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 Triller Group Inc. (formerly AGBA Group Holding Limited (“AGBA”)). 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 2023 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. Overview Triller Group Inc. is formed in the State of Delaware, on October 15, 2024, which was established to domicile its legal jurisdiction from British Virgin Islands to the State of Delaware. Merger Transaction In April 2024, we entered into a certain Agreement and Plan of Merger (the “Original Merger Agreement”) by and between our subsidiary, AGBA Social Inc., Triller Corp., a Delaware corporation (“Triller”), and Bobby Sarnevesht, as sole representative of the Triller stockholders. On August 30, 2024, all parties further entered into an Amended and Restated Agreement and Plan of Merger (as further amended, the “Merger Agreement”). The Merger Agreement has amended, restated and superseded the Original Merger Agreement accordingly (the “Merger Transaction”). On September 19, 2024, our shareholders approved the Merger Transaction and other related proposals at the extraordinary general meeting of shareholders. On October 15, 2024, we consummated the Merger Transaction and issued an aggregate of 107,674,877 shares of our common stock, 11,801,804 shares of our Series A-1 preferred stock, and 30,851 shares of our Series B preferred stock. Domestication and Name Change In connection with the Merger Transaction, we completed the domestication of our jurisdiction to domicile from British Virgin Islands to the State of Delaware, United States of America, and changed our company name from “AGBA Group Holding Limited” to “Triller Group Inc.” 45 Forward and Reverse Stock Splits On October 1, 2024, we effected a 1.9365-to-1 forward stock split (the “Forward Split”), resulting increase in the total number of authorized ordinary shares from 1,500,000,000 to 2,904,753,145, increase in the outstanding ordinary shares from 97,736,035 shares to 189,265,804 shares and reduction of par value from $0.001 to $0.00516395 per share. Further, on October 15, 2024, we effected a 1-for-4 reverse stock split (the “Reverse Split”), resulting in the proportional adjustments to the par value of the ordinary shares, the authorized number of ordinary shares, and the number of outstanding ordinary shares. Proportional adjustments were also made to all outstanding warrants and common warrants in accordance with their respective terms. All fractional shares were rounded up to the nearest whole share with respect to outstanding ordinary shares. All share numbers and per share amounts are retroactively presented in this Form 10-Q to reflect the impact of the Forward Split and the Reverse Split if they had taken effect on January 1, 2023. Nasdaq Trading To date, our common stock and public warrants are traded on the Nasdaq Capital Market under the symbol “ILLR” and “ILLRW,” respectively, which were previously traded under the symbol “AGBA” and “AGBAW.” 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. 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 ILLR Money is a direct-to-consumer digital app that provides various financial products and services to retail customers. 46 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 September 30, 2024, there were around 562 financial advisors at “Focus”, organized into 10 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 continued 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 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. 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. 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 nine months ended September 30, 2024, the Company made $15.21 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. 47 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 80 insurance providers selling 1,183 products, and 53 asset management fund houses with over 1,141 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 September 30, 2024 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. Carrying amount in US$ thousands (1) September 30, December 31, 2024 2023 Tandem Money Limited 17,751 16,880 CurrencyFair Limited 5,887 5,827 Oscar Health Inc. (2) — — Goxip Inc. 306 342 LC Healthcare Fund I, L.P. (3) — 2,152 Notes: (1) Carrying amount represents Fintech’s attributable interest in the investment portfolio asset. 48 (2) 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 in 2023. (3) On February 5, 2024, the Company sold all its equity interest in LC Healthcare Fund I, L.P. to an independent third party for a consideration of $2.15 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 centres 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. 49 Results of Operations Comparison of the Three Months Ended September 30, 2024 and 2023: The following tables set forth our results of operations for the periods presented in U.S. dollars (in thousands): Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Revenues: Interest income: Loans $ 60 $ 41 19 46.34 Total interest income 60 41 19 46.34 Non-interest income: Commissions 4,785 12,169 (7,384 ) (60.68 ) Recurring asset management service fees 349 752 (403 ) (53.59 ) Recurring asset management service fees, related party 246 245 1 0.41 Total non-interest income 5,380 13,166 (7,786 ) (59.14 ) Total revenues 5,440 13,207 (7,767 ) (58.81 ) Operating expenses: Interest expense (1,148 ) (393 ) 755 192.11 Commission expense (1,934 ) (8,916 ) (6,982 ) (78.31 ) Sales and marketing expense (93 ) (754 ) (661 ) (87.67 ) Research and development expense (401 ) (741 ) (340 ) (45.88 ) Personnel and benefit expense (6,827 ) (7,764 ) (937 ) (12.07 ) Legal and professional fee (2,594 ) (3,453 ) (859 ) (24.88 ) Legal and professional fee, related party (250 ) (78 ) 172 220.51 Office and operating fee, related party (1,088 ) (1,317 ) (229 ) (17.39 ) Provision for allowance for expected credit losses (135 ) (328 ) (193 ) (58.84 ) Other general and administrative expenses (1,153 ) (806 ) 347 43.05 Total operating expenses (15,623 ) (24,550 ) (8,927 ) (36.36 ) Loss from operations (10,183 ) (11,343 ) (1,160 ) (10.23 ) Other income (expense): Interest income 302 17 285 1,676.47 Foreign exchange gain (loss), net 1,105 (864 ) 1,969 227.89 Investment loss, net — (793 ) (793 ) (100.00 ) Change in