Core Viewpoint - TROOPS, Inc. has announced a strategic acquisition of a 49% equity interest in Y Concept Holding Limited, which operates The Cara Hotel in Malaysia, to diversify its investments in the growing flexible living and working space sector in Asia [1][3]. Group 1: Transaction Details - The acquisition involves Giant Connection Limited acquiring 49% of Jupiter Stone Holding Limited's 62.5% ownership in Y Concept Holding Limited [7]. - The transaction will be settled through convertible notes issued by TROOPS, valued at 80% of the lower of the closing share price on the signing date or the average closing share price over the prior 60 trading days [7]. - The LOI includes a put option for the Vendor to sell the remaining 51% at a later date [7]. Group 2: Strategic Significance - This acquisition aligns with TROOPS' strategy to capitalize on the increasing demand for co-living and co-working spaces in Malaysia [3]. - The Cara Hotel is well-positioned to benefit from the robust growth in this sector [3]. Group 3: Conditions Precedent - The transaction is subject to satisfactory completion of financial and legal due diligence [7]. - Necessary regulatory approvals must be obtained, including from NASDAQ and the U.S. Securities and Exchange Commission (SEC) [7]. - Approval from the boards of directors of both parties is required, along with no material adverse changes in Y Concept Holding Limited's business operations or financial conditions [7].

Core Viewpoint - TROOPS, Inc. has received a judgment from the High Court of Hong Kong, which imposes significant financial liabilities on the company and its subsidiaries [3][4]. Legal Proceedings - On August 9, 2022, TROOPS, Inc. and its subsidiaries were served with a writ of summons and injunctions that restricted asset disposal [2]. - The High Court's judgment on June 23, 2025, holds the company and its subsidiaries jointly and severally liable for payments totaling HK$163,400,000 and HK$241,400,000 [3]. - The company intends to appeal the judgment and is exploring legal options to rectify the situation [6][7]. Management's Response - Management expressed disappointment with the court's ruling, attributing it to allegations from FTI Consulting regarding a disputed restructuring plan [5]. - The company plans to mobilize shareholders for a class-action lawsuit against FTI Consulting for malicious prosecution [7]. Company Overview - TROOPS, Inc. operates in various sectors, including money lending, property investment, and financial technology solutions [8].

[Forward-Looking Statements](index=6&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature of forward-looking statements and the inherent risks that could cause actual results to differ materially from projections - This annual report contains forward-looking statements based on current expectations and projections, which are subject to known and unknown risks and uncertainties, and these statements are not guarantees of future performance[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) - Key risks highlighted that could cause actual results to differ from forward-looking statements are categorized as follows[16](index=16&type=chunk)[20](index=20&type=chunk)[22](index=22&type=chunk) - **Business and Industry Risks:** Include potential fines for non-compliance, data privacy regulations, security breaches, competition in money lending, and reliance on fintech services technology[18](index=18&type=chunk)[19](index=19&type=chunk) - **Jurisdictional Risks:** Pertain to operating in Hong Kong and the PRC, including legal system uncertainties, potential PRC government intervention, and implications of the Holding Foreign Companies Accountable Act (HFCAA)[20](index=20&type=chunk)[21](index=21&type=chunk) - **Share-related Risks:** Include failure to meet NASDAQ listing requirements, stock price volatility, and potential dilution[22](index=22&type=chunk)[23](index=23&type=chunk) Part I [Item 3. Key Information](index=16&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section provides key financial data for the last three fiscal years, highlighting significant growth in revenue and a substantial increase in net loss for 2024, and details a comprehensive list of risk factors related to the company's business, operating jurisdictions, and its publicly traded shares [A. Selected Financial Data](index=16&type=section&id=A.%20Selected%20Financial%20Data) This section presents a summary of the company's consolidated financial performance and position over the past three fiscal years Consolidated Statement of Income Data (In thousands of U.S. dollars) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **REVENUES** | 10,073 | 3,569 | 3,875 | | **GROSS PROFIT** | 1,941 | 776 | 822 | | **OPERATING LOSS** | (5,728) | (1,802) | (536) | | **NET LOSS** | (13,413) | (1,719) | (346) | | **Loss per share (Basic & Diluted)** | (0.13) | (0.02) | (0.01) | Consolidated Balance Sheet Data (In thousands of U.S. dollars) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Total assets** | 79,185 | 70,345 | 69,686 | | **Total liabilities** | 10,936 | 9,766 | 7,482 | | **Total equity** | 68,249 | 60,579 | 62,204 | [D. Risk Factors](index=17&type=section&id=D.%20Risk%20Factors) This section details the various business, jurisdictional, and share-related risks that could materially impact the company's operations and financial results - **Business & Industry Risks:** The company faces risks from regulatory scrutiny in data protection and anti-money laundering, potential cybersecurity breaches, intense competition in the money lending industry, and reliance on the performance of the Hong Kong real estate market[55](index=55&type=chunk)[61](index=61&type=chunk)[74](index=74&type=chunk) - **Jurisdictional Risks (Hong Kong & PRC):** Operations are subject to uncertainties in the Hong Kong and PRC legal systems, the PRC government may intervene in business operations, and changes in PRC regulations on overseas listings could impact the company, while the Holding Foreign Companies Accountable Act (HFCAA) poses a delisting risk if the PCAOB cannot inspect auditors, though the current auditor is not on the non-inspection list[110](index=110&type=chunk)[114](index=114&type=chunk)[98](index=98&type=chunk) - **Share-Related Risks:** The company may fail to meet NASDAQ's continued listing requirements, such as the minimum bid price, the trading price of ordinary shares is likely to be volatile, and as a foreign private issuer, the company is exempt from certain SEC reporting and governance requirements applicable to U.S. domestic companies[169](index=169&type=chunk)[173](index=173&type=chunk)[186](index=186&type=chunk) - **Cash Transfer & Dividend Risks:** As a holding company, TROOPS, Inc. relies on dividends from its subsidiaries in Hong Kong and the PRC, and PRC capital controls and foreign exchange regulations may restrict the ability of PRC subsidiaries to remit funds, potentially affecting the company's ability to pay dividends to its shareholders[37](index=37&type=chunk)[141](index=141&type=chunk)[147](index=147&type=chunk) [Item 4. Information on the Company](index=42&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's history, from its origins as a blank check company to its current status as a diversified conglomerate, outlining its primary business segments: money lending, property investment, and fintech services, recently expanded to include insurance consultancy and advisory services, and also covers regulations, organizational structure, and property holdings [A. History and Development of the Company](index=42&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This section traces the company's evolution through strategic acquisitions and disposals, highlighting its shift towards a diversified conglomerate structure - The company originated as a blank check company and has evolved through a series of strategic acquisitions and disposals, transitioning its business model over time[201](index=201&type=chunk) - Key historical transactions include the acquisition and subsequent sale of Honesty Group (manufacturing) and SGOCO (Fujian) (LCD/LED products), shifting the company towards a "light-asset" model[211](index=211&type=chunk)[220](index=220&type=chunk)[226](index=226&type=chunk) - The company has built its current conglomerate structure through several key acquisitions: Giant Credit (money lending, 2017), 11 Hau Fook Street and Paris Sky (property investment, 2018), Vision Lane (property and money lending, 2019), GFS and Apiguru (fintech, 2019-2020)[240](index=240&type=chunk)[241](index=241&type=chunk)[245](index=245&type=chunk) - In 2024, the company acquired Riches Holdings for **$13.4 million**, paid via a convertible note, expanding its services into financial and insurance advisory, immigration and education consultation, and property agency services[248](index=248&type=chunk)[249](index=249&type=chunk) [B. Business Overview](index=50&type=section&id=B.%20Business%20overview) This section outlines TROOPS, Inc.'s principal business segments, including money lending, property investment, fintech services, and newly acquired consultancy and advisory services - TROOPS, Inc. is a Hong Kong-based conglomerate with a vision to build synergy within its ecosystem, and its principal business segments are[252](index=252&type=chunk) - **Money Lending:** Provides mortgage, personal, and corporate loans in Hong Kong through subsidiaries Giant Credit Limited and First Asia Finance Limited[253](index=253&type=chunk)[254](index=254&type=chunk) - **Property Investment:** Generates rental income from a portfolio of commercial properties in Hong Kong[255](index=255&type=chunk) - **Applications, Technology & Services:** Operates an online financial marketplace (GFS) and provides API consulting services (Apiguru), leveraging AI, big data, and blockchain[256](index=256&type=chunk)[260](index=260&type=chunk) - **Consultancy & Advisory Services (via Riches acquisition):** Offers consultancy for insurance products and advisory/referral services for overseas education and immigration[262](index=262&type=chunk)[263](index=263&type=chunk) [E. Property, Plant and Equipment](index=54&type=section&id=E.