AGBA Group Holding Ltd

Previous wording

Our largest distribution channel is the FA Business, operating under the brand name Focus. With its large salesforce of financial advisors, “Focus” provides a wide range of financial products and independent advisory services to individual and corporate customers, primarily in connection with life insurance products. Our FA Business has been the clear market leader in the insurance brokerage industry in Hong Kong for decades, building up a large and highly productive salesforce. As of March 31, 2024, there were around 1,030 financial advisors at “Focus”, organized into 22 sales teams. Each team is led by a “tree head”, responsible for managing the financial advisors within their teams.

Current wording

Our largest distribution channel is the FA Business, operating under the brand name Focus. With its large salesforce of financial advisors, “Focus” provides a wide range of financial products and independent advisory services to individual and corporate customers, primarily in connection with life insurance products. Our FA Business has been the clear market leader in the insurance brokerage industry in Hong Kong for decades, building up a large and highly productive salesforce. As of June 30, 2024, there were around 670 financial advisors at “Focus”, organized into 15 sales teams. Each team is led by a “tree head”, responsible for managing the financial advisors within their teams.

Previous wording

During the first quarter of 2024, we continued to make significant investments into developing and expanding our financial advisors salesforce, broadening and deepening the product range, as well as upgrading the supporting infrastructure. Our infrastructure not only supports the financial consultants in engaging with their customers, it also provides extensive operational support in relation to the processing of transactions, associated payment flows, as well as after-sales services. Building our infrastructure required substantial investments into technological, operational and financial systems, as well as the development of comprehensive operational and support teams (operations support, customer services, payments, etc.). Since many of the financial products offered to our customers are regulated, on top of the various operational requirements, we have built significant internal capabilities in the areas of risk and internal control, as well as legal and compliance to ensure an appropriate level of regulatory compliance and supervision.

Current wording

During 2024, we continued to make significant investments into developing and expanding our financial advisors salesforce, broadening and deepening the product range, as well as upgrading the supporting infrastructure. Our infrastructure not only supports the financial consultants in engaging with their customers, it also provides extensive operational support in relation to the processing of transactions, associated payment flows, as well as after-sales services. Building our infrastructure required substantial investments into technological, operational and financial systems, as well as the development of comprehensive operational and support teams (operations support, customer services, payments, etc.). Since many of the financial products offered to our customers are regulated, on top of the various operational requirements, we have built significant internal capabilities in the areas of risk and internal control, as well as legal and compliance to ensure an appropriate level of regulatory compliance and supervision.

Previous wording

For the three months ended March 31, 2024, the Company made $6.4 million from commission in the Distribution Business. The revenue attributed to the Company during the first quarter of 2024 only captured an insignificant portion of the revenues actually generated by the financial advisors currently associated with Focus.

Current wording

For the six months ended June 30, 2024, the Company made $10.5 million from commission in the Distribution Business. The revenue attributed to the Company during the first half year of 2024 only captured an insignificant portion of the revenues actually generated by the financial advisors currently associated with Focus.

Previous wording

The OnePlatform brand currently covers 91 insurance providers selling 1,104 products, and 53 asset management fund houses with over 1,137 products.

Current wording

The OnePlatform brand currently covers 95 insurance providers selling 1,204 products, and 54 asset management fund houses with over 1,151 products.

Previous wording

The Distribution Business contributed 83.79% and 87.49% of the total revenue for the three months ended March 31, 2024 and 2023, respectively. Income from the Distribution Business mainly related to commissions earned, which decreased by US$3.3 million, or 33.78%, from US$9.7 million in 2023 to US$6.4 million in 2024. The decrease in revenue primarily attributed from the economic recession and outward migration in Hong Kong. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name.

Current wording

The Distribution Business contributed 83.21% and 92.14% of the total revenue for the three months ended June 30, 2024 and 2023, respectively. Income from the Distribution Business mainly related to commissions earned, which decreased by US$11.91 million, or 74.42%, from US$16.0 million in 2023 to US$4.1 million in 2024. The decrease in revenue primarily attributed from the economic recession and outward migration in Hong Kong. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name.

Previous wording

Interest expense increased by US$0.04 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was mainly attributed to the increase in short-term borrowings in the third quarter of 2023.

Current wording

Interest expense increased by US$0.12 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was mainly attributed to the interest expense and amortization of the debt discount on convertible notes payable.

