income:
Commissions			4,154				16,323				(12,169	)			(74.55	)
Recurring asset management service fees			503				768				(265	)			(34.51	)
Recurring asset management service fees, related party			242				242				—				—
Total non-interest income			4,899				17,333				(12,434	)			(71.74	)
Total revenues			4,921				17,371				(12,450	)			(71.67	)
Operating expenses:
Interest expense			(368	)			(248	)			120				48.39
Commission expense			(1,316	)			(11,984	)			(10,668	)			(89.02	)
Sales and marketing expense			(30	)			(515	)			(485	)			(94.17	)
Research and development expense			(495	)			(1,059	)			(564	)			(53.26	)
Personnel and benefit expense			(5,478	)			(5,302	)			(176	)			(3.32	)
Legal and professional fee			(1,488	)			(5,575	)			(4,087	)			(73.31	)
Legal and professional fee, related party			(250	)			—				250				N/A
Office and operating fee, related party			(1,074	)			(1,742	)			(668	)			(38.35	)
Provision for allowance for expected credit losses			(751	)			(333	)			418				125.53
Other general and administrative expenses			(1,409	)			(1,006	)			(403	)			(40.06	)
Total operating expenses			(12,659	)			(27,764	)			(15,105	)			(54.40	)
Loss from operations			(7,738	)			(10,393	)			(2,655	)			(25.55	)
Other income (expense):
Interest income			75				197				(122	)			(61.93	)
Foreign exchange (loss) gain, net			(51	)			349				(400	)			(114.61	)
Investment loss, net			—				(441	)			(441	)			(100.00	)
Change in fair value of warrant liabilities			(3,649	)			2				(3,651	)			(182,550.00	)
Loss on settlement of forward share purchase agreement			—				(379	)			(379	)			(100.00	)
Rental income			—				79				(79	)			(100.00	)
Sundry income			18				27				(9	)			(33.33	)
Total other expense, net			(3,608	)			(166	)			3,442				2,073.49
Loss before income taxes			(11,346	)			(10,559	)			787				7.45
Income tax expense			(23	)			(26	)			(3	)			(11.54	)
NET LOSS		$	(11,369	)		$	(10,585	)			784				7.41

 

 

Revenue

 

The following table summarizes the major operating revenues for the three months ended June 30, 2024 and 2023:

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Business segment
Distribution Business		$	4,095			$	16,006				(11,911	)			(74.42	)
Platform Business			826				1,365				(539	)			(39.49	)
Fintech Business			—				—				—				—
Healthcare Business			—				—				—				—
TOTAL		$	4,921			$	17,371				(12,450	)			(71.67	)

 

Distribution Business

 

The Distribution Business contributed 83.21% and 92.14% of the total revenue for the three months ended June 30, 2024 and 2023, respectively. Income from the Distribution Business mainly related to commissions earned, which decreased by US$11.91 million, or 74.42%, from US$16.0 million in 2023 to US$4.1 million in 2024. The decrease in revenue primarily attributed from the economic recession and outward migration in Hong Kong. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name.

 

Summarized revenue breakdown by product and type of contracts:

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
By product:
Life insurance		$	3,830			$	15,214				(11,384	)			(74.83	)
Property-casualty insurance			170				552				(382	)			(69.20	)
Mandatory provident fund and related revenues			95				240				(145	)			(60.42	)
			4,095				16,006				(11,911	)			(74.42	)
By the type of contracts:
- New and or current year			4,058				15,930				(11,872	)			(74.53	)
- Recurring			37				76				(39	)			(51.32	)
TOTAL		$	4,095			$	16,006				(11,911	)			(74.42	)

 

 

Platform Business

 

The Platform Business contributed 16.79% and 7.86% of the total revenue for the three months ended June 30, 2024 and 2023, respectively.

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Commission		$	59			$	317				(258	)			(81.39	)
Recurring service fees			745				1,010				(265	)			(26.24	)
Loans			22				38				(16	)			(42.11	)
TOTAL		$	826			$	1,365				(539	)			(39.49	)

 

Operating Expenses

 

Interest Expense

 

Interest expense increased by US$0.12 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was mainly attributed to the interest expense and amortization of the debt discount on convertible notes payable.