%20Property,%20plant%20and%20equipment) This section provides a breakdown of the carrying value of the company's property, plant, and equipment across its key subsidiaries Carrying Value of Property, Plant and Equipment by Subsidiary (as of Dec 31, 2024) | Subsidiary | Carrying Value (in millions of U.S. dollars) | | :--- | :--- | | Giant Credit | $0.55 | | 11 Hau Fook Street | $2.14 | | Suns Tower | $41.34 | | Vision Lane | $0.88 | [Item 5. Operating and Financial Review and Prospects](index=55&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's analysis of the company's financial performance and condition, noting that for fiscal year 2024, revenues increased significantly to **$10.07 million**, driven by new business lines from the Riches Holdings acquisition, however, the net loss also widened substantially to **$13.41 million**, largely due to a non-cash loss on convertible notes and increased operating expenses, with the company's liquidity primarily sourced from operations and financing activities, holding **$5.17 million** in cash at year-end [A. Operating Results](index=55&type=section&id=A.%20Operating%20results) This section analyzes the company's financial performance, detailing revenue drivers, cost structures, and the primary factors contributing to the net loss for the fiscal year Financial Performance Comparison: 2024 vs. 2023 (In thousands of U.S. dollars) | Metric | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | $10,073 | $3,569 | +182.2% | | **Cost of Revenues** | $8,132 | $2,793 | +191.2% | | **Gross Profit** | $1,941 | $776 | +150.1% | | **General & Admin Expenses** | $3,956 | $2,754 | +43.6% | | **Net Loss** | $13,413 | $1,719 | +680.3% | - The **182.2% increase in revenue in 2024** was primarily driven by the acquisition of Riches Holdings, which contributed **$4.48 million** from consultancy services for insurance products and **$0.36 million** from advisory and referral services[346](index=346&type=chunk) - The significant increase in net loss in 2024 was mainly due to a **$7.69 million non-cash loss** on the change in fair value of convertible notes related to the Riches Holdings acquisition, and a **$3.47 million impairment loss** on loan and interest receivables[354](index=354&type=chunk)[352](index=352&type=chunk)[357](index=357&type=chunk) Revenue by Major Product Line: 2024 vs. 2023 (In thousands of U.S. dollars) | Product Line | 2024 | 2023 | | :--- | :--- | :--- | | Interest on loans | $3,308 | $2,313 | | Property lease and management | $1,780 | $1,069 | | Applications, technology & services | $151 | $187 | | Consultancy services for insurance products | $4,478 | $— | | Advisory and referral services | $356 | $— | | **Total** | **$10,073** | **$3,569** | [B. Liquidity and Capital Resources](index=68&type=section&id=B.%20Liquidity%20and%20capital%20resources) This section assesses the company's cash position, working capital, and cash flow movements from operating, investing, and financing activities - As of December 31, 2024, the company held **$5.17 million** in cash and cash equivalents and had a working capital of **$13.64 million**[373](index=373&type=chunk) Summary of Cash Flows (In thousands of U.S. dollars) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Net cash from (used in) operating activities** | 1,955 | (6,538) | (368) | | **Net cash from (used in) investing activities** | 492 | 4,779 | (156) | | **Net cash from (used in) financing activities** | (384) | 1,923 | — | - Net cash from operating activities was positive in 2024 at **$1.96 million**, a significant improvement from a **$6.54 million** use of cash in 2023, primarily due to large non-cash expenses (like the loss on convertible notes) and a decrease in loan receivables[377](index=377&type=chunk) [F. Tabular Disclosure of Contractual Obligations](index=72&type=section&id=F.%20Tabular%20disclosure%20of%20contractual%20obligations) This section presents a summary of the company's contractual obligations, detailing amounts due to shareholders and advances from unrelated parties Contractual Obligations as of December 31, 2024 (In thousands of U.S. dollars) | Obligation | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Amount due to a shareholder | $1,538 | $1,538 | $— | $— | $— | | Advances from unrelated parties | $547 | $547 | $— | $— | $— | | **Total** | **$2,085** | **$2,085** | **$—** | **$—** | **$—** | [Item 6. Directors, Senior Management and Employees](index=72&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section provides details on the company's leadership, board structure, compensation practices, and employee base, including biographical information for key executives and directors, outlining the 2016 Omnibus Equity Plan, and presenting share ownership data for major shareholders and insiders [A. Directors and Senior Management](index=72&type=section&id=A.%20Directors%20and%20senior%20management) This section provides an overview of the company's key management personnel and directors Key Management Personnel | Name | Position | | :--- | :--- | | Damian Thurnheer | Chief Executive Officer and President | | Tommy Wing Ling Lui | Chief Technology Officer | | Chung Hang Lui | Chief Financial Officer | | Tony Zhong | Vice President of Finance | | Rui Wu | Director | [B. Compensation](index=74&type=section&id=B.%20Compensation) This section details the aggregate cash compensation paid to executive officers and outlines the company's equity incentive plan - The aggregate cash compensation paid to executive officers for the year ended December 31, 2024, was approximately **$0.23 million**[410](index=410&type=chunk) - The company has a 2016 Omnibus Equity Plan, which provides for up to **2,500,000 ordinary shares** to be issued as awards to attract, motivate, and retain employees and other eligible persons[414](index=414&type=chunk)[415](index=415&type=chunk) [E. Share Ownership](index=79&type=section&id=E.%20Share%20Ownership) This section presents the ownership percentages of the company's major shareholders Major Shareholders (as of April 23, 2025) | Shareholder | Ownership (%) | | :--- | :--- | | Prime Ocean Holdings Limited | 25.8% | | Leung Iris Chi Yu | 20.6% | | LIANTENG LIMITED | 9.7% | [Item 7. Major Shareholders and Related Party Transactions](index=80&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details transactions with related parties, with key transactions in 2024 including providing insurance referral services to a company owned by a director and receiving a loan from a major shareholder [B. Related Party Transactions](index=80&type=section&id=B.%20Related%20Party%20Transactions) This section details significant transactions with related parties, including revenue from services provided to a director-owned entity and loans from a major shareholder - For the year ended December 31, 2024, the company recognized **$3.05 million** in revenue from insurance referral services provided to Riches Credit Insurance Brokerage Limited, a company principally owned by director Rui Wu[447](index=447&type=chunk)[391](index=391&type=chunk) - A major shareholder, Ms. Kwok Kai Kai Clara, provided loans to the company, with the outstanding amount due to her being **$1.54 million** as of December 31, 2024[446](index=446&type=chunk)[389](index=389&type=chunk) [Item 8. Financial Information](index=81&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section notes that the full consolidated financial statements are provided elsewhere in the report and discloses a significant ongoing lawsuit in Hong Kong (HCA 938 of 2022) against the company and several subsidiaries, for which a judgment is pending [A. Consolidated Statements and Other Financial Information](index=81&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) This section confirms the inclusion of consolidated financial statements and discloses details of a significant ongoing civil lawsuit in Hong Kong - The company and certain subsidiaries are defendants in a civil lawsuit in Hong Kong (HCA 938 of 2022) involving allegations of unlawful means of conspiracy, with the trial concluding in August 2024 and a judgment pending, and the company believes the lawsuit is without merit and is unable to estimate a range of potential loss[453](index=453&type=chunk)[454](index=454&type=chunk)[457](index=457&type=chunk) - The company does not anticipate paying any cash dividends in the foreseeable future, intending to retain future earnings to finance business expansion[458](index=458&type=chunk) [Item 11. Quantitative and Qualitative Disclosure About Market Risk](index=92&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company's primary market risk is credit risk associated with its money lending business in Hong Kong, also facing concentration risks related to customers and geography, managing credit risk through approval procedures and collateral requirements, while foreign currency risk is considered not significant due to the HKD-USD peg and immaterial transactions in other currencies [Concentration