Previous wording

The Distribution Business contributed 92.10% and 94.75% of the total commission expense for the three months ended March 31, 2024 and 2023, respectively. Commission expense for the Distribution Business decreased by US$2.8 million, or 40.75%, from US$6.9 million in 2023 to US$4.1 million in 2024. As a result of the decrease in revenue associated with the Distribution Business, commission expense decreased correspondingly.

Current wording

The Distribution Business contributed 90.05% and 97.03% of the total commission expense for the three months ended June 30, 2024 and 2023, respectively. Commission expense for the Distribution Business decreased by US$10.4 million, or 89.81%, from US$11.6 million in 2023 to US$1.2 million in 2024. As a result of the decrease in revenue associated with the Distribution Business, commission expense decreased correspondingly.

Previous wording

Sales and marketing expense decreased by US$1.4 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease in sales and marketing expense is mainly attributed to lower spending associated with “AGBA” corporate branding and associated product campaigns for celebrating the successful listing.

Current wording

Sales and marketing expense decreased by US$0.5 million or 94.17% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease in sales and marketing expense is mainly attributed to lower spending associated with “AGBA” corporate branding and associated product campaigns for celebrating the successful listing.

Previous wording

Research and development expense decreased by US$0.4 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The slight decrease was primarily due to decreased in headcounts.

Current wording

Research and development expense decreased by US$0.6 million or 53.26% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The slight decrease was primarily due to decreased in headcounts.

Previous wording

Share-based compensation for employees increased by US$0.2 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to the special grant to employees to compensate their contributions and performance and the settlement of compensation to certain directors and management team of the Company. The increase was partially offset by the decrease in the amortization of the fair value of the restricted share units due to the vested and forfeited shares in 2023. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis.

Current wording

Share-based compensation for employees decreased by US$0.8 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily due to the decrease in the amortization of the fair value of the restricted share units due to the vested and forfeited shares in 2024. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis.

Previous wording

Legal and professional fees decreased by US$0.1 million, or 18.11%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease was primarily attributed to the decrease in the US legal counsel fees and the consulting fees incurred during the period.

Current wording

Legal and professional fees decreased by US$1.0 million, or 43.77%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily attributed to the decrease in the US legal counsel fees and the consulting fees incurred during the period.

Previous wording

Loss from operations decreased by US$6.7 million, or 46.09%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease was mainly attributable to the decrease in operating expenses of US$10.1 million.

Current wording

Loss from operations decreased by US$2.7 million, or 25.55%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was mainly attributable to the decrease in operating expenses of US$15.1 million, offset by the decrease in revenues of $12.5 million.

Previous wording

Foreign exchange (loss) gain, net mainly represented the unrealized net foreign exchange (loss) gain from the translation of long-term investments which are mostly denominated in Sterling. The net foreign exchange loss increased by US$0.8 million or 140.82% for the three months ended March 31, 2024, as compared to the net foreign exchange gain for the three months ended March 31, 2023, due to the stronger Sterling exchange rate.

Current wording

Foreign exchange (loss) gain, net mainly represented the unrealized net foreign exchange (loss) gain from the translation of long-term investments which are mostly denominated in Sterling. The net foreign exchange loss increased by US$0.4 million or 114.61% for the three months ended June 30, 2024, as compared to the net foreign exchange gain for the three months ended June 30, 2023, due to the continuous strong Sterling exchange rate.

Previous wording

Investment loss increased by US$1.8 million, or 102.14%, for the three months ended March 31, 2024, as compared to the investment income for the three months ended March 31, 2023, mainly because of the decrease in realized gain from sale of marketable equity securities of $1.5 million, decrease in unrealized loss in non-marketable equity securities of US$0.4 million, and decrease in dividend income of US$0.6 million.

Current wording

Investment loss decreased by US$0.4 million, or 100.00%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, mainly because of the decrease in unrealized loss in non-marketable equity securities of US$1.0 million, and decrease in dividend income of US$0.6 million.

Previous wording

Personnel and benefit cost decreased by US$3.8 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease was primarily attributable to the reduction in headcount in both Platform Business and Distribution Business.

Current wording

Personnel and benefit cost decreased by US$2.8 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was primarily due to the decreased in headcounts in both Platform Business and Distribution Business.

Previous wording

Rental income was earned from the leasing of our owned office premises. For the three months ended March 31, 2024, the rental income decreased by US$0.05 million, or 76.27%, as compared to the three months ended March 31, 2023 was resulted from the sale of one of the office premises in 2023.

Current wording

Rental income was earned from the leasing of our owned office premises. For the six months ended June 30, 2024, the rental income decreased by US$0.1 million, or 89.86%, as compared to the six months ended June 30, 2023 was resulted from the sale of one of the office premises in 2023.