 

Commission Expense

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Business segment
Distribution Business		$	1,185			$	11,628				(10,443	)			(89.81	)
Platform Business			131				356				(225	)			(63.20	)
Fintech Business			—				—				—				—
Healthcare Business			—				—				—				—
TOTAL		$	1,316			$	11,984				(10,668	)			(89.02	)

 

The Distribution Business contributed 90.05% and 97.03% of the total commission expense for the three months ended June 30, 2024 and 2023, respectively. Commission expense for the Distribution Business decreased by US$10.4 million, or 89.81%, from US$11.6 million in 2023 to US$1.2 million in 2024. As a result of the decrease in revenue associated with the Distribution Business, commission expense decreased correspondingly.

 

Sales and Marketing Expense

 

Sales and marketing expense decreased by US$0.5 million or 94.17% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease in sales and marketing expense is mainly attributed to lower spending associated with “AGBA” corporate branding and associated product campaigns for celebrating the successful listing.

 

Research and Development Expense

 

Research and development expense decreased by US$0.6 million or 53.26% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The slight decrease was primarily due to decreased in headcounts.

 

 

Personnel and Benefit Expense

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Personnel and benefit		$	4,944			$	3,984				960				24.10
Share-based compensation to employees			534				1,318				(784	)			(59.48	)
TOTAL		$	5,478			$	5,302				176				3.32

 

Personnel and benefit cost increased by US$1.0 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was primarily attributable to the new appointment of our Chairman in 2024, the reversal of annual bonus during the three months ended June 30, 2023, and offset by the reduction of headcounts in 2024.

 

Share-based compensation for employees decreased by US$0.8 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily due to the decrease in the amortization of the fair value of the restricted share units due to the vested and forfeited shares in 2024. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis.

 

Legal and Professional Fees

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Legal and professional fee		$	1,287			$	2,289				(1,002	)			(43.77	)
Legal and profession fee, related party			250				—				250				N/A
Consulting fees (share-based related)			201				3,286				(3,085	)			(93.88	)
TOTAL		$	1,738			$	5,575				(3,837	)			(68.83	)

 

Legal and professional fees decreased by US$1.0 million, or 43.77%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily attributed to the decrease in the US legal counsel fees and the consulting fees incurred during the period.

 

Legal and professional fees, related party of $0.3 million for the three months ended June 30, 2024 represented the advisory service fee paid to a related company which owned by the Chairman of the Company.

 

Consulting fees under share-based compensation for the three months ended June 30, 2024 was mainly related to the corporate strategic consultancy and business marketing service rendered by certain third party consultants, equal to 1,505,615 ordinary shares at the market price ranging from US$0.339 to US$0.403 per share.

 

 

Other General and Administrative Expense

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Depreciation on property and equipment		$	23			$	114				(91	)			(79.82	)
Depreciation on right-of-use assets			462				148				314				212.16
Financial data subscription expense			149				45				104				231.11
Interest expense on lease liabilities			184				67				117				174.63
Building management fee and utilities			232				399				(167	)			(41.85	)
Overseas travelling expense			142				117				25				21.37
Other operating expenses			217				116				101				87.07
TOTAL		$	1,409			$	1,006				403				40.06

 

Total other general and administrative expenses increased by US$0.4 million, or 40.06%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The net increase was mainly due to the increase in depreciation on right-of-use assets of US$0.3 million, financial data subscription expense of US$0.1 million, interest expense on lease liabilities of US$0.1 million, and other operating expenses of US$0.1 million, offset by the building management fee and utilities of US$0.2 million. The depreciation on right-of-use assets and the interest expense on lease liabilities were mainly attributed to the commercial operating lease entered with an independent third party for the use of an office premises in Hong Kong. The lease has original terms exceeding one year, but not more than three years with an option to renew for a further term of three years.

 

Loss from Operations

 

Loss from operations decreased by US$2.7 million, or 25.55%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was mainly attributable to the decrease in operating expenses of US$15.1 million, offset by the decrease in revenues of $12.5 million.

 

Other Income (Expense), net

 

Interest Income

 

Interest income decreased by US$0.1 million for the three months ended June 30, 2024.

 

Foreign Exchange (Loss) Gain, net

 

Foreign exchange (loss) gain, net mainly represented the unrealized net foreign exchange (loss) gain from the translation of long-term investments which are mostly denominated in Sterling. The net foreign exchange loss increased by US$0.4 million or 114.61% for the three months ended June 30, 2024, as compared to the net foreign exchange gain for the three months ended June 30, 2023, due to the continuous strong Sterling exchange rate.

