Triller Group Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS References in this report (the “Quarterly Report”) to “we,” “us”, “the Group” or the “Company” refer to AGBA Group Holding Limited. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special Note Regarding Forward-Looking Statements This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section included in our 2022 Annual Report filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Business Overview We are a leading one-stop financial supermarket based in Hong Kong servicing over 400,000 individual and corporate customers. We offer the broadest set of financial services and healthcare products in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) through a tech-led ecosystem, enabling clients to unlock the choices that best suit their needs. We currently operate four major areas of businesses, comprising of: 1. Distribution Business: The Group’s powerful financial advisor business is the largest in the market, it engages in the personal financial advisory business (including advising and sales of a full range of financial services products including long-term life insurance, savings and mortgages), with additional internal and external channels being developed and added. 2. Platform Business: The Group operates as a “financial supermarket” offering over 1,800 financial products to a large universe of retail and corporate customers. 3. Healthcare Business: Through the Group’s 4% stake in and a strategic partnership with HCMPS, operating as one of the largest healthcare management organizations in the Hong Kong and Macau region, with over 800 doctors in its network. Established in 1979, it is one of the most reputed healthcare brands in Hong Kong. 4. Fintech Business: The Group has an ensemble of leading FinTech assets and businesses in Europe and Hong Kong. In addition to financial gains, the Group also derives substantial knowledge transfers from its investee companies, supporting the development and growth of the Group’s new business models. 29 Distribution Business The Distribution Business comprises a variety of captive financial services distribution channels. We have built a market leading financial advisors distribution channel in Hong Kong. We have also built other distribution channels alongside our market leading financial advisors business. Our combined captive distribution channels enable us to directly access one of the largest pools of customers accessible to independent financial services providers in Hong Kong. Channel Description Financial Advisors Business (“FA Business”) “Focus” is engaged in the distribution of life insurance, asset management, property-casualty and Mandatory Provident Fund products through its teams of independent financial advisors (brokers). Alternative Distribution Business A collection of distribution channels, including salaried financial planners targeting HNWI, development teams pursuing corporate partnerships and incubating financial advisors teams. Digital Business AGBA Money is a direct-to-consumer digital app that provides various financial products and services to retail customers. 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, 2023, there were around 1,600 financial advisors at “Focus”, organized into 32 sales teams. Each team is led by a “tree head”, responsible for managing the financial advisors within their teams. In addition to the FA Business, we continue to expand our distribution footprint with the establishment and expansion of a number of additional distribution channels, collectively known as our Alternative Distribution Business. These distribution channels are targeted at specific customer segments and/or capturing specific distribution opportunities. Combined with our Digital Business, we now have a well-diversified range of distribution channels and capabilities. During 2022, 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. As a result of our efforts to expand our distribution capabilities and improve our supporting infrastructure, we have successfully developed these inter-related strategic assets: ● Vast customer base in Hong Kong and growing customer base in Mainland China. ● State-of-the-art supporting infrastructure. ● Relationships with and access to a broad range of leading global financial product providers. ● Deep market knowledge and understanding. ● Highly productive and well-trained salesforce. 