PART I [Key Information](index=18&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected financial data showing significant net losses and declining assets, alongside a wide range of business, operational, and regulatory risks [Selected Financial Data](index=18&type=section&id=A.%20Selected%20Financial%20Data.) The company experienced significant net losses and declining revenues from 2019 to 2021, with a peak loss in 2020 due to goodwill impairment Consolidated Statement of Income (In thousands of U.S. Dollars) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **REVENUES** | 3,683 | 4,293 | 5,115 | | **GROSS PROFIT (LOSS)** | 360 | (1,066) | 2,734 | | **OPERATING LOSS FROM CONTINUING OPERATIONS** | (8,805) | (67,342) | (732) | | **NET LOSS** | (8,413) | (67,918) | (37,059) | | **Net loss attributable to ordinary shareholders** | (8,413) | (67,918) | (19,402) | | **Loss per share (Basic & Diluted)** | (0.08) | (0.69) | (0.24) | Consolidated Balance Sheet Data (In thousands of U.S. Dollars) | | 2021 | 2020 | 2019 (Restated) | | :--- | :--- | :--- | :--- | | **Total assets** | 70,346 | 90,130 | 139,717 | | **Total liabilities** | 7,822 | 19,503 | 19,952 | | **Total equity** | 62,524 | 70,627 | 119,765 | [Risk Factors](index=20&type=section&id=D.%20Risk%20Factors.) The company faces substantial risks from its diverse business operations, regulatory changes in Hong Kong and China, and its status as a foreign private issuer - **Business and Industry Risks:** - The COVID-19 pandemic may continue to adversely affect operations and customer budgets[77](index=77&type=chunk) - Increased regulatory oversight, especially concerning privacy and data protection for its fintech subsidiary GFS, could lead to fines and operational changes[81](index=81&type=chunk) - Intense competition and the need for continuous innovation pose threats to market share and profitability[104](index=104&type=chunk) - The strategy of acquiring complementary businesses may fail and result in impairment losses[108](index=108&type=chunk) - The money lending business (FAF and Giant Credit) is subject to significant credit risks, competition, and regulatory changes in Hong Kong - **Risks of Operating in Hong Kong and China:** - Economic downturns in Hong Kong, China, or globally could adversely affect business[143](index=143&type=chunk) - The legal systems in Hong Kong and the PRC present uncertainties that could limit legal protections[146](index=146&type=chunk) - The PRC government may exercise significant oversight, intervene in operations, and implement new regulations with little notice, particularly concerning data security and overseas listings, which could hinder operations and devalue securities[151](index=151&type=chunk) - **Risks Related to Shares and Listing:** - The company may fail to meet NASDAQ's continued listing requirements[174](index=174&type=chunk) - The **Holding Foreign Companies Accountable Act (HFCAA) poses a delisting risk** as the PCAOB was unable to inspect the company's predecessor auditors, and the potential delisting period could be shortened to two years[209](index=209&type=chunk) - The company is a foreign private issuer, exempting it from certain U.S. reporting and governance rules, offering less protection to shareholders[197](index=197&type=chunk) - There is a risk of being classified as a **Passive Foreign Investment Company (PFIC)**, which could have adverse U.S. federal income tax consequences for U.S. investors[199](index=199&type=chunk) [Information on the Company](index=46&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) The company operates as a Hong Kong-based conglomerate in money lending, property, and fintech, shaped by a history of strategic acquisitions and disposals [History and Development of the Company](index=46&type=section&id=A.%20History%20and%20Development%20of%20the%20Company.) The company transformed from a blank check company into a conglomerate through key acquisitions in money lending, property, and fintech services - The company was incorporated in 2007 as a blank check company and acquired Honesty Group in 2010, which was later sold in 2011 as the company transitioned to a "light-asset" business model[219](index=219&type=chunk)[235](index=235&type=chunk)[239](index=239&type=chunk) - Acquired Giant Credit Limited in December 2017, marking its entry into the money lending business in Hong Kong[255](index=255&type=chunk) - Expanded into property investment through the acquisitions of 11 Hau Fook Street Limited and Paris Sky Limited in 2018[256](index=256&type=chunk)[257](index=257&type=chunk) - Acquired Giant Financial Services Limited (GFS) for **$64.34 million** in January 2020 to enter the fintech market, providing an online financial marketplace[259](index=259&type=chunk)[260](index=260&type=chunk) [Business Overview](index=52&type=section&id=B.%20Business%20overview.) The company's operations are structured into three principal segments: money lending, property investment, and a fintech service marketplace - The company's business is divided into three main segments: **money lending, property investment, and fintech services**[263](index=263&type=chunk) - The money lending business is conducted through licensed Hong Kong subsidiaries, Giant Credit Limited and First Asia Finance Limited[264](index=264&type=chunk)[265](index=265&type=chunk) - The fintech arm, Giant Financial Services (GFS), operates an online financial marketplace using technologies like AI and blockchain to connect financial institutions with users[267](index=267&type=chunk)[268](index=268&type=chunk) [Property, Plant and Equipment](index=55&type=section&id=E.%20Property%2c%20plant%20and%20equipment.) The company holds a significant portfolio of property assets in Hong Kong with a carrying value over $50 million as of year-end 2021 Carrying Value of Property by Subsidiary (as of Dec 31, 2021) | Subsidiary | Carrying Value (in millions of U.S. Dollars) | | :--- | :--- | | Suns Tower | $46.26 | | 11 Hau Fook Street Limited | $2.73 | | Vision Lane | $1.03 | | Giant Credit | $0.55 | [Operating and Financial Review and Prospects](index=56&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Financial performance in 2021 showed decreased revenue but a narrowed net loss due to lower goodwill impairment, with liquidity sustained by operating cash flow [Operating Results](index=56&type=section&id=A.%20Operating%20results.) In 2021, revenue declined but gross profit turned positive, and the net loss significantly narrowed due to a much smaller goodwill impairment charge Revenue by Major Product Line (In thousands of U.S. Dollars) | Revenue by major product line | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Interest on loans | 1,673 | 1,667 | 3,930 | | Property lease and management | 1,068 | 1,130 | 1,185 | | Financial technology solutions and services | 942 | 1,496 | — | | **Total** | **3,683** | **4,293** | **5,115** | - For the year ended Dec 31, 2021, **revenue decreased by 14.2%** to $3.68 million, while cost of revenues decreased by 38.0%, resulting in a **gross profit of $0.36 million** compared to a gross loss of $1.07 million in 2020[357](index=357&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) - **Net loss for 2021 was $8.41 million**, a significant reduction from the $67.92 million net loss in 2020, primarily due to a much lower impairment of goodwill ($4.74 million in 2021 vs $59.44 million in 2020)[371](index=371&type=chunk)[366](index=366&type=chunk) - For the year ended Dec 31, 2020, revenue decreased by 16.1% to $4.29 million from $5.12 million in 2019, mainly due to a drop in interest income from loans[372](index=372&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=B.