of Credit Risk](index=92&type=section&id=Concentration%20of%20Credit%20Risk) This section discusses the company's primary credit risk from money lending activities, including provisions for loan losses and customer concentration - The company's most significant risk is credit risk from its money lending activities, which are geographically concentrated in Hong Kong[522](index=522&type=chunk)[524](index=524&type=chunk) Movement of Provision for Loan Losses (In thousands of U.S. dollars) | | 2024 | 2023 | | :--- | :--- | :--- | | **Balance as of January 1** | $2,023 | $2,072 | | **Provisions for doubtful accounts** | $3,515 | $287 | | **Recoveries of amounts previously charged off** | ($47) | ($336) | | **Balance as of December 31** | $5,491 | $2,023 | - As of Dec 31, 2024, loan receivables from two customers accounted for **11% and 31%** of the total loan receivables[529](index=529&type=chunk) [Concentration of Customer and Geographic Area](index=93&type=section&id=Concentration%20of%20Customer%20and%20Geographic%20Area) This section highlights the company's revenue concentration by major customer and geographic region - For the year ended Dec 31, 2024, one major customer accounted for **30%** of the company's total revenues[531](index=531&type=chunk) Revenue by Geographic Area (In thousands of U.S. dollars) | Region | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Hong Kong | 10,047 | 3,442 | 3,595 | | Australia | — | 127 | 278 | | PRC | 26 | — | — | | **Total** | **10,073** | **3,569** | **3,873** | Part II [Item 15. Controls and Procedures](index=95&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures, as well as its internal control over financial reporting (ICFR), were effective as of December 31, 2024, following the successful remediation of several material weaknesses identified in prior years, particularly related to documentation, loan risk monitoring, and accounting personnel expertise, with the independent auditor also issuing an unqualified opinion on the effectiveness of the ICFR [Management's Annual Report on Internal Control Over Financial Reporting](index=95&type=section&id=Management's%20Annual%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) This section presents management's assessment of the effectiveness of the company's internal control over financial reporting - Management assessed the company's internal control over financial reporting and concluded that it was **effective** as of December 31, 2024, based on the COSO 2013 framework[546](index=546&type=chunk) [Changes in Internal Control Over Financial Reporting](index=95&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section details the remediation efforts undertaken by the company to address previously identified material weaknesses in internal control over financial reporting - In 2024, the company implemented remediation plans to address previously identified material weaknesses, with key improvements including[548](index=548&type=chunk) - Enhanced documentation for internal controls and their operating effectiveness[548](index=548&type=chunk)[550](index=550&type=chunk) - Established and implemented formal policies for loan credit risk monitoring and management of expired/overdue loans[551](index=551&type=chunk)[552](index=552&type=chunk) - Provided comprehensive U.S. GAAP training for key financial reporting personnel and established appropriate review functions[554](index=554&type=chunk) - Management concluded that as of December 31, 2024, the previously identified material weaknesses had been remedied[555](index=555&type=chunk) [Item 16. Other Information](index=97&type=section&id=ITEM%2016.%20Other%20Information) This section covers various corporate governance and compliance topics, disclosing fees paid to the principal accountant, detailing a change in the certifying accountant in March 2023, and describing the company's cybersecurity risk management processes, which are overseen by the full board [Item 16C. Principal Accountant Fees and Services](index=98&type=section&id=ITEM%2016C.%20Principal%20Accountant%20Fees%20and%20Services) This section discloses the fees paid to the company's principal accountant for audit and other services Principal Accountant Fees (In thousands of U.S. dollars) | | 2024 | 2023 | | :--- | :--- | :--- | | **Audit Fee** | $305 | $280 | | **Total** | **$305** | **$280** | [Item 16F. Changes in Registrant's Certifying Accountant](index=98&type=section&id=ITEM%2016F.%20Changes%20in%20Registrant's%20Certifying%20Accountant) This section details the change in the company's independent registered public accounting firm in March 2023 - On March 3, 2023, the company dismissed WWC, P.C. and appointed Audit Alliance LLP as its new independent registered public accounting firm[573](index=573&type=chunk)[576](index=576&type=chunk) [Item 16K. Cybersecurity](index=99&type=section&id=ITEM%2016K.%20Cybersecurity) This section outlines the company's processes for assessing and managing cybersecurity risks, including board oversight and the absence of material incidents - The company has processes to assess, identify, and manage material risks from cybersecurity threats, which are integrated into its overall risk management framework, and it engages third-party consultants to enhance its cybersecurity capabilities[583](index=583&type=chunk)[584](index=584&type=chunk) - The full board of directors oversees cybersecurity risks, and no cybersecurity incidents have materially affected the company for the year ended December 31, 2024[588](index=588&type=chunk)[585](index=585&type=chunk) Part III [Item 18. Financial Statements](index=100&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for the fiscal years 2022, 2023, and 2024, noting that the independent auditor, Audit Alliance LLP, issued an unqualified opinion on both the financial statements and the effectiveness of internal control over financial reporting, and identified two Critical Audit Matters: the allowance for expected credit losses (CECL) on various receivables and the impairment assessment of property, plant, and equipment [Report of Independent Registered Public Accounting Firm](index=106&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This section presents the independent auditor's unqualified opinions on the consolidated financial statements and internal control over financial reporting, along with identified Critical Audit Matters - The independent auditor, Audit Alliance LLP, issued an **unqualified opinion** on the consolidated financial statements for the three years ended December 31, 2024, stating they are presented fairly in conformity with U.S. GAAP[598](index=598&type=chunk) - The auditor also issued an **unqualified opinion** on the company's internal control over financial reporting as of December 31, 2024[599](index=599&type=chunk) - Two Critical Audit Matters (CAMs) were identified: 1. **Allowance for current expected credit losses (CECL):** Due to the subjective judgment and significant estimates involved in evaluating the CECL for loan receivables, accounts receivables, and other receivables[602](index=602&type=chunk)[603](index=603&type=chunk) 2. **Impairment of Property, Plant and Equipment:** Due to the complexity and judgment used by management in developing the fair value measurement for impairment testing[606](index=606&type=chunk) [Consolidated Financial Statements](index=109&type=section&id=Consolidated%20Financial%20Statements) This section lists the comprehensive set of consolidated financial statements and accompanying notes for the past three fiscal years - The consolidated financial statements include the Balance Sheets, Statements of Comprehensive Loss, Statements of Shareholders' Equity, Statements of Cash Flows, and the accompanying Notes to Consolidated Financial Statements for the years ended December 31, 2024, 2023, and 2022[610](index=610&type=chunk)[612](index=612&type=chunk)[614](index=614&type=chunk)

Core Insights - TROOPS, Inc. has received an initial investment exceeding US$10 million from Wang & Lee Group, which is expected to be completed by mid-April 2025, highlighting the rapid progression of their partnership aimed at integrating advanced technologies [1][2] - The collaboration focuses on creating smarter, greener communities, leveraging Wang & Lee's expertise to enhance urban living through sustainable and convenient technology solutions [2][3] - The investment strengthens TROOPS' liquidity position and aligns with its strategy to enhance asset value and tenant retention while addressing global ESG priorities [3] Technology Integration and Innovations - TROOPS plans to implement AI-driven advertising platforms for hyper-targeted advertising solutions to improve tenant engagement and revenue [5] - The company will install IoT smart home devices that are energy-efficient and enhance security in select properties [5] - A blockchain-based ESG rewards system will be developed to incentivize sustainable practices among tenants and visitors, with potential partnerships to expand token redemption opportunities [5] Strategic Roadmap - The partnership with Wang & Lee is expected to scale IoT and AI smart home systems across up to 200 buildings, enhancing operational efficiency [5] - The collaboration will leverage Wang & Lee's acquisition of Solar (HK) Limited to integrate renewable energy solutions into TROOPS' portfolio [5] - The strategic roadmap aims to address global ESG priorities while enhancing the overall value proposition for stakeholders [3]