30 We will continue to capitalize on these core strategic assets and match them with the emerging opportunities in our three core industries (life insurance, wealth management and healthcare). For the three months ended March 31, 2023, the Company made $9.7 million from commission in the Distribution Business. The revenue attributed to the Company during the first quarter of 2023 only captured an insignificant portion of the revenues actually generated by the financial advisors currently associated with Focus. Upon the re-opening of China Border, we will continue to widen our distribution footprint and actively explore further opportunities to develop partnerships and generate customer leads on the ground in Mainland China, as well as refining our abilities to service our customer base. We expect sales volumes to return to the levels previously recorded, prior to the pandemic period, especially with the re-opening of the Mainland border and the ongoing integration of Hong Kong into the Greater Bay area. Platform Business The Platform business, through OPH and its subsidiaries, is a one-stop financial supermarket with a breadth of products and services that is unrivaled in Hong Kong sourced from leading global product providers. The Platform Business was set up to take advantage of the decades-long experience we built up in supporting the largest financial advisors salesforce in Hong Kong. We were already servicing a large pool of customers and in the process, built up a wide library of world class financial products and constructed a state-of-the-art technological and operational infrastructure. The Platform Business now operates this full-service platform under its “OnePlatform” brand and has opened it up to banks, other financial institutions, family offices, brokers, and individual independent financial advisors that are looking for support in advising and serving their retail clients. Our technology-enabled Platform Business offers a wide range of financial products, covering life insurance, pensions, property-casualty insurance, stock brokerage, mutual funds, money lending and real estate agency. In addition to its unrivaled product-shelf, the Platform Business offers digital-enabled sales management and support solutions, business operations support, comprehensive customer services, and training support. Currently, our platform financial services and investment products mainly comprise mutual fund distributions, portfolio management, money lending, insurance and Mandatory Provident Fund (MPF) products, and international real estate referral and brokerage services, as discussed below:- The OnePlatform brand currently covers 44 insurance providers selling 657 products, and 40 asset management fund houses with over 1,000 products. Fintech Business The Fintech Business has collected an ensemble of valuable fintech assets in its investment portfolio. Fintech Business’ management team has strived to establish the business as a leading name in the fintech investment sector. Core Fintech investments held under the Fintech Business as of March 31, 2023 include: 1. An investment in Tandem Money Limited, a UK digital bank. 2. An investment in CurrencyFair Limited, a B2B and B2C payments company. 3. An investment in Oscar Health Inc., a US direct-to-consumer digital health insurer. 4. An investment in Goxip Inc., a fashion media platform based in Hong Kong. 5. An investment in LC Healthcare Fund I, L.P., a PRC healthcare and healthtech investment fund. 31 Carrying amount in US$ thousands (1) March 31, 2023 December 31, 2022 Tandem Money Limited 16,399 16,031 CurrencyFair Limited 5,738 5,718 Oscar Health Inc. (2) - 2,443 Goxip Inc. 510 513 LC Healthcare Fund I, L.P. 11,379 11,805 Notes: (1) Carrying amount represents Fintech’s attributable interest in the investment portfolio asset. (2) During the three months ended March 31, 2023, the Company partially sold 993,108 shares of Oscar Health Inc. on Nasdaq Stock Exchange with an average current market price of $4.01 per share, resulting with a realized gain of $1.5 million. Healthcare Business We currently hold a 4% equity stake in HCMPS, one of the leading healthcare management organizations in Hong Kong. Founded in 1979 and currently operating under the Dr. Jones Fok & Associates Medical Scheme Management Limited (“JFA”) brand, JFA is one of the most reputed healthcare brands in Hong Kong. It has four self-operated medical centers and a network of over 700 healthcare service providers – providing healthcare schemes for more than 500 corporate clients with over 300,000 scheme members. JFA’s clients include blue chip companies from various industry and leading insurers. Apart from Hong Kong, JFA is the largest operator in Macau with around 70 clinics. JFA operates a city-wide medical network that includes 340 general practitioners (“GP”), 11 laboratories and imaging centers, 273 specialist doctors, 25 physiotherapy centers, 12 Chinese medicine practitioner clinics, all based in Hong Kong, and 69 GP clinics in Macau. Over 380,000 out-patient and in-patient visits are recorded annually through HCMPS’s medical network. JFA offers its patients a full range of medical services, including general services, specialist services, physiotherapy, Chinese medicine, dental, vaccination, X-ray, laboratories and imaging services. We believe that the future of healthcare is in “Smart Health” – technology that offers improved patient-care management and leverages data as the new tool for solving complex healthcare challenges with reduced operating costs. We will focus on technology/digitalization and consumerization of healthcare to create an ecosystem empowering customers to proactively manage their health and well-being and to improve their access to healthcare at a lower cost – with connectivity across the care continuum. We believe that JFA has the captive customer base, infrastructure and product/service offerings to optimize customer experience to further grab market share. We are currently working to transform JFA into the best medical care institution in Asia by 2025, redefining industry standards in the Greater Bay Area and offering market-leading customer care and best-in-class infrastructure empowered by data analytics. 