 

Investment Loss, Net

 

		Three months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Unrealized loss in non-marketable equity securities		$	—			$	(1,000	)			(1,000	)			(100.00	)
Dividend income			—				559				(559	)			(100.00	)
TOTAL		$	—			$	(441	)			(441	)			(100.00	)

 

Investment loss decreased by US$0.4 million, or 100.00%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, mainly because of the decrease in unrealized loss in non-marketable equity securities of US$1.0 million, and decrease in dividend income of US$0.6 million.

 

Change in fair value of warrant liabilities

 

We classified the Private Warrants, Warrant – Class A, and Common Warrants as liabilities at their fair value and adjust them to fair value at each reporting period. These warrant liabilities are subject to re-measurement of each balance sheet date until exercised. For the three months ended June 30, 2024 and 2023, we recognized the change in fair value in aggregate of $3.6 million and nil in our condensed consolidated statements of operations and comprehensive loss.

 

 

Net Loss

 

Net loss increased by US$0.7 million, or 6.89% for the three months ended June 30, 2024, as compared to three months ended June 30, 2023, primarily due to the increase in other expense, net of US3.4 million, offset by the decrease in total revenues of US$12.5 million and decrease in operating expenses of US$15.1 million.

 

Six months ended June 30, 2024 vs six months ended June 30, 2023

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Revenues:
Interest income:
Loans		$	63			$	76				(13	)			(17.11	)
Total interest income			63				76				(13	)			(17.11	)
Non-interest income:
Commissions			10,876				26,339				(15,463	)			(58.71	)
Recurring asset management service fees			1,153				1,549				(396	)			(25.56	)
Recurring asset management service fees, related party			485				481				4				0.83
Total non-interest income			12,514				28,369				(15,855	)			(55.89	)
Total revenues			12,577				28,445				(15,868	)			(55.78	)
Operating expenses:
Interest expense			(575	)			(413	)			162				39.23
Commission expense			(5,763	)			(19,280	)			(13,517	)			(70.11	)
Sales and marketing expense			(513	)			(2,372	)			(1,859	)			(78.37	)
Research and development expense			(954	)			(1,938	)			(984	)			(50.77	)
Personnel and benefit expense			(11,537	)			(14,907	)			(3,370	)			(22.61	)
Legal and professional fee			(2,113	)			(8,970	)			(6,857	)			(76.44	)
Legal and professional fee, related party			(500	)			—				500				N/A
Office and operating fee, related party			(2,192	)			(3,772	)			(1,580	)			(41.89	)
Provision for allowance for expected credit losses			(1,743	)			(333	)			1,410				423.42
Other general and administrative expenses			(2,288	)			(1,437	)			(851	)			(59.22	)
Total operating expenses			(28,178	)			(53,422	)			(25,244	)			(47.25	)
Loss from operations			(15,601	)			(24,977	)			(9,376	)			(37.54	)
Other income (expense):
Interest income			87				368				(281	)			(76.36	)
Foreign exchange (loss) gain, net			(278	)			906				(1,184	)			(130.68	)
Investment (loss) income, net			(37	)			1,282				(1,319	)			(102.89	)
Change in fair value of warrant liabilities			(3,649	)			2				(3,651	)			(182,550.00	)
Change in fair value of forward share purchase liability			—				(82	)			(82	)			(100.00	)
Loss on settlement of forward share purchase agreement			—				(379	)			(379	)			(100.00	)
Rental income			14				138				(124	)			(89.86	)
Sundry income			95				84				11				13.10
Total other (expense) income, net			(3,768	)			2,319				(6,087	)			(262.48	)
Loss before income taxes			(19,369	)			(22,658	)			(3,289	)			(14.52	)
Income tax expense			(61	)			—				61				N/A
NET LOSS		$	(19,430	)		$	(22,658	)			(3,228	)			(14.25	)

 

 

Revenue

 

The following table summarizes the major operating revenues for the six months ended June 30, 2024 and 2023:

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Business segment
Distribution Business		$	10,510			$	25,693				(15,183	)			(59.09	)
Platform Business			2,067				2,752				(685	)			(24.89	)
Fintech Business			—				—				—				—
Healthcare Business			—				—				—				—
TOTAL		$	12,577			$	28,445				(15,868	)			(55.78	)

 

Distribution Business

 

The Distribution Business contributed 83.57% and 90.33% of the total revenue for the six months ended June 30, 2024 and 2023, respectively. Income from the Distribution Business mainly related to commissions earned, which significantly decreased by US$15.2 million, or 59.09%, from US$25.7 million in 2023 to US$10.5 million in 2024. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name. The decrease in revenue primarily attributed from the economic recession and outward migration in Hong Kong.

