AGBA (US:AGBA)2023-08-10 16:00PART I Financial Statements The company reported significant revenue growth but a widened net loss and negative operating cash flow, raising going concern doubts Unaudited Condensed Consolidated Balance Sheets Consolidated Balance Sheet Highlights (as of June 30, 2023) | Metric | June 30, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Total Current Assets | 45,243,012 | 55,756,165 | | Total Assets | 95,302,257 | 101,221,333 | | Total Current Liabilities | 81,523,888 | 97,020,648 | | Total Liabilities | 92,798,926 | 97,071,054 | | Total Shareholders' Equity | 2,503,331 | 4,150,279 | - As of June 30, 2023, the company had cash and cash equivalents of $3.8 million and restricted cash of $27.5 million, a significant decrease from $6.4 million and $44.8 million respectively at the end of 20229 - The company reported a working capital deficit of approximately $36.3 million as of June 30, 2023 (Current Assets of $45.2 million vs. Current Liabilities of $81.5 million)9 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary (Three Months Ended June 30) | Metric | 2023 (USD) | 2022 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 17,370,933 | 4,089,672 | +324.8% | | Total Operating Cost and Expenses | (27,764,067) | (7,598,058) | +265.5% | | Loss from Operations | (10,393,134) | (3,508,386) | +196.3% | | Net Loss | (10,585,289) | (10,891,315) | -2.8% | Statement of Operations Summary (Six Months Ended June 30) | Metric | 2023 (USD) | 2022 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 28,444,613 | 6,165,995 | +361.4% | | Total Operating Cost and Expenses | (53,421,555) | (11,586,698) | +361.1% | | Loss from Operations | (24,976,942) | (5,420,703) | +360.7% | | Net Loss | (22,657,899) | (11,338,709) | +99.8% | - Net loss per share for the six months ended June 30, 2023, was $(0.36), an increase from $(0.20) in the same period of 202213 Unaudited Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Six Months Ended June 30) | Metric | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | (19,265,823) | (2,448,816) | | Net cash provided by (used in) investing activities | 4,477,035 | (6,853,289) | | Net cash used in financing activities | (5,316,618) | (13,139,326) | | Net change in cash, cash equivalents and restricted cash | (20,055,641) | (22,752,426) | - The company's total cash, cash equivalents, and restricted cash decreased from $51.3 million at the beginning of the period to $31.2 million at the end of June 20232021 Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's platform business, confirm going concern issues, and outline legal proceedings and concentration risks - The company operates a wealth and health platform offering financial services including insurance, pensions, brokerage, and lending, primarily in Hong Kong24 - Management has expressed substantial doubt about the company's ability to continue as a going concern due to a net loss of $22.7 million, negative operating cash flow of $19.3 million for the first six months of 2023, and an accumulated deficit of $62.1 million as of June 30, 2023101103291 - The company is involved in several legal proceedings, including allegations of trademark infringement, deceit, and misrepresentation, with outcomes and potential losses currently indeterminable201202203 - For the six months ended June 30, 2023, four major customers accounted for 23%, 16%, 11%, and 11% of total revenues, indicating a significant concentration of risk190191 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth from Distribution Business, increased expenses, and critical liquidity issues with going concern risk Business Overview - The company operates as a one-stop financial supermarket in Hong Kong, serving over 400,000 customers across four main business areas: Distribution, Platform, Healthcare, and Fintech210 - The Distribution Business is the largest in the market, with its Financial Advisors Business ("Focus") having approximately 1,354 financial advisors as of June 30, 2023210214 - The Platform Business offers over 1,800 financial products from 44 insurance providers and 40 asset management fund houses211222 Results of Operations Revenue by Business Segment (Three Months Ended June 30) | Business Segment | 2023 (USD thousands) | 2022 (USD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Distribution Business | 16,006 | 2,374 | +574.2% | | Platform Business | 1,365 | 1,715 | -20.4% | | Total | 17,371 | 4,089 | +324.8% | Revenue by Business Segment (Six Months Ended June 30) | Business Segment | 2023 (USD thousands) | 2022 (USD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Distribution Business | 25,693 | 2,554 | +906.0% | | Platform Business | 2,752 | 3,611 | -23.8% | | Total | 28,445 | 6,165 | +361.4% | - The significant increase in Distribution Business revenue is because commissions generated by financial advisors associated with 'Focus' were not fully reflected in the 2022 results235254 - Total other general and administrative expenses for Q2 2023 increased by 637.9% YoY to $8.7 million, driven by higher legal and professional fees ($1.9 million), management fees ($1.2 million), and share-based compensation ($3.3 million)243 Liquidity and Capital Resources - The company reported a net loss of $22.7 million and negative operating cash flow of $19.3 million for the six months ended June 30, 2023275 - Management states that currently available cash of $3.8 million is not sufficient to meet planned obligations for the next 12 months, reinforcing the going concern risk275291 - The company's working deficit decreased by $5.0 million to $36.3 million as of June 30, 2023, from $41.3 million at the end of 2022283284 - The company has capital commitments including a remaining subscription of $1.1 million for notes, a $0.3 million capital contribution to an investment fund, and an issuance of 2,000,000 ordinary shares for services294 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, AGBA Group Holding Limited is exempt from providing market risk disclosures - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a "smaller reporting company"300 Controls and Procedures Management concluded the company's disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective301 - There were no changes in the company's internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls302 PART II – OTHER INFORMATION Legal Proceedings The company is involved in three ongoing legal cases concerning trademark infringement, deceit, and misrepresentation, with indeterminable outcomes - The company is a defendant in a trademark infringement case (HCA702/2018) with a trial scheduled for November-December 2024303 - A lawsuit (HCA765/2019) alleges deceit and misrepresentation, seeking approximately $2 million in damages304 - Another case (HCA2097 and 2098/2020) alleges misrepresentation and conspiracy related to a corporate bond investment, seeking damages of approximately $1.67 million305 Risk Factors As a smaller reporting company, AGBA is exempt from disclosing specific risk factors under this item - The company is not required to disclose risk factors as it is a smaller reporting company306 Unregistered Sales of Equity Securities and Use of Proceeds A share repurchase program for up to 1,000,000 ordinary shares was approved, but no shares were repurchased in Q2 2023 - A share repurchase program for up to 1,000,000 ordinary shares was approved on April 18, 2023307 - No shares were repurchased during the second quarter of fiscal 2023307308 Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities309 Other Information No other information was reported under this item - No other information was reported under this item309