32 Results of Operations Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Revenues: Interest income: Loans $ 38 $ 61 (23 ) (37.70 ) Total interest income 38 61 (23 ) (37.70 ) Non-interest income: Commissions 10,016 827 9,189 1,111.12 Recurring service fees 780 948 (168 ) (17.72 ) Total non-interest income 10,796 1,775 9,021 508.23 Total revenues from others 10,834 1,836 8,998 490.09 Non-interest income: Recurring service fees 239 240 (1 ) 0.42 Total revenues from related parties 239 240 (1 ) 0.42 Total revenues 11,073 2,076 8,997 433.38 Operating cost and expenses: Interest expense (165 ) — 165 N/A Commission expense (7,295 ) (701 ) 6,594 940.66 Sales and marketing expense (1,857 ) (240 ) 1,617 673.75 Technology expense (879 ) (134 ) 745 555.97 Personnel and benefit expense (9,605 ) (2,005 ) 7,600 379.05 Other general and administrative expenses (5,856 ) (908 ) 4,948 544.93 Total operating cost and expenses (25,657 ) (3,988 ) 21,669 543.36 Loss from operations (14,584 ) (1,912 ) 12,672 662.76 Other income (expense): Bank interest income 170 8 162 2,025.00 Foreign exchange gain (loss), net 556 (481 ) 1,037 215.59 Investment income, net 1,723 2,149 (426 ) (19.82 ) Change in fair value of warrant liabilities 1 — 1 N/A Change in fair value of forward share purchase liability (82 ) — 82 N/A Rental income 59 79 (20 ) (25.32 ) Sundry income 57 129 (72 ) (55.81 ) Total other income, net 2,484 1,884 600 31.85 Loss before income taxes (12,100 ) (28 ) 12,072 43,114.29 Income tax benefit (expense) 27 (419 ) 446 106.44 NET LOSS $ (12,073 ) $ (447 ) 11,626 2,600.89 Revenue The following table summarizes the major operating revenues for the three months ended March 31, 2023 and 2022: Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Business segment Distribution Business $ 9,688 $ 180 9,508 5,282.22 Platform Business 1,385 1,896 (511 ) (26.95 ) Fintech Business — -— — — Healthcare Business — — — — TOTAL $ 11,073 $ 2,076 8,997 433.38 33 Distribution Business The Distribution Business contributed 87.49% and 8.67% of the total revenue for the three months ended March 31, 2023 and 2022, respectively. Income from the Distribution Business mainly related to commissions earned, which significantly increased by US$9.5 million, or 5,282.22%, from US$0.2 million in 2022 to US$9.7 million in 2023. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name. Commissions generated by the financial advisors currently associated with Focus, along with associated potential platform commissions and fees, were attributable to the Legacy Group and as such not reflected in the results for the Distribution Business for 2022. Summarized revenue breakdown by product and type of contracts: Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % By product: Life insurance $ 8,926 $ 145 8,781 6,055.86 Property-casualty insurance 504 1 503 50,300.00 Mandatory provident fund and related revenues 258 34 224 658.82 9,688 180 9,508 5,282.22 By the type of contracts: - New and or current year 9,519 70 9,449 13,498.57 - Recurring 169 110 59 53.64 $ 9,688 $ 180 9,508 5,282.22 Platform Business The Platform Business contributed 12.51% and 91.33% of the total revenue for the three months ended March 31, 2023 and 2022, respectively. Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Commissions $ 340 $ 647 (307 ) (47.45 ) Recurring service fees 1,007 1,188 (181 ) (15.24 ) Loans 38 61 (23 ) (37.70 ) $ 1,385 $ 1,896 (511 ) (26.95 ) Operating Expenses Commission Expense Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Business segment Distribution Business $ 6,912 $ 68 6,844 10,064.71 Platform Business 383 633 (250 ) (39.49 ) Fintech Business — -— — — Healthcare Business — — — — TOTAL $ 7,295 $ 701 6,594 940.66 The Distribution Business contributed 94.75% and 9.70% of the total commission expense for the three months ended March 31, 2023 and 2022, respectively. Commission expense for the Distribution Business increased by US$6.8 million, or 10,064.71%, from US$0.07 million in 2022 to US$6.9 million in 2023. As a result of the increase in revenue associated with the Distribution Business, commission expense significantly increased. 