%20Liquidity%20and%20capital%20resources.) The company's liquidity is primarily sourced from operating activities, with sufficient cash to meet obligations for the next 12 months - As of December 31, 2021, the company had **$3.48 million in cash** and cash equivalents and **working capital of $4.01 million**[389](index=389&type=chunk) Summary of Cash Flows (In thousands of U.S. Dollars) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 12,291 | 21,639 | 3,349 | | Net cash used in investing activities | (5,594) | (27,170) | (18,825) | | Net cash (used in) provided by financing activities | (6,241) | 3,431 | 6,263 | - In 2021, **net cash from operating activities was $12.29 million**, primarily from changes in loans receivable and non-cash impairment charges, offset by the net loss[393](index=393&type=chunk) - The company fully settled a bank borrowing of **$6.41 million** from OCBC Wing Hang Bank on March 3, 2021[391](index=391&type=chunk) [Contractual Obligations](index=76&type=section&id=F.%20Tabular%20disclosure%20of%20contractual%20obligations.) As of year-end 2021, total contractual obligations were minimal, with the majority consisting of short-term advances from unrelated parties Contractual Obligations as of December 31, 2021 (in U.S. Dollars) | | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Advances from unrelated parties | $447,761 | $447,761 | $ — | $ — | $ — | | Convertible notes – future interest payment | 12,535 | 4,582 | 7,953 | — | — | | **Total** | **$460,296** | **$452,343** | **$ 7,953** | **$ —** | **$ —** | [Directors, Senior Management and Employees](index=76&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section outlines the company's leadership compensation, board structure, small employee base, and concentrated share ownership [Compensation](index=78&type=section&id=B.%20Compensation.) Executive compensation in 2021 was primarily stock-based, with directors receiving an annual fee and awards governed by an equity plan Summary Compensation Table (2021) | Name and Principal Position | Year | Salary (US$) | Stock Awards (US$) | Total (US$) | | :--- | :--- | :--- | :--- | :--- | | Raleigh Siu Lau, CEO | 2021 | — | 174,247 | 174,247 | | Chung Hang Lui, CFO | 2021 | 13,817 | — | 15,176 | | Tommy Wing Ling Lui, CTO | 2021 | — | 87,123 | 87,123 | - Directors are entitled to an annual compensation of **US$0.24 million** and reimbursement for out-of-pocket expenses[432](index=432&type=chunk) - The company's 2016 Omnibus Equity Plan allows for the issuance of up to **2,500,000 ordinary shares** through various awards to attract and retain employees and directors[433](index=433&type=chunk)[434](index=434&type=chunk) [Board Practices](index=80&type=section&id=C.%20Board%20Practices.) The board comprises five directors, including three independents, and maintains standard audit, compensation, and nominating committees - The board has five directors, **three of whom are independent** (Mr. Wood Shing Kei Sze, Mr. Jason Che Wai Au, Mr. Wang Tai Dominic Li)[443](index=443&type=chunk) - The company has three board committees: **Audit, Compensation, and Nominating**, with defined memberships and responsibilities[445](index=445&type=chunk)[446](index=446&type=chunk)[448](index=448&type=chunk) [Employees](index=83&type=section&id=D.%20Employees.) As of year-end 2021, the company employed a small, non-unionized team of 19 full-time management and administrative staff - The company had **19 full-time employees** as of December 31, 2021, all in management and administrative positions[457](index=457&type=chunk) [Share Ownership](index=83&type=section&id=E.%20Share%20Ownership.) Share ownership is highly concentrated, with two principal shareholders controlling over 50% of the company's ordinary shares 5% Shareholders (as of May 5, 2022) | 5% Shareholders | Number of Shares | Percent | | :--- | :--- | :--- | | Prime Ocean Holdings Limited | 29,000,000 | 28.7 % | | Leung Iris Chi Yu | 23,132,500 | 22.8 % | - The calculations are based on **101,597,998 ordinary shares** issued and outstanding as of May 5, 2022[460](index=460&type=chunk) [Major Shareholders and Related Party Transactions](index=84&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) The company discloses significant transactions with related parties, primarily involving the seller of its GFS fintech subsidiary - Victor Or, the seller of GFS and a shareholder, was a key related party with whom the company engaged in multiple loan agreements between 2018 and 2019[462](index=462&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk) - The promissory note of **$28.47 million** issued to Victor Or as part of the GFS acquisition was fully settled by March 30, 2021[463](index=463&type=chunk) - As of December 31, 2021, the company held **$0.58 million in cash** deposited in Alpen Baruch Bank Limited, an international bank where Mr. Or is the sole shareholder[470](index=470&type=chunk) [Financial Information](index=85&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section references the full financial statements and discloses an ongoing property lawsuit and the company's policy of retaining earnings - The company is involved in a civil lawsuit in Hong Kong concerning a property sale agreement involving its subsidiaries, 11 Hau Fook Street Limited and Vision Lane Limited, but believes an unfavorable outcome is not likely[475](index=475&type=chunk) - The company **does not expect to pay any cash dividends** in the foreseeable future, intending to retain earnings to finance business expansion[476](index=476&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=95&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company's primary market risks include credit risk from its lending business, significant customer concentration, and geographic concentration in Hong Kong - The most significant risk is **credit risk** from lending activities, with a provision for loan losses of **$1.39 million** for the year ended December 31, 2021[537](index=537&type=chunk)[541](index=541&type=chunk) - There is significant **customer concentration risk**, with two major customers accounting for **17% and 10% of total revenues** in 2021[546](index=546&type=chunk)[547](index=547&type=chunk) - The company has a concentration of cash deposits in Hong Kong banks, which are protected up to HKD 500,000, and also holds deposits in a bank in Vanuatu, which has **no deposit protection scheme**[550](index=550&type=chunk)[551](index=551&type=chunk) - As of December 31, 2021, loans receivable from 4 customers accounted for **11%, 15%, 21% and 26%** of the total loan receivable balance[544](index=544&type=chunk) PART II [Controls and Procedures](index=98&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were ineffective as of year-end 2021 due to material weaknesses in internal financial reporting controls - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2021[558](index=558&type=chunk) - **Material weaknesses** in internal control were identified, including: - Limited written documentation and policies for monitoring loan risk - Lack of controls for monitoring past-due payments and loan extensions - Lack of controls over related-party loans - Insufficient qualified accounting personnel with U.S. GAAP and SEC reporting expertise[560](index=560&type=chunk) - Remediation measures include seeking additional accounting and internal control staff, hiring a permanent CFO with SEC experience, and implementing stricter documentation and policies[561](index=561&type=chunk) [Principal Accountant Fees and Services](index=100&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Audit fees for 2021 and 2020 are disclosed, with no other audit-related or tax fees billed by the principal accountant during this period Accountant Fees (in U.S. Dollars) | | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fee | 255,000 | 247,233 | | Audit-Related Fees | — | — | | Tax fees | — | — | | **Total** | **255,000** | **247,233** | [Changes in Registrant's Certifying Accountant](index=101&type=section&id=ITEM%2016F.