Previous wording

Income tax expense increased by US$0.7 million, or 240.74%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily attributable to the provision of income tax during the period.

Current wording

Income tax expense increased by US$0.06 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily attributable to the provision of income tax during the period.

Previous wording

Net loss decreased by US$4.0 million, or 33.23% for the three months ended March 31, 2024, as compared to March 31, 2023, primarily due to the decrease in operating expenses of US$10.1 million, offset by the decrease in total revenues of US$3.4 million and increase in other expense, net of US$2.6 million.

Current wording

Net loss decreased by US$3.2 million, or 14.25% for the six months ended June 30, 2024, as compared to six months ended June 30, 2024, primarily due to the increase in other expense, net of US$6.1 million, offset by the decrease in total revenues of US$15.9 million and decrease in operating expenses of US$25.2 million.

Previous wording

We have a history of operating losses and negative cash flow. For the three months ended March 31, 2024, we reported a net loss of US$8.1 million and reported a negative operating cash flow of US$6.9 million. As of March 31, 2024, our cash balance was US$2.1 million for working capital use. Our management estimates that currently available cash will not be able to provide sufficient funds to meet the planned obligations for the next 12 months.

Current wording

We have a history of operating losses and negative cash flow. For the six months ended June 30, 2024, we reported a net loss of US$19.4 million and reported a negative operating cash flow of US$14.2 million. As of June 30, 2024, our cash balance was US$1.8 million for working capital use. Our management estimates that currently available cash will not be able to provide sufficient funds to meet the planned obligations for the next 12 months.

Previous wording

Our ability to continue as a going concern is dependent on our ability to successfully implement our plans. Our management believes that it will be able to continue to grow our revenue base and control expenditures. In parallel, AGBA continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed in order to finance our business development activities, general and administrative expenses, and growth strategy. These alternatives include external borrowings, raising funds through public equity, or tapping debt markets. Although there is no assurance that, if needed, we will be able to pursue these fundraising initiatives and have access to the capital markets going forward. The unaudited condensed consolidated financial statements attached to this Form 10-Q do not include any adjustments that might result from the outcome of these uncertainties.

Current wording

Our ability to continue as a going concern is dependent on our ability to successfully implement our plans. Our management believes that it will be able to continue to grow our revenue base and control expenditures. In parallel, AGBA continually monitors its capital structure and search for potential funding alternatives in order to finance our business development activities and operating expenses. AGBA is continuing its plan to further grow and expand operations and seek sources of capital to pay the contractual obligations as they come due. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. Although there is no assurance that, if needed, we will be able to pursue these fundraising initiatives and have access to the capital markets going forward. The unaudited condensed consolidated financial statements attached to this Form 10-Q do not include any adjustments that might result from the outcome of these uncertainties.

Previous wording

As of March 31, 2024, we had cash and cash equivalents totalling $2.1 million, and $15.6 million in restricted cash.