 

Summarized revenue breakdown by product and type of contracts:

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
By product:
Life insurance		$	9,890			$	24,139				(14,249	)			(59.03	)
Property-casualty insurance			395				1,056				(661	)			(62.59	)
Mandatory provident fund and related revenues			225				498				(273	)			(54.82	)
			10,510				25,693				(15,183	)			(59.09	)
By the type of contracts:
- New and or current year			10,429				25,448				(15,019	)			(59.02	)
- Recurring			81				245				(164	)			(66.94	)
TOTAL		$	10,510			$	25,693				(15,183	)			(59.09	)

 

Platform Business

 

The Platform Business contributed 16.43% and 9.67% of the total revenue for the six months ended June 30, 2024 and 2023, respectively. 

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Commission		$	366			$	646				(280	)			(43.34	)
Recurring service fees			1,638				2,030				(392	)			(19.31	)
Loans			63				76				(13	)			(17.11	)
TOTAL		$	2,067			$	2,752				(685	)			(24.89	)

 

 

Operating Expenses

 

Commission Expense

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Business segment
Distribution Business		$	5,281			$	18,541				(13,260	)			(71.52	)
Platform Business			482				739				(257	)			(34.78	)
Fintech Business			—				—				—				—
Healthcare Business			—				—				—				—
TOTAL		$	5,763			$	19,280				(13,517	)			(70.11	)

 

The Distribution Business contributed 91.64% and 96.17% of the total commission expense for the six months ended June 30, 2024 and 2023, respectively. Commission expense for the Distribution Business decreased by US$13.3 million, or 71.52%, from US$18.5 million in 2023 to US$5.3 million in 2024. As a result of the decrease in revenue associated with the Distribution Business, commission expense decreased correspondingly.

 

Sales and Marketing Expense

 

Sales and Marketing expense decreased by US$1.9 million or 78.37%, from US$2.4 million in 2023 to US$0.5 million in 2024. The decrease in sales and marketing expense is mainly attributed to lower spending associated with “AGBA” corporate branding and associated product campaigns for celebrating the successful listing.

 

Research and Development Expense

 

Research and development expense decreased by US$1.0 million or 50.83%, from US$1.9 million in 2023 to US$0.9 million in 2024. The decrease was primarily due to decreased in headcounts.

 

Personnel and Benefit Expense

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Personnel and benefit		$	9,470			$	12,271				(2,801	)			(22.83	)
Share-based compensation to employees			2,067				2,636				(569	)			(21.59	)
TOTAL		$	11,537			$	14,907				(3,370	)			(22.61

 

Personnel and benefit cost decreased by US$2.8 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was primarily due to the decreased in headcounts in both Platform Business and Distribution Business.

 

Share-based compensation for employees decreased by US$0.6 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The slight decrease was primarily due to the decrease in the amortization of the fair value of the restricted share units due to the vested and forfeited shares in 2024. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis.

 

 

Legal and Professional Fees

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Legal and professional fees		$	1,697			$	3,095				(1,398	)			(45.17	)
Legal and professional fees, related party			500				—				500				N/A
Consulting fees (share-based related)			416				5,875				(5,459	)			(92.92	)
TOTAL		$	2,613			$	8,970				(6,357	)			(70.87	)

 

Legal and professional fees decreased by US$1.4 million, or 45.17%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was primarily attributed to the decrease in the US legal counsel fees and the consulting fees incurred during the period.

 

Legal and professional fees, related party of $0.5 million for the six months ended June 30, 2024 represented the advisory service fee paid to a related company which owned by the Chairman of the Company.

 

Consulting fees under share-based compensation for the six months ended June 30, 2024 was mainly related to the corporate strategic consultancy and business marketing service rendered by certain third party consultants, equal to 1,505,615 ordinary shares at the market price ranging from US$0.339 to US$0.403 per share.