%20CHANGES%20IN%20REGISTRANT'S%20CERTIFYING%20ACCOUNTANT) The company changed its independent registered public accounting firm in January 2021, reporting no disagreements with the former auditor - On January 11, 2021, the company dismissed Centurion ZD CPA & Co. and appointed **Yu Certified Public Accountant, P.C.** as its new auditor[575](index=575&type=chunk)[579](index=579&type=chunk) - The company stated there were **no disagreements** with the former auditor, CZD, on any matter of accounting principles or practices[576](index=576&type=chunk) PART III [Financial Statements](index=102&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements and accompanying notes for the fiscal years 2019 through 2021 [Report of Independent Registered Public Accounting Firm](index=107&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) The auditor's report provides a fair presentation opinion and highlights critical audit matters related to goodwill impairment and credit loss allowances - Auditor Yu Certified Public Accountant, P.C. issued an opinion that the **2021 and 2020 financial statements are fairly presented** in all material respects[592](index=592&type=chunk) - **Critical Audit Matters** identified were: 1. **Goodwill Impairment Assessment:** Required subjective judgment in evaluating forecasts for the financial technology solutions and services reporting unit, which recorded a **$4.74 million impairment loss** in 2021[599](index=599&type=chunk) 2. **Allowance for CECL:** Involved significant management estimates for loan receivables and other financial assets, resulting in an allowance of **$1.97 million** for the year ended Dec 31, 2021[604](index=604&type=chunk) - Predecessor auditor Centurion ZD CPA & Co. issued an opinion on the 2019 financial statements, noting they were restated and that discontinued operations were reclassified[609](index=609&type=chunk)[613](index=613&type=chunk)[614](index=614&type=chunk) [Notes to Consolidated Financial Statements](index=116&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail key accounting policies, segment performance, significant asset impairments, and related-party transactions shaping the financial results - **Discontinued Operations (Note 3):** The company reclassified operations of Century Skyway Limited (CSL) and Boca International Limited as discontinued following their disposals by 2019 and 2020, respectively[717](index=717&type=chunk)[723](index=723&type=chunk) - **Loans Receivable (Note 5):** Total net loans receivable decreased from $23.7 million in 2020 to **$10.6 million in 2021**, with past-due loans falling significantly from $15.02 million to $0.42 million[731](index=731&type=chunk)[734](index=734&type=chunk) - **Goodwill (Note 10):** The company recorded goodwill impairment losses of **$4.74 million in 2021** and **$55.53 million in 2020** related to the underperforming financial technology solutions unit[794](index=794&type=chunk)[800](index=800&type=chunk) - **Segment Information (Note 19):** For 2021, the Money Lending segment generated **$1.67 million in revenue** and **$1.47 million in gross profit**, while the Financial Technology Solutions segment generated **$0.94 million in revenue** and a **gross loss of $76 thousand**[842](index=842&type=chunk)

Part I [Key Information](index=9&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section summarizes the company's financial data, capitalization, and significant risk factors, highlighting a history of strategic shifts, substantial net losses from impairment charges, and key risks including COVID-19, regulatory scrutiny, and internal control weaknesses [Selected Financial Data](index=9&type=section&id=A.%20Selected%20Financial%20Data.) The company has undergone significant strategic changes through numerous acquisitions and disposals, shifting its focus towards money lending, property investment, and fintech, resulting in a substantial net loss of $67.9 million in 2020 primarily due to a $59.4 million goodwill impairment - The company has a complex history of acquisitions and disposals, reflecting a significant and ongoing strategic transformation, with key recent acquisitions including **Giant Financial Services (GFS) in 2020**, **Vision Lane Limited in 2019**, and **Paris Sky Limited in 2018**, pivoting towards fintech, money lending, and property investment[15](index=15&type=chunk) Selected Consolidated Statement of Operations Data (in thousands of U.S. Dollars) | Indicator | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Net revenues** | 4,293 | 5,115 | 1,570 | | **Gross profit (loss)** | (1,066) | 2,734 | 313 | | **Operating loss from continuing operations** | (67,342) | (732) | (2,461) | | **Impairment loss of goodwill** | (59,440) | - | - | | **Net loss attributable to ordinary shareholders** | (67,918) | (19,402) | (12,372) | | **Loss per share (Basic & Diluted)** | (0.69) | (0.24) | (0.35) | Selected Consolidated Balance Sheet Data (in thousands of U.S. Dollars) | Indicator | 2020 | 2019 (Restated) | 2018 | | :--- | :--- | :--- | :--- | | **Total assets** | 90,130 | 139,717 | 189,380 | | **Total liabilities** | 19,503 | 19,952 | 22,667 | | **Total equity** | 70,627 | 119,765 | 166,713 | [Risk Factors](index=13&type=section&id=D.%20Risk%20Factors.) The company faces a multitude of risks across its business segments, including adverse effects from COVID-19, increased regulatory scrutiny for its fintech and money lending operations, significant financial risks, identified material weaknesses in internal controls, and challenges for investors protecting rights under Cayman Islands law - The business is exposed to significant risks from health epidemics like COVID-19, which could reduce customer budgets, delay payments, and disrupt partner operations, materially impacting revenue and financial condition[22](index=22&type=chunk) - The company's fintech (GFS) and money lending (FAF, Giant Credit) subsidiaries face substantial regulatory risks, including increased oversight, potential fines for non-compliance with anti-money laundering and data privacy laws, and the need to maintain money lenders licenses[23](index=23&type=chunk)[25](index=25&type=chunk)[41](index=41&type=chunk) - The company has identified several **material weaknesses in its internal control over financial reporting**, including a lack of documented loan risk assessment, insufficient controls for credit risk monitoring, and inadequate procedures for handling past-due loans and related-party transactions[58](index=58&type=chunk)[59](index=59&type=chunk) - The company faces a risk of being **delisted from NASDAQ** for failing to timely file its Annual Report on Form 20-F for the year ended December 31, 2020, having received a deficiency notice on May 18, 2021[62](index=62&type=chunk)[63](index=63&type=chunk) - As a Cayman Islands company, shareholders may have difficulty protecting their interests, as their rights are governed by a less developed body of securities law compared to the U.S., and the company can follow home country governance practices that may offer less protection[67](index=67&type=chunk)[69](index=69&type=chunk) [Information on the Company](index=27&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) SGOCO Group, Ltd. is a Hong Kong-based conglomerate that evolved from a blank check company into a diversified holding company, focusing on money lending, property investment, and fintech services, with a property portfolio valued over $52 million as of December 31, 2020 [History and Development of the Company](index=27&type=section&id=A.