Core Insights - Wang and Lee Group, Inc. announced a strategic investment in TROOPS, Inc. to integrate AI-driven advertising media, smart home devices, and blockchain-powered token rewards into TROOPS' infrastructure [1][2] - The partnership aims to deploy Wang and Lee's technologies across TROOPS' potential 200-building portfolio, enhancing user engagement through a token rewards ecosystem aligned with ESG principles [2][4] Synergies and Strategic Vision - The collaboration seeks to leverage TROOPS' real estate footprint to accelerate the adoption of smart technologies and create an interconnected ecosystem [3] - The CEO of Wang and Lee emphasized the transformative nature of this investment in building smarter, sustainable communities [3] Driving ESG Value and Market Growth - The partnership aligns with global ESG priorities by promoting energy-efficient technologies and empowering users through tokenized rewards [4] - Wang and Lee anticipates increased demand for its smart devices and advertising services as TROOPS' buildings evolve into innovation hubs [4] Transaction Details - The investment is subject to customary closing conditions, regulatory approvals, and final agreement terms, with further details to be disclosed upon finalization [5] Company Overview - Wang and Lee Group, Inc. is a Hong Kong-based construction prime and subcontractor specializing in Electrical & Mechanical Systems installation, offering design and contracting services across the construction industry [6]

Core Viewpoint - Wang and Lee Group, Inc. has announced a strategic investment in TROOPS, Inc. to integrate AI-driven advertising media, smart home devices, and blockchain-powered token rewards into TROOPS' infrastructure, aiming to create synergies and enhance user engagement [1][2][3] Investment Details - The investment will allow Wang and Lee to deploy its AI-driven digital advertising platforms and IoT-enabled smart home solutions across TROOPS' potential 200-building portfolio, reaching a vast number of tenants and visitors [2] - The partnership includes the introduction of an ESG-aligned token rewards ecosystem, where users can earn redeemable tokens for engaging with the technologies [2][8] Strategic Vision - The collaboration aims to leverage TROOPS' established real estate footprint to accelerate the adoption of smart technologies and create a seamless ecosystem [3] - The CEO of Wang and Lee emphasized that this investment is a transformative step towards building smarter, more sustainable communities [3] ESG and Market Growth - The partnership aligns with global ESG priorities by promoting energy-efficient technologies and financially empowering users through tokenized rewards [4] - Wang and Lee anticipates increased demand for its smart devices and advertising services as TROOPS' buildings become innovation hubs [4] Company Background - Wang and Lee Group, Inc. is a Hong Kong-based construction prime and subcontractor specializing in the installation of Electrical & Mechanical Systems, including low voltage electrical systems and mechanical ventilation [6]

Core Insights - TROOPS, Inc. is pursuing two strategic initiatives to enhance its growth in Asia, focusing on the Hong Kong real estate and insurance sectors [1][4] Group 1: Acquisition Initiatives - The company is conducting preliminary due diligence on a Hong Kong-based insurance brokerage, which would complement its existing financial services portfolio and enhance capabilities in the insurance market [2] - TROOPS is in advanced negotiations to acquire 100% of Bestfaith International Technology Limited, a building management firm servicing over 200 properties in Hong Kong, which aligns with its mission to provide integrated property management solutions [3] Group 2: Strategic Rationale - The acquisition of Bestfaith is expected to position TROOPS as a key player in Hong Kong's property management industry, while the potential insurance brokerage acquisition would diversify revenue streams and create cross-selling opportunities between property management and insurance services [4] Group 3: Company Overview - TROOPS, Inc. operates as a conglomerate in Hong Kong, engaged in money lending, property investment, and the development of an online financial marketplace leveraging technologies such as AI, big data, and blockchain [7]

[Preliminary Information](index=6&type=section&id=Preliminary%20Information) [Forward-Looking Statements](index=6&type=section&id=FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements subject to significant risks and uncertainties detailed elsewhere - The report contains forward-looking statements subject to risks and uncertainties, made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[9](index=9&type=chunk) - Key risks highlighted include **regulatory scrutiny, competition, technological changes, data security breaches, credit risks** in the lending business, and **economic downturns**[12](index=12&type=chunk)[13](index=13&type=chunk)[15](index=15&type=chunk) - Risks related to operating in Hong Kong and China include **potential government intervention, legal system uncertainties**, and changes in policy[19](index=19&type=chunk)[20](index=20&type=chunk) [Definitions](index=9&type=section&id=DEFINITIONS) This section defines key terms, abbreviations, entities, and reporting currencies used throughout the annual report - The company, **TROOPS, Inc.**, was previously named SGOCO Group, Ltd. and is a Cayman Islands incorporated entity[28](index=28&type=chunk) - Key operating subsidiaries include **Giant Financial Services Limited (GFS)**, **First Asia Finance Limited (FAF)**, and **Giant Credit Limited (GCL)**[27](index=27&type=chunk) - The reporting currency is the **U.S. Dollar**, while functional currencies include the **Hong Kong Dollar (HKD)**, **Chinese Renminbi (RMB)**, and **Australian Dollar (AUD)**[29](index=29&type=chunk) [PART I](index=12&type=section&id=PART%20I) [Item 1. Identity of Directors, Senior Management and Advisers](index=14&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) This section is marked as 'Not applicable' in the report [Item 2. Offer Statistics and Expected Timetable](index=15&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) This section is marked as 'Not applicable' in the report [Item 3. Key Information](index=15&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected financial data, a detailed breakdown of risk factors, and disclosures regarding the company's foreign private issuer status - The company operates as a holding company incorporated in the Cayman Islands, with substantial operations conducted through subsidiaries in Hong Kong and a non-operating subsidiary in Beijing, China[35](index=35&type=chunk) - There are significant risks associated with the **Holding Foreign Companies Accountable Act (HFCAA)**, which could lead to delisting if the PCAOB cannot inspect the company's auditor for two consecutive years[30](index=30&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - The company has **not utilized cash from one subsidiary to fund another since 2018** and has **never issued dividends** to the holding company[36](index=36&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) [A. Selected Financial Data](index=15&type=section&id=A.%20Selected%20Financial%20Data.) This subsection presents consolidated financial data for the last three fiscal years, highlighting key income statement and balance sheet figures Consolidated Statement of Income (In thousands of U.S. dollars) | Indicator | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Revenues** | 3,569 | 3,875 | 3,683 | | **Gross Profit** | 776 | 822 | 360 | | **Operating Loss** | (1,802) | (536) | (8,805) | | **Net Loss** | (1,719) | (346) | (8,413) | | **Basic and Diluted Loss Per Share** | (0.02) | (0.01) | (0.08) | Consolidated Balance Sheet Data (In thousands of U.S. dollars) | Indicator | As of Dec 31, 2023 | As of Dec 31, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | :--- | | **Total Assets** | 70,345 | 69,686 | 70,346 | | **Total Liabilities** | 9,766 | 7,482 | 7,822 | | **Total Equity** | 60,579 | 62,204 | 62,524 | [D. Risk Factors](index=16&type=section&id=D.%20Risk%20Factors.) This subsection details numerous business, jurisdictional, and share-related risks, including competition, regulation, and potential NASDAQ delisting - **Business Risks:** The company faces **intense competition**, risks of **significant fines** for non-compliance with anti-money laundering and data privacy laws, and **greater credit risks** in its lending business[53](index=53&type=chunk)[63](index=63&type=chunk)[81](index=81&type=chunk) - **Jurisdictional Risks:** Operations are subject to the economic and political policies of China and Hong Kong, with risks of **government intervention** and **legal system uncertainties**[118](index=118&type=chunk)[122](index=122&type=chunk)[126](index=126&type=chunk) - **Share-Related Risks:** The company may fail to meet **NASDAQ's continued listing requirements**, is exempt from certain U.S. reporting rules, and risks being classified as a **Passive Foreign Investment Company (PFIC)**[149](index=149&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - The company has identified several **material weaknesses in its internal control over financial reporting**, including inadequate documentation and a lack of qualified accounting personnel[98](index=98&type=chunk)[99](index=99&type=chunk) [Item 4. Information on the Company](index=39&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's history, business operations, organizational structure, and property holdings [A. History and Development of the Company](index=39&type=section&id=A.