Current wording

As of June 30, 2024, we had cash and cash equivalents totalling $1.8 million, and $13.8 million in restricted cash.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was primarily the result of the net loss of US$8.06 million, an increase in deposits, prepayments, and others receivable of US$0.24 million, decrease in accounts payable and accrued liabilities of US$1.63 million, decrease in escrow liabilities of US$1.23 million, decrease in lease liabilities of US$0.48 million, and decrease in income tax payable of US$0.19 million. These amounts were partially offset by the increase in accounts receivable of US$1.18 million, and non-cash adjustments consisting of share-based compensation expense of US$1.75 million, non-cash lease expense of US$0.64 million, depreciation of property and equipment of US$0.02 million, interest income on notes receivable of US$0.01 million, interest expense on borrowings of US$0.18 million, net foreign exchange loss of US$0.23 million, net investment loss of US$0.04 million, and allowance for expected credit losses of US$0.99 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was primarily the result of the net loss of US$19.4 million, an increase in deposits, prepayments, and others receivable of US$0.6 million, decrease in accounts payable and accrued liabilities of US$1.1 million, decrease in escrow liabilities of US$3.0 million, decrease in lease liabilities of US$1.0 million and decrease in income tax payable of US$0.2 million. These amounts were partially offset by the decrease in accounts receivable of US$0.01 million, and non-cash adjustments consisting of share-based compensation expense of US$2.5 million, non-cash lease expense of US$1.3 million, depreciation of property and equipment of US$0.05 million, interest income on promissory note receivables of US$0.07 million, interest expense on convertible promissory notes payable of $0.2 million, interest expense on borrowings of $0.4 million, net foreign exchange loss of US$0.3 million, provision for allowance for expected credit losses of US$1.7 million, and change in fair value of warrant liabilities of US$3.6 million.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was primarily the result of the net loss of US$12.1 million, an increase in accounts receivable of US$0.5 million, increase in deposit, prepayments, and other receivables of US$0.5 million, decrease in escrow liabilities of US$0.02 million and decrease in income tax payable of US$0.2 million. These amounts were partially offset by the decrease in loans receivables of US$0.01 million, increase in accounts payable and accrued liabilities of US$1.2 million, and non-cash adjustments consisting of share-based compensation expense of US$3.9 million, depreciation of property and equipment of US$0.1 million, net foreign exchange gain of US$0.6 million, net investment income of US$1.7 million, and change in fair value of forward share purchase liability of US$0.08 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was primarily the result of the net loss of US$22.7 million, an increase in accounts receivable of US$1.0 million, increase in deposits, prepayments, and others receivable of US$3.6 million, decrease in accounts payable and accrued liabilities of US$6.6 million, decrease in escrow liabilities of US$2.0 million, decrease in lease liabilities of US$0.2 million and decrease in income tax payable of US$0.1 million. These amounts were partially offset by the decrease in loans receivable of US$0.01 million, and non-cash adjustments consisting of share-based compensation expense of US$8.5 million, non-cash lease expense of US$0.2 million, depreciation of property and equipment of US$0.2 million, interest income on note receivables of US$0.01 million, net foreign exchange gain of US$0.9 million, net investment income of US$1.3 million, allowance for credit loss on financial instruments of US$0.3 million, loss on settlement of forward share purchase agreement of US$0.4 million and reversal of annual bonus accrued in prior year of US$3.8 million.

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2024 of US$2.17 million was primarily due to proceeds from sale of long-term investments of US$2.15 million and proceeds from disposal of property and equipment of US$0.02 million.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2024 of US$2.6 million was primarily due to proceeds from sale of long-term investments of US$2.2 million and proceeds from sale of convertible notes receivable of US$0.4 million.

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2023 of US$3.99 million was primarily due to proceeds from sale of long-term investments of US$3.97 million, dividend received from long-term investments of US$0.61 million, offset by the purchase of notes receivable of US$0.59 million.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2023 of US$4.5 million was primarily due to proceeds from sale of investments of US$4.0 million, dividend received from long-term investments of US$1.2 million, offset by the purchase of notes receivable of US$0.6 million and purchase of property and equipment of US$0.08 million.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 of US$3.50 million was primarily due to advances from the holding company of US$3.50 million.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 of US$8.5 million was primarily due to advances from holding company.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2023 of US$3.47 million was primarily due to advances from the shareholder of US$1.68 million and proceeds from borrowings of US$1.78 million.

Current wording

Net cash used in financing activities for the six months ended June 30, 2023 of US$5.3 million was primarily due to advances from holding company of US$6.8 million, proceeds from borrowings of US$1.8 million, offset by the settlement of forward share purchase agreement of US$14.0 million.

Previous wording

For the three months ended March 31, 2024, we reported a net loss of approximately US$8.06 million. With a significant decrease in our operating expenses, described in the paragraph below, we had an accumulated deficit of approximately US$73.66 million as of March 31, 2024.

Current wording

For the six months ended June 30, 2023, we reported a net loss of approximately US$19.4 million. With a significant increase in our operating costs, described in the paragraph below, we had an accumulated deficit of approximately US$85.0 million as of June 30, 2024.

Previous wording

Coupled with the economic recession in Hong Kong, we reported a sales decline with total revenue of approximately US$7.66 million for the three months ended March 31, 2024 (three months ended March 31, 2023: US$11.07 million) and resulting with an operating loss of approximately US$7.86 million (three months ended March 31, 2023: US$14.58 million). We expect to continue our business growth, while closely monitoring our future spending.

Current wording

Coupled with the economic recession in Hong Kong, we reported a sales decline with total revenue of approximately US$12.6 million for the six months ended June 30, 2024 (six months ended June 30, 2023: US$28.4 million) and resulting with an operating loss of approximately US$15.6 million (six months ended June 30, 2023: US$25.0 million). We expect to continue our business growth, while closely monitoring our future spending.