%20History%20and%20Development%20of%20the%20Company.) SGOCO, originally a blank check company, underwent significant transformation through strategic M&A, divesting manufacturing to pivot into finance and property with key acquisitions like Giant Credit, Paris Sky, Vision Lane, GFS, and Apiguru, reflecting a dynamic growth strategy - The company transitioned from a manufacturing-focused entity to a **'light-asset' model** after selling Honesty Group in 2011 and SGOCO (Fujian) in 2014[76](index=76&type=chunk)[77](index=77&type=chunk) - From 2017 to 2020, the company aggressively expanded into financial services and property investment through multiple acquisitions, including **Giant Credit** (money lending), **Paris Sky** (property), **Vision Lane** (property and money lending), and **Giant Financial Services** (fintech)[83](index=83&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - In 2020, the company acquired **Giant Financial Services Limited (GFS) for $64.34 million** and **Apiguru Pty Ltd for $0.59 million** to build out its fintech capabilities, including an online financial marketplace and API consulting services[88](index=88&type=chunk)[89](index=89&type=chunk) [Business Overview](index=33&type=section&id=B.%20Business%20overview.) SGOCO Group operates as a conglomerate with three principal business lines: money lending in Hong Kong, property investment for rental income, and fintech services through Giant Financial Services (GFS) and its subsidiary Apiguru - The company's business is structured as a conglomerate with three main pillars: **Money lending in Hong Kong**, **Property investment for rental income**, and **Fintech solutions and services**[91](index=91&type=chunk) - The money lending business, operated via Giant Credit and First Asia Finance, targets personal and corporate loans, capitalizing on demand created by stringent policies from traditional financial institutions[93](index=93&type=chunk) - The fintech arm, Giant Financial Services (GFS), provides an online financial marketplace and leverages technologies like AI, big data, and blockchain, with its subsidiary Apiguru specializing in API strategy and implementation to expand the customer base[93](index=93&type=chunk) [Organizational Structure](index=36&type=section&id=D.%20Organizational%20structure.) SGOCO Group, Ltd., a Cayman Islands parent, holds a diverse portfolio of wholly-owned subsidiaries, including SGOCO International (HK) Limited (holding GFS and Apiguru) and Giant Connection Limited (holding money lending and property investment assets like Giant Credit and Paris Sky) Key Subsidiaries and Ownership | Subsidiary | Place of Incorporation | Ownership Percentage | | :--- | :--- | :--- | | SGOCO International (HK) Limited | Hong Kong | 100% | | Giant Financial Services Limited ("GFS") | Samoa | 100% | | Apiguru Pty Ltd. ("Apiguru") | Australia | 100% | | Giant Connection Limited | Republic of Seychelles | 100% | | Giant Credit Limited ("GCL") | Hong Kong | 100% | | Paris Sky Limited | Marshall Islands | 100% | [Property, Plant, and Equipment](index=37&type=section&id=E.%20Property%2C%20plant%20and%20equipment.) The company's primary physical assets are investment properties in Hong Kong, held through subsidiaries, with a total carrying value of approximately $52.04 million as of December 31, 2020 Carrying Value of Land and Property by Subsidiary (as of Dec 31, 2020) | Subsidiary | Carrying Value (in millions of U.S. Dollars) | | :--- | :--- | | Suns Tower | $47.67 | | 11 Hau Fook Street Limited | $2.81 | | Vision Lane | $1.10 | | Giant Credit | $0.46 | | **Total** | **$52.04** | [Operating and Financial Review and Prospects](index=37&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section details the company's financial performance, liquidity, and contractual obligations, highlighting a significant decline in 2020 revenue and a net loss of $67.9 million due to goodwill impairment, with liquidity sourced from operations and financing, and significant related-party transactions [Operating Results](index=37&type=section&id=A.%20Operating%20results.) In fiscal year 2020, revenue decreased 16.1% to $4.29 million, resulting in a gross loss and a net loss of $67.92 million primarily due to a $59.44 million goodwill impairment, contrasting with 2019's 226.1% revenue growth driven by money lending and property leases Revenue by Segment (2020 vs. 2019, in millions of U.S. Dollars) | Revenue Source | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Interest on loans | $1.67 | $3.93 | -57.5% | | Property lease and management | $1.13 | $1.19 | -5.0% | | Financial technology solutions and services | $1.50 | $0.00 | N/A | | **Total Revenue** | **$4.29** | **$5.12** | **-16.1%** | - The company recorded a **goodwill impairment of $59.44 million** and an **intangible asset impairment of $1.23 million in 2020**, both primarily related to the GFS acquisition, as its financial performance fell below original expectations[158](index=158&type=chunk) - In 2019, revenue grew significantly by **226.1% to $5.12 million** compared to 2018, mainly due to increased income from money lending services and property leases following recent acquisitions[161](index=161&type=chunk) - Loss from discontinued operations was a major factor in 2019 results, totaling **$36.12 million**, primarily from impairment charges related to the Boca and Century Skyway businesses[158](index=158&type=chunk)[164](index=164&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=B.%20Liquidity%20and%20capital%20resources.) As of December 31, 2020, the company held $3.03 million in cash and $18.21 million in working capital, with net cash from operating activities at $21.64 million, while investing activities used $27.17 million, and financing provided $3.43 million Summary of Cash Flows (in thousands of U.S. Dollars) | Cash Flow Activity | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Net cash from Operating Activities** | 21,639 | 3,349 | (36,882) | | **Net cash used in Investing Activities** | (27,170) | (18,825) | (7,960) | | **Net cash from Financing Activities** | 3,431 | 6,263 | 56,146 | | **(Decrease) Increase in Cash** | (2,133) | (9,186) | 9,570 | - As of December 31, 2020, the company had cash and cash equivalents of **$3.03 million** and working capital of **$18.21 million**[166](index=166&type=chunk) - The company had significant related party transactions with Victor Or (seller of GFS), including providing multiple loans totaling **$9.47 million outstanding** as of year-end 2020, and issued a promissory note for the GFS acquisition which was fully repaid by March 2021[174](index=174&type=chunk)[175](index=175&type=chunk) [Contractual Obligations](index=58&type=section&id=F.