34 Sales and Marketing Expense Sales and Marketing expense increased by US$1.6 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase in sales and marketing expense mainly reflects spending associated with “AGBA” corporate branding and associated product campaigns, celebrating it’s the successful listing, through public relations, corporate video and campaigns, digital marketing and public advertisements. Technology Expense Technology expense increased by US$0.7 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily due to increased headcount to support anticipated growth in the business and platform expansion. Personnel and Benefit Expense Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Personnel and benefit $ 8,287 $ 2,005 6,282 313.32 Share-based compensation to employees 1,318 — 1,318 N/A Total $ 9,605 $ 2,005 7,600 379.05 Personnel and benefit cost increased by US$6.3 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily due to the increased headcount to support the continuing growth of the Platform Business and Distribution Business. Share-Based Compensation Pursuant to the Share Award Scheme (the “Scheme”), the Company filed S-8 registration statement to register 11,675,397 ordinary shares on February 24, 2023. During the three months ended March 31, 2023, the Company recorded US$1.3 million in share-based compensation expense on the restricted share units. There was no such expense during the three months ended March 31, 2022. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis. Other General and Administrative Expenses Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Depreciation $ 101 $ 97 4 4.12 Financial data subscription expense 94 130 (36 ) (27.69 ) Legal and professional fees 806 109 697 639.45 Management fee expense 2,200 505 1,695 335.64 Share-based compensation (service related) 2,589 — 2,589 N/A Other operating expenses 66 67 (1 ) (1.49 ) Total $ 5,856 $ 908 4,948 544.93 Total other general and administrative expenses increased by US$4.9 million, or 544.93%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The net increase was mainly due to the increase in legal and professional fees of US$0.7 million, management fee expense of US$1.7 million, share-based compensation of $2.6 million, offset by a decrease in financial data subscription expense of US$0.04 million. Upon the consummation of Business Combination, the post-combination entity has expensed more as a listed company, with a significant increase in the legal and professional fees and management fee expense increased were primarily attributed to 1) the US legal counsel fee incurred and 2) the office and administrative expenses pay to the shareholder for the use of office premises in Trust Tower and Hopewell Centre, including building management fees, government rates and rent, office rent, lease-related interest, and depreciation actually incurred by the shareholder, with the increased occupancy from business expansion. Share-based compensation in the first quarter of 2023, was mainly related to marketing consultancy service rendered by a third party consultant, payable by 1,200,000 ordinary shares at the market price of $2.1575 per share. 35 Loss from Operations Loss from operations increased by US$12.7 million, or 662.76%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was mainly attributable to the increase in operating expenses of US$21.7 million. Other Income (Expense), Net Bank Interest Income Bank interest income increased by US$0.2 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. Foreign Exchange Gain (Loss), Net Foreign exchange gain (loss) mainly represented the unrealized net foreign exchange gain (loss) from the translation of long-term investments which are mostly denominated in Sterling. The net foreign exchange gain increased by US$1.0 million or 215.59% for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to the stronger Sterling exchange rate. Investment Income, Net Three month ended March 31, 2023 2022 Variance (US$ in thousands) $ % Realized gain in marketable equity securities $ 1,542 $ — 1,542 N/A Unrealized gain in marketable equity securities — 2,149 (2,149 ) (100.00 ) Unrealized loss in non-marketable equity securities (428 ) — (428 ) N/A Dividend income 609 — 609 N/A Total $ 1,723 $ 2,149 (426 ) (19.82 ) Investment income decreased by US$0.4 million, or 19.82%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, mainly as a result of the realized gain of US$1.5 million on the sale of the shares of Oscar Health Inc. in the open market at the average market price of $4.01 per shares and dividend income of US$0.6 million, offset by unrealized loss in non-marketable equity securities of US$0.4 million, which was fewer than the unrealized gain in marketable securities of US$2.1 million. Change in fair value of forward share purchase liability The forward share purchase liability (“FSP liability”) under the Meteora Backstop Agreement is valued using a Black-Scholes model, which is considered to be Level 3 fair value measurement on a recurring basis. For the three months ended March 31, 2023, the change in fair value of liability was $0.1 million, as recognized in the condensed consolidated statements of operations. Income Tax Benefit (Expense) Income tax benefit increased by US$0.4 million, or 106.44% for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily attributable to the over provision of income tax for prior years. 