%20History%20and%20Development%20of%20the%20Company.) This subsection outlines the company's corporate evolution from a blank check company to its current conglomerate structure through various acquisitions and disposals - The company was incorporated as a blank check company and completed its initial business combination by acquiring Honesty Group in March 2010[183](index=183&type=chunk)[185](index=185&type=chunk) - The company shifted its business model through strategic sales, including the disposal of its manufacturing arm Honesty Group in 2011 and SGOCO (Fujian) in 2014[195](index=195&type=chunk)[199](index=199&type=chunk) - Key current business segments were established through acquisitions: **Giant Credit Limited (2017)** for money lending, **Paris Sky Limited (2018)** for property investment, and **Giant Financial Services Limited (GFS) (2020)** for fintech services[210](index=210&type=chunk)[212](index=212&type=chunk)[215](index=215&type=chunk) [B. Business Overview](index=45&type=section&id=B.%20Business%20overview.) The company operates as a Hong Kong-based conglomerate with three principal business segments: money lending, property investment, and fintech services - The company is a conglomerate group with three main business lines: **money lending, property investment, and fintech services**[218](index=218&type=chunk) - **Money Lending:** Operates through licensed entities Giant Credit Limited and First Asia Finance Limited in Hong Kong, providing personal and corporate loans[219](index=219&type=chunk)[220](index=220&type=chunk) - **Property Investment:** Generates rental income from four real properties and a 19-storey building in Hong Kong[221](index=221&type=chunk) - **Fintech & IT:** Provides an online financial marketplace via its subsidiary GFS, leveraging AI, big data, and blockchain, and offers API consulting through Apiguru[221](index=221&type=chunk)[224](index=224&type=chunk) [D. Organizational Structure](index=48&type=section&id=D.%20Organizational%20structure.) This subsection presents a diagram illustrating the company's corporate structure, reflecting its conglomerate business model - The report includes a diagram that outlines the corporate hierarchy, with **TROOPS, Inc. (Cayman Islands)** as the ultimate parent of subsidiaries in multiple jurisdictions[231](index=231&type=chunk)[232](index=232&type=chunk) [E. Property, Plant and Equipment](index=49&type=section&id=E.%20Property%2C%20plant%20and%20equipment.) This subsection provides the carrying values of property, plant, and equipment for its main operating subsidiaries in Hong Kong Carrying Value of PP&E by Subsidiary (as of Dec 31, 2023) | Subsidiary | Carrying Value (in millions of U.S. Dollars) | | :--- | :--- | | Suns Tower | $42.92 | | 11 Hau Fook Street | $2.32 | | Vision Lane | $0.96 | | Giant Credit | $0.56 | [Item 5. Operating and Financial Review and Prospects](index=50&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's analysis of financial condition and results of operations, liquidity, capital resources, and critical accounting policies [A. Operating Results](index=50&type=section&id=A.%20Operating%20results.) This subsection provides a detailed comparison of operating results for fiscal years 2023 vs 2022 and 2022 vs 2021 Revenue by Segment (In thousands of U.S. dollars) | Product Line | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Interest on loans | 2,313 | 2,451 | 1,673 | | Property lease and management | 1,069 | 1,106 | 1,068 | | Financial technology solutions and services | 187 | 318 | 942 | | **Total** | **3,569** | **3,875** | **3,683** | - **Net loss increased to $1.72 million in 2023** from $0.35 million in 2022, mainly due to an **8.0% decrease in revenue** and a **25.6% increase in general and administrative expenses**[301](index=301&type=chunk)[304](index=304&type=chunk)[308](index=308&type=chunk) - **Net loss significantly decreased to $0.35 million in 2022** from $8.41 million in 2021, primarily due to a **$4.74 million goodwill impairment in 2021** that did not recur[308](index=308&type=chunk)[313](index=313&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) [B. Liquidity and Capital Resources](index=65&type=section&id=B.%20Liquidity%20and%20capital%20resources.) This subsection analyzes the company's cash position, working capital, and cash flows from operating, investing, and financing activities Summary of Cash Flows (In thousands of U.S. dollars) | Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | (6,538) | (368) | 12,291 | | Net cash from investing activities | 4,779 | (156) | (5,594) | | Net cash from financing activities | 1,923 | — | (6,241) | | **Increase (Decrease) in Cash** | **163** | **(530)** | **452** | - As of December 31, 2023, the company had **$3.11 million in cash and cash equivalents** and **working capital of $5.95 million**[317](index=317&type=chunk) - In 2023, financing activities included a **$1.92 million loan from a shareholder**, Ms Kwok Kai Kai Clara[327](index=327&type=chunk)[330](index=330&type=chunk) [F. Tabular Disclosure of Contractual Obligations](index=68&type=section&id=F.%20Tabular%20disclosure%20of%20contractual%20obligations.) This subsection provides a table detailing the company's contractual obligations, all of which are due in less than one year Contractual Obligations as of December 31, 2023 (In thousands of U.S. dollars) | Obligation | Total | Due in Less than 1 Year | | :--- | :--- | :--- | | Amount due to a shareholder | 1,923 | 1,923 | | Advances from unrelated parties | 538 | 538 | | **Total** | **2,461** | **2,461** | [Item 6. Directors, Senior Management and Employees](index=68&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section provides information on the company's leadership, board structure, compensation practices, and employee base [A. Directors and Senior Management](index=68&type=section&id=A.%20Directors%20and%20senior%20management.) This subsection lists the company's directors and executive officers, providing their age, position, and a brief biography - **Raleigh Siu Lau** serves as the Chief Executive Officer and President[337](index=337&type=chunk) - **Chung Hang Lui** serves as the Chief Financial Officer[337](index=337&type=chunk)[339](index=339&type=chunk) - The Board of Directors consists of five members, **three of whom are independent directors**[337](index=337&type=chunk)[360](index=360&type=chunk) [B. Compensation](index=70&type=section&id=B.%20Compensation.) This subsection details the compensation philosophy and structure for executives, including base salary, bonuses, and equity incentives - **Aggregate cash compensation** paid to executive officers was approximately **$0.23 million** for the year ended December 31, 2023[347](index=347&type=chunk) - The company has a **2016 Omnibus Equity Plan** which allows for the granting of up to **2,500,000 ordinary shares** as equity compensation[350](index=350&type=chunk) [C. Board Practices](index=73&type=section&id=C.%20Board%20Practices.) This subsection describes the board's composition, committees, director duties, and the adoption of a new clawback policy - The board has five directors, **three of whom are independent**: Mr. Wood Shing Kei Sze, Mr. Jason Che Wai Au, and Mr. Wang Tai Dominic Li[360](index=360&type=chunk) - The company has three board committees: **Audit, Compensation, and Nominating**, with defined memberships and responsibilities[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) - A **clawback policy was adopted on November 17, 2023**, allowing the company to recoup incentive compensation following an accounting restatement[372](index=372&type=chunk) [D. Employees](index=76&type=section&id=D.%20Employees.) This subsection provides information on the company's workforce size and labor relations - The company had **19 full-time employees** as of December 31, 2023[373](index=373&type=chunk) [E. Share Ownership](index=76&type=section&id=E.%20Share%20Ownership.) This subsection provides a table detailing the beneficial ownership of the company's ordinary shares for major shareholders and management Beneficial Share Ownership (as of April 22, 2024) | Shareholder | Shares Beneficially Owned | Percentage | | :--- | :--- | :--- | | Prime Ocean Holdings Limited (1) | 29,000,000 | 28.5% | | Leung Iris Chi Yu | 23,132,500 | 22.8% | | All directors and executive officers as a group (8 persons) | 559,581 | * | <small>(1) Beneficially owned by Ms Kwok Kai Kai Clara.