%20Tabular%20disclosure%20of%20contractual%20obligations.) As of December 31, 2020, the company had total contractual obligations of approximately $8.45 million, primarily long-term bank loans and associated future interest payments, with over $6.3 million due in more than five years Contractual Obligations as of December 31, 2020 (in thousands of U.S. Dollars) | Obligation | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term bank loans (current & non-current) | 6,240.5 | 200.7 | 414.5 | 432.5 | 5,192.9 | | Future interest payment on bank loans | 1,752.5 | 122.1 | 252.4 | 234.4 | 1,143.6 | | Advances from other/unrelated parties | 445.2 | 445.2 | - | - | - | | Convertible notes – future interest payment | 16.0 | 4.6 | 11.4 | - | - | | **Total** | **8,454.2** | **772.6** | **678.3** | **666.9** | **6,336.5** | [Directors, Senior Management, and Employees](index=59&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's governance and human capital structure, including its five-member Board of Directors, executive compensation for 2020, board committees, and major shareholders, noting 14 full-time employees at year-end 2020 [Directors and Senior Management](index=59&type=section&id=A.%20Directors%20and%20senior%20management.) As of December 31, 2020, the company's leadership consisted of a five-member Board of Directors and a senior management team including Raleigh Siu Lau as CEO & President, Tommy Wing Ling LUI as CTO, and Xiao-Ming HU as Interim CFO - The Board of Directors consists of five members: Jason Che Wai AU, Lai Man CHEUNG, Wood Shing Kei SZE, Wang Tai Dominic LI, and Mark Leonard TAN[180](index=180&type=chunk) - Key executive officers include **Raleigh Siu LAU** (Chief Executive Officer and President), **Tommy Wing Ling LUI** (Chief Technology Officer), and **Xiao-Ming HU** (Interim Chief Financial Officer)[180](index=180&type=chunk)[183](index=183&type=chunk) [Compensation](index=60&type=section&id=B.%20Compensation.) Executive compensation for 2020 included approximately $0.1 million in cash and $0.68 million in share-based compensation, utilizing the 2010 and 2016 Omnibus Equity Plans to attract and retain talent through various equity incentives Executive and Director Compensation (FY 2020) | Compensation Type | Amount (in millions of U.S. Dollars) | | :--- | :--- | | Aggregate Cash Compensation (Executive Officers) | ~$0.1 | | Share-Based Compensation (Directors & Executive Officers) | $0.68 | - The company has two primary equity incentive plans: the **2010 Equity Incentive Plan** and the **2016 Omnibus Equity Plan**, which allow for granting options, restricted shares, and other awards to eligible persons[187](index=187&type=chunk)[191](index=191&type=chunk) [Board Practices](index=64&type=section&id=C.%20Board%20Practices.) The Board of Directors comprises five members, with three independent directors meeting NASDAQ standards, and maintains Audit, Compensation, and Nominating Committees, all composed of independent directors, with Mr. Sze designated as the audit committee financial expert - The Board has five directors, **three of whom (Mr. Sze, Mr. Au, Mr. Li) are considered independent** under NASDAQ rules[195](index=195&type=chunk)[199](index=199&type=chunk) - The company maintains three board committees: **Audit, Compensation, and Nominating**, all composed of independent directors[201](index=201&type=chunk) - Mr. Sze serves as the Audit Committee Chairperson and is designated as the **'audit committee financial expert'**[201](index=201&type=chunk) [Share Ownership](index=67&type=section&id=E.%20Share%20Ownership.) As of June 30, 2021, the company's ownership was concentrated among major shareholders, with Prime Ocean Holdings Limited holding 28.7% and Leung Iris Chi YU 22.8%, while executive officers held less than 1% each Principal Shareholders (as of June 30, 2021) | Shareholder | Number of Shares | Percentage | | :--- | :--- | :--- | | Prime Ocean Holdings Limited | 29,000,000 | 28.7% | | Leung Iris Chi YU | 23,132,500 | 22.8% | - Beneficial ownership for executive officers and directors was generally **less than 1% each**, with CEO Raleigh Siu LAU holding **1,000,000 shares** and CTO Tommy Wing Ling LUI holding **500,000 shares**[204](index=204&type=chunk) [Major Shareholders and Related Party Transactions](index=68&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's concentrated ownership and significant related party transactions, particularly the extensive financial relationship with Victor Or, the GFS seller, including $9.47 million in outstanding loans as of year-end 2020, highlighting concentrated credit risk - The company has significant related party transactions with Victor Or, the seller of its GFS subsidiary, including a promissory note issued to him as part of the acquisition and multiple loans extended to him by the company[208](index=208&type=chunk) - As of December 31, 2020, loans receivable from Mr. Or and two other unrelated parties totaled **HK$73.84 million ($9.47 million)**, representing **39.9% of the company's total loans receivable**[209](index=209&type=chunk)[408](index=408&type=chunk) - The company also had cash deposits of **HK$6.74 million ($0.86 million)** in Alpen Baruch Bank Limited, an international bank in which Mr. Or owned a **75% stake**[211](index=211&type=chunk) [Financial Information](index=69&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the full consolidated financial statements are in Item 18, notes no significant pending legal proceedings, and states the company has no plans for cash dividends, intending to retain earnings for expansion, subject to PRC regulations - The company is not currently party to any pending legal proceedings expected to have a significant effect on its business[213](index=213&type=chunk) - The company has no plans to pay cash dividends in the foreseeable future and intends to retain earnings for business operations and expansion, with payments also restricted by PRC regulations on subsidiary profit distribution[213](index=213&type=chunk) [Additional Information](index=70&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers legal and regulatory matters, including the company's Cayman Islands incorporation, taxation for shareholders in various jurisdictions, and the significant risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes - The company is incorporated in the Cayman Islands, which currently levies **no taxes on corporate profits, income, or gains**[218](index=218&type=chunk) - For U.S. federal income tax purposes, there is a significant risk that the company could be treated as a **Passive Foreign Investment Company (PFIC)**, potentially resulting in adverse tax consequences for U.S. Holders, including gains taxed at ordinary income rates plus an interest charge[56](index=56&type=chunk)[233](index=233&type=chunk) - The company believes it was likely a PFIC for its **2008 and 2009 taxable years** and that there is a risk it could be treated as a PFIC for **2018 and 2019**, though it does not expect to be for the year ended Dec 31, 2018[233](index=233&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=79&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company's primary market risk is credit risk concentration in its money lending business, with significant exposure to a related party, Victor Or, and high geographical concentration of revenue in Hong Kong, alongside deposit institution risk in Vanuatu - The company has significant **credit risk concentration**, with loans to three customers representing **16%, 15%, and 39.9% of the total loan receivable** as of December 31, 2020, and the largest exposure to a related party, Victor Or[248](index=248&type=chunk) - There is also a high concentration of customer revenue, with two major