 

Other General and Administrative Expenses

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Depreciation on property and equipment		$	46			$	215				(169	)			(78.6	)
Depreciation on right-of-use assets			919				148				771				520.95
Financial data subscription expense			187				139				48				34.53
Interest expense on lease liabilities			369				67				302				450.75
Building management fee and utilities			502				467				35				7.49
Overseas travelling expense			204				221				(17	)			(7.69	)
Other operating expenses			61				180				(119	)			(66.11	)
TOTAL		$	2,288			$	1,437				851				59.22

 

Total other general and administrative expenses increased by US$0.9 million, or 59.22%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The net increase was mainly due to the increase in depreciation on right-of-use assets of US$0.8 million and interest expense on lease liabilities of US$0.3 million, offset by the decrease in depreciation on property and equipment of US$0.2 million. The depreciation on right-of-use assets and the interest expense on lease liabilities were mainly attributed to the commercial operating lease entered with an independent third party for the use of an office premises in Hong Kong. The lease has original terms exceeding one year, but not more than three years with an option to renew for a further term of three years.

 

Loss from Operations

 

Loss from operations decreased by US$9.4 million, or 37.54%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was mainly attributable to the significant decrease in operating expenses of US$25.2 million, offset by the decrease in revenues of $15.9 million.

 

Other Income (Expense), net

 

Interest Income

 

Interest income decreased by US$0.3 million for the six months ended June 30, 2024.

 

 

Foreign Exchange (Loss) Gain, net

 

Foreign exchange (loss) gain, net mainly represented the unrealized net foreign exchange (loss) gain from the translation of long-term investments which are mostly denominated in Sterling. The net foreign exchange loss increased by US$1.2 million or 130.68% for the six months ended June 30, 2024, as compared to the net foreign exchange gain for the six months ended June 30, 2023, due to continuous strong Sterling exchange rate.

 

Investment (Loss) Income, Net

 

		Six months ended June 30,
		2024				2023				Variance
		(US$ in thousands)								$				%
Realized gain in marketable equity securities		$	—			$	1,542				(1,542	)			(100.00	)
Unrealized loss in non-marketable equity securities			(37	)			(1,427	)			(1,390	)			(97.41	)
Dividend income			—				1,167				(1,167	)			(100.00	)
TOTAL		$	(37	)		$	1,282				(1,319	)			(102.89	)

 

Investment loss decreased by US$1.3 million, or 102.89%, for the six months ended June 30, 2024, as compared to the investment income for the six months ended June 30, 2023, mainly because of the decrease in realized gain in marketable equity securities of US$1.5 million, decrease in dividend income of US$1.2 million, and offset by the decrease in unrealized loss in non-marketable equity securities of US$1.4 million. The decrease in realized gain in marketable equity securities and dividend income was mainly due to the disposal of long-term investments.

 

Change in fair value of warrant liabilities

 

We classified the Private Warrants, Warrant – Class A, and Common Warrants as liabilities at their fair value and adjust them to fair value at each reporting period. These warrant liabilities are subject to re-measurement of each balance sheet date until exercised. For the six months ended June 30, 2024 and 2023, we recognized the change in fair value in aggregate of $3.6 million and nil in our condensed consolidated statements of operations and comprehensive loss.

 

Rental Income

 

Rental income was earned from the leasing of our owned office premises. For the six months ended June 30, 2024, the rental income decreased by US$0.1 million, or 89.86%, as compared to the six months ended June 30, 2023 was resulted from the sale of one of the office premises in 2023.

 

Income Tax Expense

 

Income tax expense increased by US$0.06 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily attributable to the provision of income tax during the period.

 

Net Loss

 

Net loss decreased by US$3.2 million, or 14.25% for the six months ended June 30, 2024, as compared to six months ended June 30, 2024, primarily due to the increase in other expense, net of US$6.1 million, offset by the decrease in total revenues of US$15.9 million and decrease in operating expenses of US$25.2 million.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

We have a history of operating losses and negative cash flow. For the six months ended June 30, 2024, we reported a net loss of US$19.4 million and reported a negative operating cash flow of US$14.2 million. As of June 30, 2024, our cash balance was US$1.8 million for working capital use. Our management estimates that currently available cash will not be able to provide sufficient funds to meet the planned obligations for the next 12 months.

 

 

Our ability to continue as a going concern is dependent on our ability to successfully implement our plans. Our management believes that it will be able to continue to grow our revenue base and control expenditures. In parallel, AGBA continually monitors its capital structure and search for potential funding alternatives in order to finance our business development activities and operating expenses. AGBA is continuing its plan to further grow and expand operations and seek sources of capital to pay the contractual obligations as they come due. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. Although there is no assurance that, if needed, we will be able to pursue these fundraising initiatives and have access to the capital markets going forward. The unaudited condensed consolidated financial statements attached to this Form 10-Q do not include any adjustments that might result from the outcome of these uncertainties.