36 Net Loss Net loss increased by US$11.6 million, or 2,600.89% for the three months ended March 31, 2023, as compared to March 31, 2022, due primarily to the increase in operating expenses of US$21.7 million. Liquidity and Capital Resources Sources of Liquidity We have a history of operating losses and negative cash flow. During the three months ended March 31, 2023, we reported a net loss of US$12.1 million and reported a negative operating cash flow of US$10.2 million. As of March 31, 2023, our cash balance was US$3.7 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 starting March 31, 2023. 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. Future Liquidity On a recurring basis, the primary future cash needs of the Company will be focused on operating activities, working capital, capital expenditures, investment, regulatory and compliance costs. The ability of the Company to fund these needs will depend, in part, on its ability to generate or raise cash in the future, which is subject to general economic, financial, competitive, regulatory, and other factors that are beyond its control. The ability to fund our operating needs will depend on its future ability to continue to generate positive cash flow from operations and raise capital in the capital markets. Our management believe that we will meet known or reasonably likely future cash requirements through the combination of cash flows from operating activities, available cash balances, and external borrowings and fund raising. Our management expects that the primary cash requirements in 2023 will be to fund capital expenditures for (i) expansion of the Distribution Business and (ii) Platform Business. If our sources of liquidity need to be augmented, additional cash requirements would likely need to be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms, or at all, in the future. We expect that operating losses could continue into the foreseeable future as we continue to invest in growing our businesses. Based upon our current operating plans, our management believes that cash and equivalents will not be able to provide sufficient funds to its operations for at least the next 12 months from the date of its unaudited condensed consolidated financial statements provided with this Form 10-Q. However, these forecasts involve risks and uncertainties, and actual results could vary materially. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenues growth, the timing and extent of spending on sales and marketing, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our brand, and overall economic conditions. We may also seek additional capital to fund our operations, including through the sale of equity or debt financings. To the extent that we raise additional capital through the future sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. 37 Cash Flows As of March 31, 2023, we had cash and cash equivalents totalling US$3.7 million, and US$45.0 million in restricted cash. As of December 31, 2022, we had cash and cash equivalents totalling US$6.4 million, and US$44.8 million in restricted cash. The following table summarizes our cash flows for the periods presented: Three month ended March 31, 2023 2022 (US$ in thousands) Net cash (used in) provided by operating activities $ (10,197 ) $ 1,331 Net cash provided by (used in) investing activities 3,989 (6,853 ) Net cash provided by (used in) financing activities 3,468 (14,525 ) Effect on exchange rate change on cash and cash equivalents 82 (100 ) Net change in cash, cash equivalents and restricted cash (2,658 ) (20,147 ) Cash, cash equivalents and restricted cash, at the beginning 51,294 73,081 Cash, cash equivalents and restricted cash, at the end 48,636 52,934 Representing as: Cash and cash equivalents 3,654 16,721 Restricted cash – forward share purchase agreement 15,519 — Restricted cash – fund held in escrow 29,463 36,213 $ 48,636 $ 52,934 The following table sets forth a summary of our working capital: March 31, 2023 December 31, 2022 Variance (US$ in thousands) $ % Total Current Assets $ 54,245 $ 55,756 (1,511 ) (2.71 ) Total Current Liabilities 94,765 97,021 (2,256 ) (2.33 ) Working Deficit (40,520 ) (41,265 ) (745 ) (1.81 ) Working Deficit The working deficit as of March 31, 2023 and December 31, 2022 was amounted to approximately US$40.52 million and US$41.27 million, respectively, a decline of US$0.7 million or 1.81%. Cash Flows from Operating Activities Net cash used in operating activities was US$10.2 million for the three months ended March 31, 2023, as compared to net cash provided by operating activities of US$1.3 million for the three months ended March 31, 2022. 