customers accounting for **19% and 10% of total revenues in 2020**, and one major customer (Victor Or) accounting for **21% of total revenues in 2019**[248](index=248&type=chunk) - The business is geographically concentrated, with **98.6% of its 2020 revenue ($4.235 million out of $4.293 million) generated in Hong Kong**[249](index=249&type=chunk) - The company faces **deposit institution risk**, with **HK$8.17 million ($1.05 million)** held in Alpen Baruch Bank in Vanuatu as of June 30, 2021, a jurisdiction without a deposit protection scheme[250](index=250&type=chunk) Part II [Controls and Procedures](index=81&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2020, due to several material weaknesses in internal control over financial reporting, primarily related to loan risk management, for which remediation measures are being implemented - Management concluded that the company's disclosure controls and procedures were **not effective** as of December 31, 2020[252](index=252&type=chunk) - Several **material weaknesses** were identified in internal controls, primarily related to the money lending business, including limited written documentation for loan risk assessment, insufficient controls for post-loan credit risk monitoring, lack of controls for monitoring past-due principal and interest, insufficient policy on loan term extensions and troubled loan restructuring, and lack of controls on loans with related parties and monitoring concentration risk[254](index=254&type=chunk) - Another material weakness identified was the **lack of sufficient qualified accounting personnel** with an appropriate understanding of U.S. GAAP and SEC reporting requirements[254](index=254&type=chunk) - Remediation plans include hiring additional accounting staff, providing further training, engaging professional consultants, and implementing more stringent documentation and monitoring procedures for the money lending operations[254](index=254&type=chunk) [Principal Accountant Fees and Services](index=83&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The company paid its principal external independent registered public accounting firms **$247,233 in 2020** and **$230,376 in 2019**, exclusively for audit services, with all services pre-approved by the Audit Committee Accountant Fees (in U.S. Dollars) | Fee Category | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fee | $247,233 | $230,376 | | Audit-Related Fees | - | - | | Tax fees | - | - | | **Total** | **$247,233** | **$230,376** | [Changes in Registrant's Certifying Accountant](index=84&type=section&id=ITEM%2016F.%20CHANGES%20IN%20REGISTRANT%27S%20CERTIFYING%20ACCOUNTANT) On January 11, 2021, SGOCO Group dismissed Centurion ZD CPA & Co. and appointed Yu Certified Public Accountant, P.C as its new auditor, with no disagreements reported, though material weaknesses in internal control were considered "reportable events" during the former auditor's tenure - On January 11, 2021, the company dismissed its auditor, **Centurion ZD CPA & Co. ("CZD")**[259](index=259&type=chunk) - On the same day, the company appointed **Yu Certified Public Accountant, P.C ("Yu CPA")** as its new independent registered public accounting firm[259](index=259&type=chunk) - There were no disagreements with the former auditor, but the previously disclosed **material weaknesses in internal control** were considered "reportable events" under SEC rules[259](index=259&type=chunk) Part III [Financial Statements](index=85&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) The audited consolidated financial statements for 2020, audited by Yu Certified Public Accountant, P.C., reflect a net loss of $67.9 million and highlight critical audit matters including goodwill impairment and CECL, with 2018 and 2019 statements restated for share-based compensation errors - The auditor's report from Yu Certified Public Accountant, P.C. for FY2020 identified two **Critical Audit Matters**: **Goodwill Impairment Assessment** and **Allowance for current expected credit losses ("CECL") on receivables**[277](index=277&type=chunk)[278](index=278&type=chunk)[281](index=281&type=chunk) - The financial statements for the years ended December 31, 2019 and 2018 were **restated to correct an error** in the accounting treatment of unvested restricted stock, which decreased additional paid-in-capital and total equity[418](index=418&type=chunk)[419](index=419&type=chunk) Consolidated Balance Sheet Highlights (in thousands of U.S. Dollars) | Account | Dec 31, 2020 | Dec 31, 2019 (Restated) | | :--- | :--- | :--- | | Cash | 3,028 | 5,126 | | Loans receivable, net | 22,096 | 33,886 | | Goodwill | 5,107 | 3,906 | | Total Assets | 90,130 | 139,717 | | Total Liabilities | 19,503 | 19,952 | | Total Equity | 70,627 | 119,765 | Consolidated Statement of Comprehensive Loss Highlights (in thousands of U.S. Dollars) | Account | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Revenues | 4,293 | 5,115 | 1,570 | | Gross Profit (Loss) | (1,066) | 2,734 | 313 | | Impairment loss of goodwill | 59,440 | - | - | | Net Loss from Continuing Operations | (67,923) | (943) | (1,881) | | Net Loss | (67,918) | (37,059) | (21,064) |

Part I [Key Information](index=10&type=section&id=ITEM%203.%20KEY%20INFORMATION) The company's financial performance is marked by significant net losses and impairment charges, driven by strategic acquisitions and disposals across money lending, property, and fintech, alongside various operational and financial risks [Selected Financial Data](index=10&type=section&id=A.%20Selected%20Financial%20Data.) The company transformed into a conglomerate through acquisitions and disposals, experiencing volatile revenues and consistent net losses, primarily due to significant impairment charges - The company has a history of frequent and significant acquisitions and disposals, fundamentally changing its business focus over the years, including key transactions in energy saving, money lending, property, and fintech, alongside manufacturing divestitures[14](index=14&type=chunk)[15](index=15&type=chunk) Consolidated Statement of Income (In thousands of U.S. Dollars) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net revenues** | 5,525 | 1,580 | 51 | | **Gross profit (loss)** | 1,406 | (1,055) | (1,292) | | **Operating loss from continuing operations** | (41,673) | (14,318) | (9,126) | | **Impairment loss of intangible assets** | (18,893) | - | - | | **Impairment loss of goodwill** | (20,556) | (10,330) | (5,618) | | **Net loss from continuing operations** | (37,052) | (13,551) | (8,803) | | **Net loss** | (37,059) | (21,064) | (11,214) | | **Net loss attributable to ordinary shareholders** | (19,402) | (12,372) | (11,214) | | **Loss per share (Basic)** | (0.24) | (0.35) | (0.99) | Consolidated Balance Sheet Data (In thousands of U.S. Dollars) | As of December 31, | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Total assets** | 140,578 | 190,841 | 98,453 | | **Total liabilities** | 19,952 | 22,667 | 14,638 | | **Total equity** | 120,626 | 168,174 | 83,815 | [Risk Factors](index=13&type=section&id=D.