 

Future Liquidity 

 

On a recurring basis, the primary future cash needs of the Company will be focused on operating activities, working capital, capital expenditures, investment, regulatory and compliance costs. The ability of the Company to fund these needs will depend, in part, on its ability to generate or raise cash in the future, which is subject to general economic, financial, competitive, regulatory, and other factors that are beyond its control.

 

The ability to fund our operating needs will depend on its future ability to continue to generate positive cash flow from operations and raise capital in the capital markets. Our management believe that we will meet known or reasonably likely future cash requirements through the combination of cash flows from operating activities, available cash balances, and external borrowings and fund raising. Our management expects that the primary cash requirements in 2024 will be to fund capital expenditures for (i) expansion of the Distribution Business and (ii) Platform Business.

 

If our sources of liquidity need to be augmented, additional cash requirements would likely need to be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms, or at all, in the future.

 

We expect that operating losses could continue into the foreseeable future as we continue to invest in growing our businesses. Based upon our current operating plans, our management believes that cash and equivalents will not be able to provide sufficient funds to its operations for at least the next 12 months from the date of its unaudited condensed consolidated financial statements provided with this Form 10-Q. However, these forecasts involve risks and uncertainties, and actual results could vary materially.

 

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenues growth, the timing and extent of spending on sales and marketing, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our brand, and overall economic conditions. We may also seek additional capital to fund our operations, including through the sale of equity or debt financings. To the extent that we raise additional capital through the future sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.

 

Cash Flows

 

As of June 30, 2024, we had cash and cash equivalents totalling $1.8 million, and $13.8 million in restricted cash.

 

As of December 31, 2023, we had cash and cash equivalents totalling $1.9 million, and $16.8 million in restricted cash.

 

 

Comparison of the six months ended June 30, 2024 and 2023

 

The following table summarizes our cash flows for the periods presented:

 

		Six months ended June 30,
		2024				2023
		(US$ in thousands)
Net cash used in operating activities		$	(14,247	)		$	(19,265	)
Net cash provided by investing activities			2,580				4,477
Net cash provided by (used in) financing activities			8,455				(5,317	)
Effect on exchange rate change on cash and cash equivalents			157				49
Net change in cash, cash equivalents and restricted cash			(3,055	)			(20,056	)
Cash, cash equivalents and restricted cash, at the beginning			18,678				51,294
Cash, cash equivalents and restricted cash, at the end			15,623				31,238
Representing as:
Cash and cash equivalents			1,792				3,784
Restricted cash – fund held in escrow			13,831				27,454
		$	15,623			$	31,238

 

The following table sets forth a summary of our working capital:

 

		June 30, 2024				December 31, 2023				Variance
		(US$ in thousands)								$				%
Total Current Assets		$	51,759			$	25,619				26,140				102.
Total Current Liabilities			87,348				47,840				39,508				82.58
Working Capital Deficit			(35,589	)			(22,221	)			13,368				60.16

 

Working Capital Deficit

 

The working capital deficit as of June 30, 2024 and December 31, 2023 was amounted to approximately US$35.6 million and US$22.2 million, respectively, an increase of US$13.4 million or 60.16%. The increase was mainly attributed to the issuance of convertible promissory note payable of $31.7 million and warrant liabilities of $3.6 million, offset by the receivable from Yorkville of $23.4 million.

 

Cash Flows from Operating Activities

 

Net cash used in operating activities was US$14.2 million and US$19.3 million for the six months ended June 30, 2024 and 2023, respectively.

 

Net cash used in operating activities for the six months ended June 30, 2024 was primarily the result of the net loss of US$19.4 million, an increase in deposits, prepayments, and others receivable of US$0.6 million, decrease in accounts payable and accrued liabilities of US$1.1 million, decrease in escrow liabilities of US$3.0 million, decrease in lease liabilities of US$1.0 million and decrease in income tax payable of US$0.2 million. These amounts were partially offset by the decrease in accounts receivable of US$0.01 million, and non-cash adjustments consisting of share-based compensation expense of US$2.5 million, non-cash lease expense of US$1.3 million, depreciation of property and equipment of US$0.05 million, interest income on promissory note receivables of US$0.07 million, interest expense on convertible promissory notes payable of $0.2 million, interest expense on borrowings of $0.4 million, net foreign exchange loss of US$0.3 million, provision for allowance for expected credit losses of US$1.7 million, and change in fair value of warrant liabilities of US$3.6 million.

