AGBA (AGBA) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements Q1 2023 revenues increased to $11.1 million, yet a $12.1 million net loss and $10.2 million negative operating cash flow reflect significant financial strain Unaudited Condensed Consolidated Balance Sheets Consolidated Balance Sheet Summary (as of March 31, 2023 vs. December 31, 2022) | Balance Sheet Item | March 31, 2023 (USD) | December 31, 2022 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 3,653,778 | 6,449,876 | | Restricted cash | 44,982,294 | 44,844,196 | | Total current assets | 54,245,402 | 55,756,165 | | Total non-current assets | 43,420,037 | 45,465,168 | | Total Assets | 97,665,439 | 101,221,333 | | Liabilities & Equity | | | | Total current liabilities | 94,764,893 | 97,020,648 | | Total long-term liabilities | 49,481 | 50,406 | | Total Liabilities | 94,814,374 | 97,071,054 | | Accumulated deficit | (51,467,743) | (39,395,133) | | Total Shareholders' Equity | 2,851,065 | 4,150,279 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Consolidated Statement of Operations Summary (For the three months ended March 31) | Income Statement Item | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Total revenues | 11,073,680 | 2,076,323 | | Total operating cost and expenses | (25,657,488) | (3,988,640) | | Loss from operations | (14,583,808) | (1,912,317) | | Total other income, net | 2,484,550 | 1,884,420 | | Loss before income taxes | (12,099,258) | (27,897) | | Net Loss | (12,072,610) | (447,394) | | Net loss per ordinary share | (0.20) | (0.01) | Unaudited Condensed Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Summary (For the three months ended March 31) | Cash Flow Item | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | (10,196,863) | 1,330,672 | | Net cash provided by (used in) investing activities | 3,989,392 | (6,852,870) | | Net cash provided by (used in) financing activities | 3,467,622 | (14,524,849) | | Net change in cash, cash equivalents and restricted cash | (2,658,000) | (20,147,400) | | Total cash, cash equivalents and restricted cash (End of Period) | 48,636,072 | 52,934,007 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's business, accounting policies, going concern uncertainty, related party transactions, legal proceedings, and customer concentration - The Company operates a wealth and health platform offering financial services (insurance, brokerage, funds, lending) and is also engaged in fintech and healthcare investments[22] - There is substantial doubt about the Company's ability to continue as a going concern due to a net loss of $12.1 million and $10.2 million in negative operating cash flow for Q1 2023. The company has obtained financial support from its major shareholder to sustain operations for the next 12 months[86][88] - The company is involved in several legal proceedings, including alleged trademark infringement and misrepresentation related to fund subscriptions, with outcomes and potential losses currently indeterminable[166][167][168] - For Q1 2023, three customers (A, B, and C) accounted for 25%, 12%, and 11% of total revenues, respectively, indicating significant customer concentration risk[153][154] Revenue Disaggregation by Segment (Q1 2023) | Segment | Revenue (USD) | | :--- | :--- | | Distribution Business | 9,687,819 | | Platform Business | 1,385,861 | | Total | 11,073,680 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 revenue growth from the Distribution Business, offset by rising operating expenses, resulting in a $12.1 million net loss and strained liquidity Business Overview - The company operates as a one-stop financial supermarket in Hong Kong with four main business areas: Distribution, Platform, Healthcare, and Fintech[178] - The Distribution Business is the largest in the market, with around 1,600 financial advisors under the "Focus" brand[178][181] - The Platform Business ("OnePlatform") offers over 1,800 financial products from 44 insurance providers and 40 asset management fund houses[179][188] - The Healthcare Business holds a 4% stake in HCMPS, a leading healthcare management organization in Hong Kong and Macau with over 800 doctors in its network[179][192] - The Fintech Business holds an investment portfolio including stakes in UK digital bank Tandem Money Limited and US digital health insurer Oscar Health Inc[179][189] Results of Operations Q1 2023 vs Q1 2022 Performance | Metric (in thousands USD) | Q1 2023 | Q1 2022 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 11,073 | 2,076 | 8,997 | 433.38% | | Total Operating Expenses | (25,657) | (3,988) | (21,669) | 543.36% | | Loss from Operations | (14,584) | (1,912) | (12,672) | 662.76% | | Net Loss | (12,073) | (447) | (11,626) | 2,600.89% | - Revenue from the Distribution Business increased by 5,282.22% to $9.7 million, accounting for 87.5% of total revenue in Q1 2023[197] - Commission expense increased by 940.66% to $7.3 million, driven by the significant revenue growth in the Distribution Business[201] - Personnel and benefit expenses increased by $7.6 million, primarily due to increased headcount and $1.3 million in share-based compensation[204] - Other general and administrative expenses rose by 544.93% to $5.9 million, driven by higher legal/professional fees, management fees, and $2.6 million in share-based compensation for a consultant[206] Liquidity and Capital Resources - The company has a history of operating losses and negative cash flow, reporting a net loss of $12.1 million and negative operating cash flow of $10.2 million in Q1 2023[214] - As of March 31, 2023, the company had a working deficit of $40.5 million and a cash balance of only $3.7 million available for working capital[214][223][224] - Management states that currently available cash is insufficient to meet planned obligations for the next 12 months, raising going concern issues. The company is evaluating funding alternatives, including external borrowings and equity/debt markets[214][215] - The company has capital commitments including a forward share purchase liability of $13.6 million, a notes receivable subscription commitment of $1.1 million, and a capital contribution commitment of $0.3 million[234] Quantitative and Qualitative Disclosures about Market Risk The company, as a "smaller reporting company," is not required to provide the information for this item - As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the company is not required to provide information for this item[239] Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[241] - There were no changes in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[242] PART II – OTHER INFORMATION Legal Proceedings The company faces ongoing legal proceedings, including trademark infringement and misrepresentation cases with claims up to $2 million, with indeterminable outcomes - The company is a defendant in a case alleging infringement of registered trademarks (Action Case: HCA702/2018). The trial date has not yet been fixed[244] - A subsidiary is involved in a case alleging deceit and misrepresentation related to a fund subscription, with the plaintiff claiming damages of approximately $2 million (Action Case: HCA765/2019)[245] - The company is a defendant in a case alleging misrepresentation and conspiracy related to a corporate bond investment, with a claim for damages of approximately $1.67 million (Action Case: HCA2097 and 2098/2020)[246] Risk Factors As a smaller reporting company, AGBA Group Holding Limited is not required to provide disclosures under this item - As a smaller reporting company, the company is not required to make disclosures under this Item[247] Unregistered Sales of Equity Securities and Use of Proceeds The company issued 2,173,913 ordinary shares to settle a $4 million fee and approved a share repurchase program for up to 1 million ordinary shares - On March 21, 2023, the company issued 2,173,913 ordinary shares to Apex Twinkle Limited to settle a $4 million payment[247] - On April 18, 2023, the company approved a share repurchase program to buy back up to 1 million ordinary shares at a maximum price of $10 per share, expiring in April 2024[248] Defaults Upon Senior Securities None reported - None[248] Mine Safety Disclosures Not applicable - Not applicable[250] Other Information Not applicable - Not applicable[250] Exhibits This section lists exhibits filed with Form 10-Q, including officer certifications and Inline XBRL data files - The report includes required certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[252] - Inline XBRL data files (Instance, Calculation, Schema, Definition, Labels, Presentation) are filed with this report[252]