%20Risk%20Factors.) The company faces substantial operational, regulatory, financial, and market risks, including COVID-19 impacts, increased scrutiny on fintech, significant impairment losses, and challenges to its NASDAQ listing - **Business and Industry Risks:** - **COVID-19 Impact:** The company's revenues, substantially generated in Hong Kong, are vulnerable to the economic effects of pandemics, potentially leading to reduced customer budgets, payment delays, and loss of customers[21](index=21&type=chunk) - **Regulatory Scrutiny:** The newly acquired GFS (fintech) business faces increasing regulatory oversight in areas like anti-money laundering, data privacy, and licensing, which could lead to significant fines and operational changes[22](index=22&type=chunk)[24](index=24&type=chunk) - **Acquisition & Impairment Risk:** Acquisitions like Boca have not produced anticipated benefits, leading to significant goodwill and intangible asset impairment losses (**$20.6 million goodwill impairment in 2019**). Future acquisitions carry similar risks[32](index=32&type=chunk)[35](index=35&type=chunk) - **Lending & Property Risks:** The money lending business (FAF, Giant Credit) is subject to significant credit risk, interest rate fluctuations, and intense competition. The property investment business is sensitive to downturns in the Hong Kong real estate market[40](index=40&type=chunk)[51](index=51&type=chunk) - **Internal Controls:** Management identified a material weakness in internal controls due to a lack of sufficient qualified accounting personnel with U.S. GAAP and SEC reporting experience[57](index=57&type=chunk) - **Share-Related Risks:** - **NASDAQ Listing:** The company faces the risk of failing to meet NASDAQ's continued listing requirements, such as the minimum **$1.00 bid price**, which it previously failed to meet in 2018. Delisting would severely impact liquidity and share price[62](index=62&type=chunk) - **No Dividends:** The company does not expect to pay dividends, meaning shareholder returns depend solely on share price appreciation, which is not guaranteed[65](index=65&type=chunk) - **Foreign Issuer Status:** As a foreign private issuer incorporated in the Cayman Islands, the company is exempt from certain SEC reporting and governance rules, offering less protection to shareholders compared to U.S. domestic companies[53](index=53&type=chunk)[67](index=67&type=chunk) [Information on the Company](index=28&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) SGOCO Group evolved into a Hong Kong-based conglomerate, operating in energy saving, money lending, property investment, and fintech, with intellectual property and operations subject to various regulations [History and Development of the Company](index=28&type=section&id=A.%20History%20and%20Development%20of%20the%20Company.) SGOCO transitioned from manufacturing to a diversified holding company through a series of strategic acquisitions in energy saving, money lending, property, and fintech from 2015 to 2020 - The company has a complex history of corporate restructuring, marked by a pivot away from manufacturing towards a diversified holding company structure[70](index=70&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - A series of major acquisitions occurred between 2015 and 2020, shaping the current business focus: - **Boca International (Mar 2016):** Energy saving for **$52 million cash** and **1.16 million shares**[81](index=81&type=chunk) - **Giant Credit Limited (Dec 2017):** Money lending for **2.22 million shares**[83](index=83&type=chunk) - **Paris Sky Limited (June 2018):** Property investment, involving cash, shares, and asset transfers[86](index=86&type=chunk) - **Vision Lane Limited (Mar 2019):** Property investment and money lending for **$7.5 million cash** and **4.52 million shares**[87](index=87&type=chunk) - **Giant Financial Services (Jan 2020):** Fintech solutions for **$64.3 million**, paid via cash, shares, and a promissory note[88](index=88&type=chunk) [Business Overview](index=34&type=section&id=B.%20Business%20overview.) SGOCO operates as a conglomerate across four main segments: energy saving (Boca), money lending (Giant Credit, FAF), property investment, and fintech services (GFS) - The company's business is diversified across four main segments: 1. **Energy Saving:** Boca's PCM-TES storage systems for cooling and heating[90](index=90&type=chunk) 2. **Money Lending:** Personal and corporate loans in Hong Kong via Giant Credit and First Asia Finance (FAF)[90](index=90&type=chunk) 3. **Property Investment:** Holds four real properties and a 19-storey building in Hong Kong for rental income[90](index=90&type=chunk) 4. **Fintech & IT Services:** Development of a financial technology platform via Giant Financial Services (GFS)[90](index=90&type=chunk)[92](index=92&type=chunk) [Organizational Structure](index=37&type=section&id=D.%20Organizational%20structure.) SGOCO Group, a Cayman Islands holding company, operates through multi-layered subsidiaries in Hong Kong, PRC, and US, managing energy, money lending, and property investment businesses - The company operates through a multi-layered holding structure with the parent company in the Cayman Islands and key operating subsidiaries based in Hong Kong, the Republic of Seychelles, and the Marshall Islands, which in turn hold the business assets in Hong Kong and the PRC[103](index=103&type=chunk) [Operating and Financial Review and Prospects](index=38&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Revenue growth from acquisitions is offset by substantial operating losses due to impairment charges, with the company relying on external financing and facing challenges in financial comparability due to frequent business transformations [Operating Results](index=38&type=section&id=A.%20Operating%20results.) In 2019, revenues grew significantly due to money lending and property acquisitions, but a substantial net loss of **$37.06 million** was driven by massive impairment charges on intangible assets and goodwill, primarily from the Boca segment Revenue by Major Product Line (In thousands of U.S. Dollars) | Product Line | 2019 | 2018 | | :--- | :--- | :--- | | Interest on loans | 3,930 | 980 | | Property lease and management | 1,185 | 590 | | Provision of energy saving services | 402 | - | | Product sales | 8 | 10 | | **Total** | **5,525** | **1,580** | - The company recorded significant impairment losses in 2019, which were the primary drivers of its net loss: - **Impairment of intangible assets:** **$18.89 million**, primarily related to the proprietary technology of Boca[145](index=145&type=chunk) - **Impairment of goodwill:** **$20.56 million**, also primarily attributable to the underperformance of the Boca (green energy) reporting unit[146](index=146&type=chunk) - General and administrative expenses increased by **81.9%** to **$4.35 million** in 2019 from **$2.39 million** in 2018, mainly due to the administrative costs of newly acquired subsidiaries Vision Lane and FAF[144](index=144&type=chunk) - Loss from discontinued operations, related to the Century Skyway (VR) business, was **$0.01 million** in 2019, down from **$7.51 million** in 2018. The 2018 loss was mainly due to amortization and goodwill impairment of Century Skyway[148](index=148&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=B.%20Liquidity%20and%20capital%20resources.) As of December 31, 2019, the company had **$5.16 million** in cash and **$40.74 million** in working capital, relying on external financing, with operating cash flow turning positive in 2019 despite significant debt obligations Summary of Cash Flows (In thousands of U.S. Dollars) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | 3,115 | (36,174) | (7,977) | | **Net cash (used in) provided by investing activities** | (19,265) | (10,402) | 7,400 | | **Net cash provided by financing activities** | 6,964 | 56,146 | 5,325 | | **(DECREASE) INCREASE IN CASH** | (9,186) | 9,570 | 4,748 | - The company relies on external financing. In 2019, it secured a bank loan of **$6.4 million**. In 2018, it raised approximately **$50.15 million** from a rights offering and **$5.78 million** from convertible notes[155](index=155&type=chunk)[157](index=157&type=chunk)[161](index=161&type=chunk) - As of Dec 31, 2019, the company had significant debt obligations, including **$6.4 million** in bank loans, **$4.26 million** in other loans from unrelated parties, and a liability component of convertible notes[161](index=161&type=chunk) [Contractual Obligations](index=55&type=section&id=F.