</small> <small>* Indicates less than 1%</small> [Item 7. Major Shareholders and Related Party Transactions](index=77&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section discloses a key related party transaction involving a loan from a major shareholder - On December 8, 2023, a major shareholder, **Ms Kwok Kai Kai Clara, loaned $1.92 million** to the company's subsidiary Giant Credit Limited[377](index=377&type=chunk) [Item 8. Financial Information](index=77&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section discloses an ongoing material legal proceeding and the company's dividend policy - The company and several subsidiaries are defendants in a lawsuit in Hong Kong involving allegations of **unlawful conspiracy**, with restrictions on the disposal of certain key assets remaining in place[379](index=379&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - The company **does not anticipate paying any cash dividends** in the foreseeable future, intending to retain earnings to finance business expansion[383](index=383&type=chunk) [Item 10. Additional Information](index=79&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers corporate information, exchange controls, and a detailed overview of taxation in various jurisdictions, including U.S. PFIC rules - **Cayman Islands Taxation:** **No corporate or individual taxes** on profits, income, or gains are levied, and no exchange control regulations exist[389](index=389&type=chunk) - **Hong Kong Taxation:** No tax on dividends or capital gains; trading gains may be subject to **profits tax (16.5% for corporations)**[392](index=392&type=chunk)[393](index=393&type=chunk) - **U.S. Federal Income Taxation:** The report provides a detailed summary for U.S. Holders, including the risk that the company could be classified as a **Passive Foreign Investment Company (PFIC)**[394](index=394&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk) [Item 11. Quantitative and Qualitative Disclosure About Market Risk](index=87&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) This section details the company's exposure to market risks, primarily credit risk from its money lending activities and customer concentration risk - The company's primary market risk is **credit risk** associated with its loan portfolio, which is geographically concentrated in Hong Kong[431](index=431&type=chunk)[433](index=433&type=chunk) - For FY 2023, there was a significant **customer concentration**, with two major customers accounting for **23% and 11% of total revenues**[439](index=439&type=chunk) - The company recognized a **reversal of provision for loan losses of $0.05 million in 2023**, compared to a reversal of $0.97 million in 2022[434](index=434&type=chunk) - As of December 31, 2023, the company held **$0.42 million in cash at a bank in Vanuatu**, which does not have a deposit protection scheme[443](index=443&type=chunk) [PART II](index=90&type=section&id=PART%20II) [Item 15. Controls and Procedures](index=90&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were not effective due to several material weaknesses in internal control over financial reporting - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2023[447](index=447&type=chunk) - **Material weaknesses** identified include: inadequate documentation on internal controls, insufficient controls for loan credit risk monitoring, and a **lack of sufficient qualified accounting personnel** with U.S. GAAP/SEC expertise[449](index=449&type=chunk)[450](index=450&type=chunk) - The independent registered public accounting firm, Audit Alliance LLP, issued an **adverse opinion** on the company's internal control over financial reporting[456](index=456&type=chunk) - Remediation plans include **hiring additional accounting staff**, providing more training, and implementing better control procedures[451](index=451&type=chunk)[452](index=452&type=chunk) [Item 16C. Principal Accountant Fees and Services](index=94&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section discloses the fees paid to the principal external independent registered public accountant for professional services Accountant Fees (In thousands of U.S. dollars) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fee | 280 | 244 | | Audit-Related Fees | — | — | | Tax fees | — | — | | **Total** | **280** | **244** | [Item 16F. Changes in Registrant's Certifying Accountant](index=94&type=section&id=ITEM%2016F.%20CHANGES%20IN%20REGISTRANT'S%20CERTIFYING%20ACCOUNTANT) This section details recent changes in the company's independent registered public accounting firm - On September 7, 2022, the company dismissed Yu Certified Public Accountant, P.C. and appointed WWC, P.C.[467](index=467&type=chunk)[470](index=470&type=chunk) - On March 3, 2023, the company dismissed WWC, P.C. and appointed **Audit Alliance LLP** as its new independent registered public accounting firm[471](index=471&type=chunk)[472](index=472&type=chunk) [PART III](index=96&type=section&id=PART%20III) [Item 18. Financial Statements](index=96&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the company's audited consolidated financial statements and the independent auditor's report Consolidated Balance Sheet (In thousands of U.S. Dollars) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | 10,670 | 11,539 | | **Total Non-Current Assets** | 59,675 | 58,147 | | **Total Assets** | **70,345** | **69,686** | | **Total Current Liabilities** | 4,723 | 2,185 | | **Total Non-Current Liabilities** | 5,043 | 5,297 | | **Total Liabilities** | **9,766** | **7,482** | | **Total Shareholders' Equity** | **60,579** | **62,204** | Consolidated Statements of Comprehensive Income (Loss) (In thousands of U.S. Dollars) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Revenues** | 3,569 | 3,875 | 3,683 | | **Gross Profit (Loss)** | 776 | 822 | 360 | | **Operating Loss** | (1,802) | (536) | (8,805) | | **Net Loss** | (1,719) | (346) | (8,413) | | **Comprehensive Loss** | (1,719) | (351) | (8,400) | [Note 4 - Loans Receivable, Net](index=123&type=section&id=Note%204-%20Loans%20receivable%2C%20net) This note details the composition of the company's loan portfolio, which is diversified across personal and corporate loans primarily in Hong Kong Loans Receivable, Gross (In thousands of U.S. dollars) | Loan Type | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Personal loans | 7,099 | 7,622 | | Corporate loans | 14,603 | 7,000 | | **Subtotal** | **21,702** | **14,622** | | Provision for loan losses | (2,023) | (2,072) | | **Total loans receivable, net** | **19,679** | **12,550** | - The annualized interest rates on loans ranged from **6% to 48%** in 2023[598](index=598&type=chunk) [Note 9 - Goodwill](index=134&type=section&id=Note%209%20%E2%80%93%20Goodwill) This note explains the status of the company's goodwill, including a significant impairment loss recorded in 2021 Goodwill Movement (In thousands of U.S. dollars) | | Amount | | :--- | :--- | | Balance as of Jan 1, 2021 | 5,107 | | Impairment of goodwill (2021) | (4,740) | | Balance as of Dec 31, 2021 | 385 | | Impairment of goodwill (2022) | — | | Balance as of Dec 31, 2022 | 385 | | Impairment of goodwill (2023) | — | | **Balance as of Dec 31, 2023** | **385** | - A **goodwill impairment loss of $4.74 million** was recorded in 2021 for the financial technology solutions and services reporting unit[662](index=662&type=chunk) [Note 17 - Segment Information](index=139&type=section&id=Note%2017%20%E2%80%93%20Segment%20information) This note provides a breakdown of the company's financial performance by its primary operating segments Segment Performance for Year Ended Dec 31, 2023 (In thousands of U.S. dollars) | Segment | Revenues | Operating Income/(Loss) | Total Assets | | :--- | :--- | :--- | :--- | | Money lending services | 2,313 | 624 | 22,157 | | Property lease and management | 1,069 | (1,536) | 46,953 | | Financial technology solutions and services | 187 | (36) | 583 | | Corporate unallocated | — | (854) | 652 | | **Consolidated** | **3,569** | **(1,802)** | **70,345** |

PART I [Key Information](index=15&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected financial data for 2020-2022, highlighting a significant net loss reduction in 2022, and outlines comprehensive business and share-related risks [Selected Financial Data](index=15&type=section&id=A.%20Selected%20Financial%20Data.) Net loss significantly decreased to **$0.35 million** in 2022, primarily due to reduced goodwill impairment, while revenues slightly increased to **$3.88 million** Consolidated Statement of Income (In thousands of U.S. Dollars) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **REVENUES** | 3,875 | 3,683 | 4,293 | | **GROSS PROFIT (LOSS)** | 822 | 360 | (1,066) | | **OPERATING LOSS** | (536) | (8,805) | (67,342) | | **NET LOSS** | (346) | (8,413) | (67,918) | | **Basic and Diluted Loss per share** | (0.01) | (0.08) | (0.69) | Consolidated Balance Sheet Data (In thousands of U.S. Dollars) | | As of Dec 31, 2022 | As of Dec 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | :--- | | **Total assets** | 69,686 | 70,346 | 90,130 | | **Total liabilities** | 7,482 | 7,822 | 19,503 | | **Total equity** | 62,204 | 62,524 | 70,627 | [Risk Factors](index=17&type=section&id=D.%20Risk%20Factors.) The company faces significant business, operational, and share-related risks, including intense competition, regulatory scrutiny, and potential delisting - The company's financial services arm, GFS, is subject to increasing regulatory scrutiny regarding privacy and data protection, particularly under the PRC Data Security Law, which could lead to significant fines or operational changes[53](index=53&type=chunk)[56](index=56&type=chunk) - The money lending subsidiaries (FAF and Giant Credit) face significant credit risks from borrowers, intense competition in the Hong Kong market, and are subject to the Money Lenders Ordinance, which caps interest rates[76](index=76&type=chunk)[79](index=79&type=chunk)[83](index=83&type=chunk) - The company identified several material weaknesses in its internal control over financial reporting as of December 31, 2021, including insufficient controls in loan risk assessment and a lack of qualified accounting personnel with U.S. GAAP and SEC reporting experience[93](index=93&type=chunk)[94](index=94&type=chunk) - The company is exposed to risks related to the Holding Foreign Companies Accountable Act (HFCAA); while its current auditor is PCAOB-inspected, its predecessor was not, and recent legislation has reduced the non-inspection period for delisting from three to two years, increasing the risk to investors[105](index=105&type=chunk)[110](index=110&type=chunk) - The PRC government may intervene in business operations or exert more control over overseas listings; if future approval from authorities like the CSRC or CAC is needed and denied, the company may be unable to continue listing on U.S. exchanges[122](index=122&type=chunk)[130](index=130&type=chunk) [Information on the Company](index=39&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) TROOPS, Inc. is a Hong Kong-based conglomerate with a history of strategic acquisitions, operating in money lending, property investment, and fintech services [History and Development of the Company](index=39&type=section&id=A.