 

 

Net cash used in operating activities for the six months ended June 30, 2023 was primarily the result of the net loss of US$22.7 million, an increase in accounts receivable of US$1.0 million, increase in deposits, prepayments, and others receivable of US$3.6 million, decrease in accounts payable and accrued liabilities of US$6.6 million, decrease in escrow liabilities of US$2.0 million, decrease in lease liabilities of US$0.2 million and decrease in income tax payable of US$0.1 million. These amounts were partially offset by the decrease in loans receivable of US$0.01 million, and non-cash adjustments consisting of share-based compensation expense of US$8.5 million, non-cash lease expense of US$0.2 million, depreciation of property and equipment of US$0.2 million, interest income on note receivables of US$0.01 million, net foreign exchange gain of US$0.9 million, net investment income of US$1.3 million, allowance for credit loss on financial instruments of US$0.3 million, loss on settlement of forward share purchase agreement of US$0.4 million and reversal of annual bonus accrued in prior year of US$3.8 million.

 

Cash Flows from Investing Activities

 

Net cash provided by investing activities for the six months ended June 30, 2024 of US$2.6 million was primarily due to proceeds from sale of long-term investments of US$2.2 million and proceeds from sale of convertible notes receivable of US$0.4 million.

 

Net cash provided by investing activities for the six months ended June 30, 2023 of US$4.5 million was primarily due to proceeds from sale of investments of US$4.0 million, dividend received from long-term investments of US$1.2 million, offset by the purchase of notes receivable of US$0.6 million and purchase of property and equipment of US$0.08 million.

 

Cash Flows from Financing Activities

 

Net cash provided by financing activities for the six months ended June 30, 2024 of US$8.5 million was primarily due to advances from holding company.

 

Net cash used in financing activities for the six months ended June 30, 2023 of US$5.3 million was primarily due to advances from holding company of US$6.8 million, proceeds from borrowings of US$1.8 million, offset by the settlement of forward share purchase agreement of US$14.0 million. 

 

Liquidity and Going Concern

 

Our unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The management of the Company estimates that currently available cash will not be able to provide sufficient funds to meet the Company’s planned obligations for the next 12 months from the date that these unaudited condensed consolidated financial statements were made available to be issued.

 

For the six months ended June 30, 2023, we reported a net loss of approximately US$19.4 million. With a significant increase in our operating costs, described in the paragraph below, we had an accumulated deficit of approximately US$85.0 million as of June 30, 2024.

 

Coupled with the economic recession in Hong Kong, we reported a sales decline with total revenue of approximately US$12.6 million for the six months ended June 30, 2024 (six months ended June 30, 2023: US$28.4 million) and resulting with an operating loss of approximately US$15.6 million (six months ended June 30, 2023: US$25.0 million). We expect to continue our business growth, while closely monitoring our future spending.

 

Our ability to continue as a going concern is dependent on the management’s ability to successfully implement its plans. Our management team believes that we will be able to continue to grow our revenue base and control our expenditures. In parallel, our management team will continually monitor our capital structure and operating plans and evaluate various potential funding alternatives that may be needed in order to finance our business development activities, general and administrative expenses and growth strategy.

 

 

We intend to raise additional capital through various debt and equity offerings, but there can be no assurance that these funds will be available on terms acceptable, or will be sufficient to enable us to fully complete its development activities or sustain operations. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to further extend payables, reduce overhead, or scale back our current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

 

Capital Commitments

 