%20Tabular%20disclosure%20of%20contractual%20obligations.) As of December 31, 2019, total contractual obligations were **$15.28 million**, with the majority (**$7.91 million**) due in more than five years, primarily long-term bank loans Contractual Obligations as of December 31, 2019 (In thousands of U.S. Dollars) | | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term bank loans | 6,410 | 155 | 334 | 360 | 5,561 | | Future interest payment on bank loans | 3,480 | 246 | 456 | 431 | 2,347 | | Other loan - unsecured | 3,877 | 3,877 | - | - | - | | Other Obligations | 1,508 | 954 | 109 | 66 | - | | **Total** | **15,275** | **5,612** | **899** | **857** | **7,908** | [Directors, Senior Management and Employees](index=55&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section outlines the company's leadership, compensation, and governance, noting recent changes, a five-member board, **11** employees, and concentrated share ownership among key principal shareholders - As of December 31, 2019, the company had **11 full-time employees**, all in management and administration[192](index=192&type=chunk) Principal Shareholders (as of June 10, 2020) | Name | Number of Shares | Percent | | :--- | :--- | :--- | | Victor Or | 16,356,500 | 17.0% | | Prime Ocean Holdings Limited | 29,000,000 | 30.2% | | Leung Iris Chi Yu | 23,132,500 | 24.1% | [Major Shareholders and Related Party Transactions](index=64&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) Ownership is highly concentrated among three principal shareholders, with significant related party transactions, notably **$21.3 million** in loans receivable from shareholder Victor Or and payments for IT services - The company has significant related party transactions with shareholder Victor Or. The company's subsidiary, GCL, provided multiple loans to Mr. Or and other parties[195](index=195&type=chunk) Loans to Shareholder Victor Or and other parties | Date | Amount | Status as of Dec 31, 2019 | | :--- | :--- | :--- | | Sep 26, 2018 | HK$11.5M ($1.5M) | Outstanding, term extended to Sep 2020 | | Sep 26, 2018 | HK$116.5M ($14.9M) | Outstanding, term extended to Sep 2020 | | Oct 3, 2018 | HK$20.0M ($2.6M) | Repaid in 2019 | | Mar 14, 2019 | HK$7.0M ($0.9M) | Repaid in 2019 | | Nov 1, 2019 | HK$38.0M ($4.9M) | Outstanding, maturing Oct 2020 | - As of December 31, 2019, total loans receivable due from Mr. Or and two other unrelated parties amounted to **$21.3 million** (HK$166.0 million)[195](index=195&type=chunk) - In 2019, the company paid GFS (acquired from Victor Or in Jan 2020) **$1.58 million** for IT consultancy and support services[195](index=195&type=chunk) [Quantitative and Qualitative Disclosure about Market Risk](index=75&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company faces significant market risks, including credit risk from concentrated lending, unhedged foreign exchange risk from RMB exposure, and interest rate risk from floating-rate borrowings, with a **100 basis point** change impacting pre-tax loss by **$0.06 million** - **Credit Risk:** A significant risk from lending activities, concentrated geographically in Hong Kong. The company requires collateral to minimize risk, but has high customer concentration[227](index=227&type=chunk)[228](index=228&type=chunk) - **Foreign Exchange Risk:** The company is exposed to fluctuations between the RMB and the USD, as a portion of its earnings and assets are in RMB. The company does not currently use hedging transactions to mitigate this risk[229](index=229&type=chunk) - **Interest Rate Risk:** Arises from bank borrowings with floating rates. A **100 basis point (1%)** change in interest rates is estimated to impact pre-tax loss by **$0.06 million** as of December 31, 2019[230](index=230&type=chunk) Part II [Controls and Procedures](index=76&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2019, due to material weaknesses in internal control, including insufficient qualified accounting personnel and inadequate review functions, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2019[232](index=232&type=chunk) - Material weaknesses in internal control were identified: - Lack of sufficient qualified accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements - Insufficient internal control personnel to set up adequate review functions at each reporting level - Limited written documentation on monitoring loan risk assessment on a regular basis[233](index=233&type=chunk) - Remediation measures include seeking additional accounting staff, hiring a permanent CFO, providing further training, and implementing more stringent documentation for credit risk[235](index=235&type=chunk) - The annual report does not include an attestation report from the registered public accounting firm on internal control over financial reporting, as the company is a non-accelerated filer[236](index=236&type=chunk) Part III [Financial Statements](index=79&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the audited consolidated financial statements for 2017-2019, prepared under U.S. GAAP with an unqualified opinion, reflecting the company's complex structure, discontinued operations, significant related party loans, and substantial goodwill impairments - The independent registered public accounting firm, Centurion ZD CPA & Co., provided an unqualified opinion on the consolidated financial statements[252](index=252&type=chunk) [Notes to Consolidated Financial Statements](index=89&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail discontinued operations (CSL), significant related party loans (Victor Or), a history of numerous acquisitions, substantial goodwill and intangible asset impairments (Boca, CSL), and a high concentration of credit risk - **Note 3 - Discontinued Operations:** The operations of Century Skyway Limited (CSL) were reported as discontinued operations following a plan to dispose of the remaining **51% interest**, which was completed on December 31, 2019[306](index=306&type=chunk) - **Note 8 - Acquisitions:** The company has engaged in numerous business combinations, acquiring Boca (energy), CSL (VR), GCL (lending), Paris Sky (property), Vision Lane (lending/property), and GFS (fintech), which has fundamentally reshaped its balance sheet and operations[326](index=326&type=chunk)[331](index=331&type=chunk)[335](index=335&type=chunk) - **Note 11 - Goodwill:** The company recognized significant goodwill impairment losses from continuing operations (related to Boca) of **$20.56 million** in 2019, **$10.33 million** in 2018, and **$5.62 million** in 2017 due to underperformance of the green energy segment[349](index=349&type=chunk)[351](index=351&type=chunk) - **Note 25 - Concentration of Risks:** There is a high concentration of credit risk. As of Dec 31, 2019, loans receivable due from one customer (shareholder Victor Or) accounted for **52%** of the total loan receivable balance[385](index=385&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark one) ¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19 ...