%20History%20and%20Development%20of%20the%20Company.) TROOPS, Inc. originated as a blank check company in 2007, evolving through strategic acquisitions and disposals to focus on money lending, property investment, and fintech - The company was incorporated in 2007 as a blank check company and acquired Honesty Group in 2010[180](index=180&type=chunk) - The company transitioned to a "light-asset" model by selling its manufacturing arm, Honesty Group, in 2011 and SGOCO (Fujian) in 2014[192](index=192&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) - From 2017 to 2020, the company built its current portfolio by acquiring several businesses in money lending (Giant Credit, First Asia Finance), property investment (11 Hau Fook Street, Paris Sky, Vision Lane), and fintech (Giant Financial Services, Apiguru)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk)[213](index=213&type=chunk) [Business Overview](index=45&type=section&id=B.%20Business%20overview.) TROOPS, Inc. operates three main segments: money lending, property investment, and fintech/IT services, leveraging technology for an online financial marketplace - The company's business is divided into three main segments: money lending, property investment, and fintech/IT services[215](index=215&type=chunk) - The money lending business is conducted through licensed Hong Kong subsidiaries, Giant Credit Limited and First Asia Finance Limited[216](index=216&type=chunk)[217](index=217&type=chunk) - The fintech arm, Giant Financial Services (GFS), provides an online financial marketplace leveraging technologies like AI, big data, and blockchain[218](index=218&type=chunk)[219](index=219&type=chunk) [Organizational Structure](index=48&type=section&id=D.%20Organizational%20structure.) TROOPS, Inc., a Cayman Islands parent, operates through wholly-owned subsidiaries in Hong Kong, including SGOCO International, Giant Financial Services, and Giant Connection Limited - The company's corporate structure consists of the parent, TROOPS, Inc. (Cayman Islands), with multiple layers of wholly-owned subsidiaries primarily based in Hong Kong, Seychelles, Samoa, and the Marshall Islands[228](index=228&type=chunk) [Property, Plant and Equipment](index=48&type=section&id=E.%20Property,%20plant%20and%20equipment.) As of December 31, 2022, the company holds significant property, plant, and equipment assets in Hong Kong through its subsidiaries, with total carrying value primarily concentrated in Suns Tower Limited Carrying Value of Property, Plant and Equipment by Subsidiary (as of Dec 31, 2022) | Subsidiary | Carrying Value (in millions of U.S. Dollars) | | :--- | :--- | | Suns Tower | $44.58 | | 11 Hau Fook Street Limited | $2.51 | | Vision Lane | $1.03 | | Giant Credit | $0.52 | [Operating and Financial Review and Prospects](index=49&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial performance, highlighting increased 2022 revenue, reduced net loss, and liquidity, alongside critical accounting policies [Operating Results](index=49&type=section&id=A.%20Operating%20results.) For FY2022, revenue increased to **$3.88 million**, gross profit improved, and net loss significantly reduced to **$0.35 million** due to lower impairment charges Revenue by Major Product Line (In millions of U.S. Dollars) | Product Line | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Interest on loans | $2.45 | $1.67 | +46.7% | | Property lease and management | $1.11 | $1.07 | +3.7% | | Financial technology solutions and services | $0.32 | $0.94 | -66.0% | | **Total Revenue** | **$3.88** | **$3.68** | **+5.4%** | - General and administrative expenses decreased by **20.1%** to **$2.19 million** in 2022, mainly because no share-based compensation or system development fees were incurred, unlike in 2021[302](index=302&type=chunk) - The company recorded a reversal of provision for loan losses of **$0.97 million** in 2022, compared to a provision of **$1.39 million** in 2021[303](index=303&type=chunk)[428](index=428&type=chunk) - There were no impairment losses on goodwill or intangible assets in 2022, compared to a combined **$4.94 million** in such charges in 2021, which was a primary driver for the reduced net loss[305](index=305&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=B.%20Liquidity%20and%20capital%20resources.) As of December 31, 2022, the company held **$2.95 million** in cash and **$9.35 million** in working capital, with liquidity primarily from operations, expecting sufficiency for the next 12 months - As of December 31, 2022, the company held **$2.95 million** in cash and cash equivalents and had working capital of **$9.35 million**[315](index=315&type=chunk) Summary of Cash Flows (In millions of U.S. Dollars) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Operating Activities** | (0.37) | 12.29 | 21.64 | | **Investing Activities** | (0.16) | (5.59) | (27.17) | | **Financing Activities** | 0.00 | (6.24) | 3.43 | - The company believes its current cash and available funds will be sufficient to meet its cash needs for at least the next 12 months[325](index=325&type=chunk) [Contractual Obligations](index=67&type=section&id=F.%20Tabular%20disclosure%20of%20contractual%20obligations.) As of December 31, 2022, the company's contractual obligations totaled approximately **$0.41 million**, all due in less than one year, primarily from advances and convertible note interest Contractual Obligations as of December 31, 2022 | Obligation | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Advances from unrelated parties | $409,414 | $409,414 | $— | $— | $— | | Convertible notes – future interest payment | $4,582 | $4,582 | $— | $— | $— | | **Total** | **$413,996** | **$413,996** | **$—** | **$—** | **$—** | [Directors, Senior Management and Employees](index=67&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, and governance, including executive team, board structure, employee count, and concentrated share ownership [Directors and Senior Management](index=67&type=section&id=A.%20Directors%20and%20senior%20management.) The company's leadership team includes Raleigh Siu Lau as CEO, Chung Hang Lui as CFO, and Tommy Wing Ling Lui as CTO, with a board of five directors, three of whom are independent - Key executive officers include Raleigh Siu Lau (CEO), Chung Hang Lui (CFO), and Tommy Wing Ling Lui (CTO)[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk) [Compensation](index=69&type=section&id=B.%20Compensation.) Executive compensation for FY2022 totaled approximately **$0.27 million**, with the company's 2016 Omnibus Equity Plan authorizing up to **2,500,000 ordinary shares** for equity awards - Aggregate cash compensation for executive officers was approximately **$0.27 million** for the fiscal year 2022[344](index=344&type=chunk) - The company has a 2016 Omnibus Equity Plan authorizing up to **2,500,000 ordinary shares** for equity compensation awards to employees, directors, and consultants[347](index=347&type=chunk) [Board Practices](index=71&type=section&id=C.%20Board%20Practices.) The Board of Directors consists of **five members**, three of whom are independent, and has established Audit, Compensation, and Nominating Committees with defined responsibilities - The board has **five directors**, three of whom are independent[355](index=355&type=chunk) - The company has established an Audit Committee, a Compensation Committee, and a Nominating Committee with defined responsibilities and membership[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) [Employees](index=73&type=section&id=D.%20Employees.) As of December 31, 2022, TROOPS, Inc. had **19 full-time employees**, all management and administrative staff, maintaining a good working relationship without union representation - The company had **19 full-time employees** as of December 31, 2022[367](index=367&type=chunk) [Share Ownership](index=74&type=section&id=E.