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$0.1 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. Net cash provided by operating activities for the three months ended March 31, 2022 was primarily the result of the net loss of US$0.4 million, a decrease in loans receivable of US$2.3 million, and an increase in escrow liabilities of US$1.7 million. These amounts were partially offset by the increase in accounts receivable of US$0.04 million, deposits, prepayments, and other receivable of US$0.06 million, decrease in accounts payable and accrued liabilities of US$1.0 million, and non-cash adjustments consisting of unrealized investment income of US$2.1 million, net foreign exchange loss of US$0.5 million, and depreciation of property and equipment of US$0.1 million. 38 Cash Flows from Investing Activities Net cash provided by investing activities for the three months ended March 31, 2023 of US$4.0 million was primarily due to proceeds from sale of investments of US$4.0 million, dividend received from long-term investments of US$0.6 million, offset by the purchase of notes receivable of US$0.6 million. Net cash used in investing activities for the three months ended March 31, 2022 of US$6.9 million was primarily due to proceeds from sale of investments of US$1.9 million, offset by the purchase of property and equipment of US$0.9 million, and payment of earnest deposit of US$7.8 million for the purchase of an office premise from the shareholder. Cash Flows from Financing Activities Net cash provided by financing activities for the three months ended March 31, 2023 of US$3.5 million was primarily due to advances from the shareholder of US$1.7 million and proceeds from borrowings of US$1.8 million.. Net cash used in financing activities for the three months ended March 31, 2022 of US$14.5 million was primarily due to advances from the shareholder of US$2.9 million, offset by the dividend distribution of US$17.4 million to the shareholder. Liquidity and Going Concern Our unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The management of the Company estimates that currently available cash will not be able to provide sufficient funds to meet the Company’s planned obligations for the next 12 months from the date that these unaudited condensed consolidated financial statements were made available to be issued. For the three months ended March 31, 2023, we reported a net loss of approximately US$12.1 million. With a significant increase in our operating costs, described in the paragraph below, we had an accumulated deficit of approximately US$51.5 million as of March 31, 2023. However, coupled with its business expansion, we reported significant sales growth with total revenue of approximately US$11.1 million for the three months ended March 31, 2023 (2022: US$2.1 million), and resulted with an operating loss of approximately US$14.6 million (2022: US$1.9 million). We expect to continue our business growth, while closely monitoring our future spending. 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. We intend to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable, or will be sufficient to enable us to fully complete its development activities or sustain operations. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to further extend payables, reduce overhead, or scale back our current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. 39 Capital Commitments Forward Share Purchase Agreement — Pursuant to the Meteora Backstop Agreement, subject to demand, the Company is committed to purchase up to 2,500,000 shares of its issued and outstanding ordinary shares from the investors in nine months following the consummation of Business Combination in November 2022. As of March 31, 2023, the Company accounted the related committed liability as forward share purchase liability of $13,573,788. Notes Receivable Agreement — Pursuant to the Agreements, subject to demand, the Company is committed to subscribe the notes of CurrencyFair Limited with an aggregate amount of $1,673,525, in batches, which are payable on or before January 31, 2024. As of March 31, 2023, the remaining committed subscription amount was $1,084,439. Capital Contribution in LC Healthcare Fund I, L.P. — As of March 31, 2023, the remaining committed capital amount in LC Healthcare Fund I, L.P. was $331,432. Off-Balance Sheet Arrangements We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations. We have not engaged in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources. Stock Repurchase Program On April 18, 2023, our Board of Directors approved the repurchase of 1,000,000 ordinary shares (the “2023 Share Repurchase Program”). Under the 2023 Share Repurchase Program, we are authorized to re-purchase up to 1,000,000 ordinary shares at a maximum price of $10 per share from the open market, for a term of one year, no later than April 18, 2024. Critical Accounting Policies, Judgements and Estimates The preparation of financial statements in conformity with GAAP requires us to make judgments, estimates, and assumptions in the preparation of our unaudited condensed consolidated financial statements. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates as reported in our 2022 Annual Report. 40 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.