Previous wording

Our ability to continue as a going concern is dependent on the management’s ability to successfully implement its plans. Our management team believes that we will be able to continue to grow our revenue base and control our expenditures. In parallel, our management team will continually monitor our capital structure and operating plans and search for potential funding alternatives in order to finance our business development activities and operating expenses. These alternatives may include merger and acquisitions, borrowings, raising funds through public equity or debt markets. However, we cannot predict the exact amount or timing of the alternatives or guarantee those alternatives will be favorable to our shareholders. Any failure to obtain financing when required will have a material adverse impact on our business, operation and financial result.

Current wording

Our ability to continue as a going concern is dependent on the management’s ability to successfully implement its plans. Our management team believes that we will be able to continue to grow our revenue base and control our expenditures. In parallel, our management team will continually monitor our capital structure and operating plans and evaluate various potential funding alternatives that may be needed in order to finance our business development activities, general and administrative expenses and growth strategy.

Previous wording

Sale and Purchase Agreement — Pursuant to the Agreement entered with Sony Life Singapore Pte. Ltd. (“SLS”), the Company is committed to purchase 100% equity interest in Sony Life Financial Advisers Pte. Ltd. for a cash consideration of SGD2,500,000 (equivalent to $1,882,000). On December 28, 2023, the Company and SLS entered into a second supplementary agreement to extend the closing date of the transaction from December 31, 2023 to March 31, 2024. On March 29, 2024, the Company and SLS entered into a third supplementary agreement to extend the closing date of the transaction from March 31, 2024 to May 9, 2024. Pursuant to the third supplementary agreement, the Company subsequently paid SGD250,000 (equivalent to $188,200) to SLS as the partial payment to cash consideration on April 12, 2024. On May 9, 2024, the Company and SLS entered into a fourth supplementary agreement to extend the closing date of the transaction from May 9, 2024 to May 20, 2024.

Current wording

Sale and Purchase Agreement —Pursuant to the agreement dated April 5, 2023, entered with Sony Life Singapore Pte. Ltd. (“SLS”), an independent third party, the Company is committed to purchase 100% equity interest in Sony Life Financial Advisers Pte. Ltd. for a cash consideration of SGD2,500,000 (equivalent to $1,882,000). On December 28, 2023, the Company and SLS entered into a second supplementary agreement to extend the closing date of the transaction from December 31, 2023 to March 31, 2024. On March 29, 2024, the Company and SLS entered into a third supplementary agreement to extend the closing date of the transaction from March 31, 2024 to May 9, 2024. Pursuant to the third supplementary agreement, the Company paid SGD250,000 (equivalent to $188,200) to SLS as the partial payment to cash consideration on April 12, 2024. On May 9, 2024, the Company and SLS entered into a fourth supplementary agreement to extend the closing date of the transaction from May 9, 2024 to May 20, 2024. On June 18, 2024, the Company and SLS entered into a fifth supplementary agreement to extend the closing date of the transaction from May 20, 2024 to July 31, 2024. Pursuant to the fifth supplementary agreement, the Company paid an aggregate of SGD150,000 (equivalent to $112,920) as the extension fee and indemnification fee in July 2024. Up to the date of the unaudited condensed consolidated financial statements available to be issued, further extension on the closing date of the transaction is under negotiation between SLS and the Company.

Previous wording

Nasdaq Compliance — On September 20, 2023, the Company received written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that, based on the closing bid price of the Company’s ordinary shares, par value $0.001 per share (the “Ordinary Shares”), for the last 30 consecutive trading days, the Company no longer complies with the minimum bid price requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”), and Nasdaq Listing Rule 5810(c)(3)(A). The Notice had no immediate effect but, before March 18, 2024, the Company was required to regain compliance by trading at least $1.00 per share for a minimum of 10 consecutive trading days. Otherwise, after the date, subject to other requirements and conditions, the Company may proceed to delisting procedures. On March 20, 2024, Nasdaq granted an additional 180 calendar days period or until September 16, 2024, to the Company to regain the compliance. On May 3, 2024, the closing bid price of the ordinary shares of the Company has been over $1.00 per share for a minimum of 10 consecutive trading days. Accordingly, Nasdaq confirmed that the Company had regained compliance with Rule 5550(a)(2) and that this matter is now closed.

Current wording

Nasdaq Compliance —On March 20, 2024, Nasdaq granted an additional 180 calendar days period or until September 16, 2024, to the Company to regain the compliance. On May 3, 2024, the closing bid price of the ordinary shares of the Company has been over $1.00 per share for a minimum of 10 consecutive trading days. Accordingly, Nasdaq confirmed that the Company regained compliance with Rule 5550(a)(2) and that this matter is now closed.