%20Share%20Ownership.) As of April 28, 2023, the company had **101,597,998 ordinary shares** outstanding, with directors and executive officers owning **2.1%** and Prime Ocean Holdings Limited holding **28.7%** Beneficial Share Ownership (as of April 28, 2023) | Shareholder | Number of Shares | Percentage | | :--- | :--- | :--- | | All directors and executive officers as a group (8 persons) | 2,129,581 | 2.1% | | Prime Ocean Holdings Limited | 29,000,000 | 28.7% | [Financial Information](index=75&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section refers to the full consolidated financial statements in Item 18, discloses two material legal proceedings in Hong Kong (one discontinued), and states no cash dividends are anticipated - The company and its subsidiaries are defendants in a lawsuit in Hong Kong (HCA 938 of 2022) involving allegations of unlawful means conspiracy, with injunctions placed on their Hong Kong assets; the company believes the lawsuit is without merit and is defending the case vigorously[374](index=374&type=chunk)[375](index=375&type=chunk) - A separate lawsuit (HCA 1520 of 2021) against subsidiaries 11 Hau Fook Street Limited and Vision Lane Limited was wholly discontinued by the plaintiff in October 2022[376](index=376&type=chunk) - The company does not expect to pay cash dividends in the foreseeable future, planning to retain earnings for business expansion[377](index=377&type=chunk) [Additional Information](index=76&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers corporate and regulatory matters, including Cayman Islands exchange controls, tax regimes, and U.S. federal income tax implications, notably PFIC risk - The company is incorporated in the Cayman Islands, which currently levies **no taxes** on profits, income, gains, or appreciation[383](index=383&type=chunk) - The company's Hong Kong subsidiaries are subject to a **16.5% profits tax**, while PRC subsidiaries are subject to a **25% tax rate**; dividends from PRC entities to foreign parents may be subject to a **10% withholding tax** (or **5%** for Hong Kong resident enterprises under the tax arrangement)[384](index=384&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk) - There is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. investors; the company believes it was not a PFIC for 2022 but notes the determination is not certain[161](index=161&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=85&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company's primary market risk is credit concentration in its money lending business, managed via collateral and provisions, alongside significant customer and geographic concentration - The company's main risk is credit risk from its lending activities, primarily concentrated in Hong Kong; this is managed via collateral and loan loss provisions[425](index=425&type=chunk)[713](index=713&type=chunk) - In 2022, the company recognized a **reversal of provision for loan losses of $0.97 million**, compared to a provision of **$1.39 million** in 2021[428](index=428&type=chunk)[716](index=716&type=chunk) - Significant customer concentration exists, with two customers representing **18%** and **13%** of total revenues in 2022; four loan customers accounted for **68%** of the total loan receivable balance[431](index=431&type=chunk)[433](index=433&type=chunk) - The majority of the company's cash is held in Hong Kong banks covered by the Deposit Protection Scheme, but as of March 31, 2023, **$0.13 million** was held in a bank in Vanuatu with no such protection[437](index=437&type=chunk)[438](index=438&type=chunk) PART II [Controls and Procedures](index=88&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were ineffective as of December 31, 2022, due to material weaknesses in internal control over financial reporting, with remediation plans underway - Management concluded that disclosure controls and procedures were **not effective** as of the end of the reporting period[443](index=443&type=chunk) - Material weaknesses were identified in internal control over financial reporting, including: - Limited documentation and policies for monitoring loan risk - Lack of controls for monitoring past-due payments and loan extensions - Insufficient controls over related-party loans - Lack of sufficient qualified accounting personnel with U.S. GAAP and SEC reporting experience[445](index=445&type=chunk) - Remediation plans include hiring additional accounting and internal control staff, providing further training, and engaging professional consultants to improve controls, particularly in the money lending operations[446](index=446&type=chunk)[447](index=447&type=chunk)[448](index=448&type=chunk) [Principal Accountant Fees and Services](index=91&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The company's audit fees were **$244,000** in 2022 and **$255,000** in 2021, with no audit-related or tax fees billed by the principal accountant, and all services pre-approved by the Audit Committee Principal Accountant Fees (in U.S. Dollars) | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fee | $244,000 | $255,000 | | Audit-Related Fees | $— | $— | | Tax fees | $— | $— | | **Total** | **$244,000** | **$255,000** | [Changes in Registrant's Certifying Accountant](index=91&type=section&id=ITEM%2016F.%20CHANGES%20IN%20REGISTRANT'S%20CERTIFYING%20ACCOUNTANT) The company experienced multiple changes in its independent registered public accounting firm, with Audit Alliance LLP performing the 2022 audit, and reported no disagreements with dismissed firms - On September 7, 2022, the company dismissed its auditor, Yu Certified Public Accountant, P.C., and appointed WWC, P.C[458](index=458&type=chunk)[460](index=460&type=chunk) - On March 3, 2023, the company dismissed WWC, P.C. and appointed Audit Alliance LLP as its new independent auditor for the fiscal year 2022[461](index=461&type=chunk)[463](index=463&type=chunk) - The company stated there were no disagreements with either of the dismissed auditors on accounting principles, financial statement disclosure, or auditing scope[458](index=458&type=chunk)[462](index=462&type=chunk) PART III [Financial Statements](index=93&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the audited consolidated financial statements for 2020-2022, prepared under U.S. GAAP, including the auditor's unqualified opinion and critical audit matters [Report of Independent Registered Public Accounting Firm](index=98&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion on the 2022 financial statements, identifying CECL and Property, Plant, and Equipment impairment as Critical Audit Matters due to subjective judgment - The auditor issued an **unqualified (clean) opinion** on the financial statements for the year ended December 31, 2022[473](index=473&type=chunk) - Critical Audit Matters identified were: 1. Allowance for current expected credit losses (CECL) on receivables, due to the subjective judgment and estimates involved 2. Impairment of Property, Plant and Equipment, due to the complexity and judgment in fair value measurement[477](index=477&type=chunk)[479](index=479&type=chunk)[482](index=482&type=chunk) [Consolidated Balance Sheets](index=104&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2022, total assets were **$69.69 million**, a slight decrease from **$70.35 million** in 2021, with total liabilities at **$7.48 million** and total equity at **$62.20 million** Consolidated Balance Sheet Highlights (In thousands of U.S. Dollars) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | 11,539 | 6,208 | | **Total Non-Current Assets** | 58,147 | 64,138 | | **Total Assets** | **69,686** | **70,346** | | **Total Current Liabilities** | 2,185 | 2,190 | | **Total Non-Current Liabilities** | 5,297 | 5,632 | | **Total Liabilities** | **7,482** | **7,822** | | **Total Shareholders' Equity** | **62,204** | **62,524** | [Consolidated Statements of Comprehensive Income (Loss)](index=105&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) For FY2022, net loss significantly improved to **$0.35 million** from **$8.41 million** in 2021, driven by a loan loss reversal and no goodwill impairment, with revenues increasing Key Income Statement Items (In thousands of U.S. Dollars) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **REVENUES** | 3,875 | 3,683 | 4,293 | | **GROSS PROFIT (LOSS)** | 822 | 360 | (1,066) | | **Impairment (reversal) loss of loan and interest receivable** | (973) | 1,386 | 1,980 | | **Impairment loss of goodwill** | — | 4,740 | 59,440 | | **OPERATING LOSS FROM CONTINUING OPERATIONS** | (536) | (8,805) | (67,342) | | **NET LOSS** | (346) | (8,413) | (67,918) | [Consolidated Statements of Cash Flows](index=107&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For FY2022, net cash used in operating activities was **$0.37 million**, a shift from **$12.29 million** provided in 2021, resulting in a **$0.53 million** decrease in cash, ending at **$2.95 million** Cash Flow Summary (In thousands of U.S. Dollars) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | (368) | 12,291 | 21,853 | | **Net cash used in investing activities** | (156) | (5,594) | (27,417) | | **Net cash (used in) provided by financing activities** | — | (6,241) | 3,431 | | **Increase (Decrease) in Cash** | (530) | 452 | (2,133) | | **Cash and cash equivalent, end of year** | 2,950 | 3,480 | 3,028 |

[Form 6-K Report of Foreign Private Issuer](index=1&type=section&id=Form%206-K%20Report) This Form 6-K report outlines the formation of a Special Committee to investigate an independent director and review corporate governance, along with an exhibit [Item 8.01 Other Events](index=2&type=section&id=Item%208.01%20Other%20Events) On April 11, 2023, TROOPS, Inc. formed a Special Committee of the Board of Directors. The committee's purpose is to investigate allegations from Civil Action HCA 938 of 2022 against independent director Mr. Wang Tai Dominic Li, specifically concerning his independence and integrity, and to conduct a review of the company's internal corporate governance - A Special Committee of the Board of Directors was formed on **April 11, 2023**[2](index=2&type=chunk) - The committee will investigate allegations against independent director **Mr. Wang Tai Dominic Li** regarding his independence and integrity, as raised in Civil Action HCA 938 of 2022[2](index=2&type=chunk) - The committee will also review the company's internal corporate governance[2](index=2&type=chunk) [Item 9.01 Financial Statements and Exhibits](index=2&type=section&id=Item%209.01.%20Financial%20Statements%20and%20Exhibits.) The report includes one exhibit, a press release issued by the company on April 11, 2023, which is incorporated by reference Exhibit List | Exhibit Number | Description | | :--- | :--- | | 99.1 | Press release issued by TROOPS, Inc., dated April 11, 2023 |