
PART I Key Information 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 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 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 budgets77 - Increased regulatory oversight, especially concerning privacy and data protection for its fintech subsidiary GFS, could lead to fines and operational changes81 - Intense competition and the need for continuous innovation pose threats to market share and profitability104 - The strategy of acquiring complementary businesses may fail and result in impairment losses108 - 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 business143 - The legal systems in Hong Kong and the PRC present uncertainties that could limit legal protections146 - 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 securities151 - Risks Related to Shares and Listing: - The company may fail to meet NASDAQ's continued listing requirements174 - 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 years209 - The company is a foreign private issuer, exempting it from certain U.S. reporting and governance rules, offering less protection to shareholders197 - 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. investors199 Information on the Company 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 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 model219235239 - Acquired Giant Credit Limited in December 2017, marking its entry into the money lending business in Hong Kong255 - Expanded into property investment through the acquisitions of 11 Hau Fook Street Limited and Paris Sky Limited in 2018256257 - Acquired Giant Financial Services Limited (GFS) for $64.34 million in January 2020 to enter the fintech market, providing an online financial marketplace259260 Business Overview 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 services263 - The money lending business is conducted through licensed Hong Kong subsidiaries, Giant Credit Limited and First Asia Finance Limited264265 - The fintech arm, Giant Financial Services (GFS), operates an online financial marketplace using technologies like AI and blockchain to connect financial institutions with users267268 Property, Plant and Equipment 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 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 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 2020357359360 - 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)371366 - 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 loans372 Liquidity and Capital Resources 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 million389 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 loss393 - The company fully settled a bank borrowing of $6.41 million from OCBC Wing Hang Bank on March 3, 2021391 Contractual Obligations 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 This section outlines the company's leadership compensation, board structure, small employee base, and concentrated share ownership Compensation 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 expenses432 - 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 directors433434 Board Practices 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 - The company has three board committees: Audit, Compensation, and Nominating, with defined memberships and responsibilities445446448 Employees 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 positions457 Share Ownership 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, 2022460 Major Shareholders and Related Party Transactions 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 2019462464465 - The promissory note of $28.47 million issued to Victor Or as part of the GFS acquisition was fully settled by March 30, 2021463 - 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 shareholder470 Financial Information 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 likely475 - The company does not expect to pay any cash dividends in the foreseeable future, intending to retain earnings to finance business expansion476 Quantitative and Qualitative Disclosure About Market Risk 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, 2021537541 - There is significant customer concentration risk, with two major customers accounting for 17% and 10% of total revenues in 2021546547 - 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 scheme550551 - As of December 31, 2021, loans receivable from 4 customers accounted for 11%, 15%, 21% and 26% of the total loan receivable balance544 PART II Controls and Procedures 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, 2021558 - 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 expertise560 - Remediation measures include seeking additional accounting and internal control staff, hiring a permanent CFO with SEC experience, and implementing stricter documentation and policies561 Principal Accountant Fees and Services 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 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 auditor575579 - The company stated there were no disagreements with the former auditor, CZD, on any matter of accounting principles or practices576 PART III Financial Statements 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 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 respects592 - 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 2021599 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, 2021604 - Predecessor auditor Centurion ZD CPA & Co. issued an opinion on the 2019 financial statements, noting they were restated and that discontinued operations were reclassified609613614 Notes to Consolidated Financial Statements 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, respectively717723 - 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 million731734 - 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 unit794800 - 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 thousand842