Sale and Purchase Agreement — Pursuant to the agreement dated April 5, 2023, entered with Sony Life Singapore Pte. Ltd. (“SLS”), an independent third party, the Company is committed to purchase 100% equity interest in Sony Life Financial Advisers Pte. Ltd. for a cash consideration of SGD2,500,000 (equivalent to $1,882,000). On December 28, 2023, the Company and SLS entered into a second supplementary agreement to extend the closing date of the transaction from December 31, 2023 to March 31, 2024. On March 29, 2024, the Company and SLS entered into a third supplementary agreement to extend the closing date of the transaction from March 31, 2024 to May 9, 2024. Pursuant to the third supplementary agreement, the Company paid SGD250,000 (equivalent to $188,200) to SLS as the partial payment to cash consideration on April 12, 2024. On May 9, 2024, the Company and SLS entered into a fourth supplementary agreement to extend the closing date of the transaction from May 9, 2024 to May 20, 2024. On June 18, 2024, the Company and SLS entered into a fifth supplementary agreement to extend the closing date of the transaction from May 20, 2024 to July 31, 2024. Pursuant to the fifth supplementary agreement, the Company paid an aggregate of SGD150,000 (equivalent to $112,920) as the extension fee and indemnification fee in July 2024. Up to the date of the unaudited condensed consolidated financial statements available to be issued, further extension on the closing date of the transaction is under negotiation between SLS and the Company.

 

Nasdaq Compliance — On March 20, 2024, Nasdaq granted an additional 180 calendar days period or until September 16, 2024, to the Company to regain the compliance. On May 3, 2024, the closing bid price of the ordinary shares of the Company has been over $1.00 per share for a minimum of 10 consecutive trading days. Accordingly, Nasdaq confirmed that the Company regained compliance with Rule 5550(a)(2) and that this matter is now closed.

 

Off-Balance Sheet Arrangements

 

We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.

 

We have not engaged in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

 

Critical Accounting Policies, Judgements and Estimates

 

The preparation of financial statements in conformity with GAAP requires us to make judgments, estimates, and assumptions in the preparation of our unaudited condensed consolidated financial statements. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates as reported in our 2023 Annual Report on Form 10-K. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective   to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but there can be no assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

As of June 30, 2024, the Company involved with various legal proceedings:

 

Action Case: HCA702/2018 On March 27, 2018, the writ of summons was issued against the Company and seven related companies of the former shareholder by the Plaintiff. This action alleged the infringement of certain registered trademarks currently registered under the Plaintiff. On February 23, 2023, the Court granted leave for this action be set down for trial of 13 days, and the trial will commence on November 25, 2024. Legal counsel of the Company will continue to handle in this matter. At this stage in the proceedings, it is unable to determine the probability of the outcome of the matter or the range of reasonably possible loss, if any.

 

Action Case: HCA765/2019 On April 30, 2019, the writ of summons was issued against the Company’s subsidiary, three related companies and the former directors, shareholders and financial consultant by the Plaintiff. This action alleged the deceit and misrepresentation from an inducement of the fund subscription and claimed for compensatory damage of approximately $2 million (equal to HK$17.1 million). On April 18, 2024, the court made an order that the plantiff shall set the case down for trial on or before July 6, 2024 for a 7 days trial before a judge and there shall be a pre-trial review before the trial judge on a date 12 weeks before the trial. The plantiff and the defendants agreed on a time extension until August 8, 2024 to set the case down for trial. The case is on-going and parties have yet to attempt mediation. Legal counsel of the Company will continue to handle this matter. At this stage in the proceedings, it is unable to determine the probability of the outcome of the matter or the range of reasonably possible loss, if any.

 

Action Case: HCA2097 and 2098/2020 On December 15, 2020, the writs of summons were issued against the Company and the former consultant by the Plaintiff. This action alleged the misrepresentation and conspiracy causing the loss from the investment in corporate bond and claimed for compensatory damage of approximately $1.67 million (equal to HK$13 million). The Company previously made $0.84 million as contingency loss for the year ended December 31, 2021. Parties participated in a mediation held on March 25, 2022 and negotiated for settlement through without prejudice correspondence, no settlement was reached. The case is on-going and legal counsel of the Company will continue to handle this matter. At this stage in the proceedings, it is unable to determine the probability of the outcome of the matter or the range of reasonably potential loss, if any.

 

ITEM 1A. RISK FACTORS.

 

As smaller reporting company we are not required to make disclosures under this Item.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

None.

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None. 

 

ITEM 6. EXHIBITS.

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

No.		Description of Exhibit
31.1*		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32**		Certification of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*	Filed herewith.
**	Furnished.

 

 

SIGNATURES

 

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	AGBA GROUP HOLDING LIMITED
Date: August 14, 2024	By:	/s/ Ng Wing Fai
	Name:	Ng Wing Fai
	Title:	Chief Executive Officer
		(Principal Executive Officer)
Date: August 14, 2024	By:	/s/ Shu Pei Huang, Desmond
	Name:	Shu Pei Huang, Desmond
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

 

 

58