fair value of warrant liabilities (632 ) 1 (633 ) (63,300.00 ) Rental income — 79 (79 ) (100.00 ) Sundry income 26 38 (12 ) (31.58 ) Total other income (expense), net 801 (1,522 ) 2,323 152.63 Loss before income taxes (9,382 ) (12,865 ) (3,483 ) (27.07 ) Income tax expense (37 ) (56 ) (19 ) (33.93 ) NET LOSS $ (9,419 ) $ (12,921 ) (3,502 ) (27.10 ) Revenue The following table summarizes the major operating revenues for the three months ended September 30, 2024 and 2023: Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Business segment Distribution Business $ 4,701 $ 11,876 (7,175 ) (60.42 ) Platform Business 739 1,331 (592 ) (44.48 ) Fintech Business — — — — Healthcare Business — — — — TOTAL $ 5,440 $ 13,207 (7,767 ) (58.81 ) 50 Distribution Business The Distribution Business contributed 86.42% and 89.92% of the total revenue for the three months ended September 30, 2024 and 2023, respectively. Income from the Distribution Business mainly related to commissions earned, which decreased by US$7.2 million, or 60.42%, from US$11.9 million in 2023 to US$4.7 million in 2024. The decrease in revenue primarily attributed from the economic recession and outward migration in Hong Kong. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name. Summarized revenue breakdown by product and type of contracts: Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % By product: Life insurance $ 3,921 $ 11,147 (7,226 ) (64.82 ) Property-casualty insurance 639 467 172 36.83 Mandatory provident fund and related revenues 141 262 (121 ) (46.18 ) 4,701 11,876 (7,175 ) (60.42 ) By the type of contracts: - New and or current year 4,701 11,496 (6,795 ) (59.11 ) - Recurring — 380 (380 ) (100.00 ) TOTAL $ 4,701 $ 11,876 (7,175 ) (60.42 ) Platform Business The Platform Business contributed 13.58% and 10.08% of the total revenue for the three months ended September 30, 2024 and 2023, respectively. Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Commission $ 84 $ 293 (209 ) (71.33 ) Recurring service fees 595 996 (401 ) (40.26 ) Loans 60 42 18 42.86 TOTAL $ 739 $ 1,331 (592 ) (44.48 ) Operating Expenses Interest Expense Interest expense increased by US$0.8 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase was mainly attributed to the interest expense and amortization of the debt discount on convertible notes payable. Commission Expense Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Business segment Distribution Business $ 1,843 $ 8,593 (6,750 ) (78.55 ) Platform Business 91 323 (232 ) (71.83 ) Fintech Business — — — — Healthcare Business — — — — TOTAL $ 1,934 $ 8,916 (6,982 ) (78.31 ) 51 The Distribution Business contributed 95.29% and 96.38% of the total commission expense for the three months ended September 30, 2024 and 2023, respectively. Commission expense for the Distribution Business decreased by US$6.8 million, or 78.55%, from US$8.6 million in 2023 to US$1.8 million in 2024. As a result of the decrease in revenue associated with the Distribution Business, commission expense decreased correspondingly. Sales and Marketing Expense Sales and marketing expense decreased by US$0.7 million or 87.67% for the three months ended September 30, 2024, as compared to the three months ended September 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. Research and Development Expense Research and development expense decreased by US$0.3 million or 45.88% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The slight decrease was primarily due to decreased in headcounts. Personnel and Benefit Expense Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Personnel and benefit $ 3,517 $ 6,446 (2,929 ) (45.44 ) Share-based compensation to employees 3,310 1,318 1,992 151.14 TOTAL $ 6,827 $ 7,764 (937 ) (12.07 ) Personnel and benefit cost decreased by US$1.0 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily attributable to the reduction of headcounts during the period. Share-based compensation for employees increased by US$2.0 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase was primarily due to the issuance of common stocks to our independent directors under the 2024 Equity Incentive Plan and issuance of common stocks to our officers and employees to compensate for their contributions of services and performance, offset by the decrease in the amortization of the fair value of the restricted share units due to the vested and forfeited shares in 2024. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis. Legal and Professional Fees Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Legal and professional fee $ 1,915 $ 1,301 614 47.19 Legal and professional fee, related party 250 78 172 220.51 Consulting fees (share-based related) 679 2,152 (1,473 ) (68.45 ) TOTAL $ 2,844 $ 3,531 (687 ) (19.46 ) 52 Legal and professional fees in aggregate decreased by US$0.7 million, or 19.46%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily attributed to the decrease in the consulting fees incurred during the period, which settled by the issuance of our common stocks. Legal and professional fees, related party of $0.3 million for the three months ended September 30, 2024 represented the advisory service fee paid to a related company which owned by the Chairman of the Company. Consulting fees under share-based compensation for the three months ended September 30, 2024 was mainly related to the corporate strategic consultancy, intelligence technology consultancy, and business marketing service rendered by certain third party consultants, equal to 5,349,582 shares of common stock at the market price ranging from US$0.339 to US$2.5111 per share. Other General and Administrative Expense Three months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Depreciation on property and equipment $ 23 $ 23 — — Depreciation on right-of-use assets 467 446 21 4.71 Financial data subscription expense 67 155 (88 ) (56.77 ) Interest expense on lease liabilities 173 199 (26 ) (13.07 ) Building management fee and utilities 247 166 81 48.80 Overseas travelling expense 52 129 (77 ) (59.69 ) Other operating expenses 124 (312 ) 436 139.74 TOTAL $ 1,153 $ 806 347 43.05 Total other general and administrative expenses increased US$0.3 million, or 43.05%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The net increase was mainly due to the increase in building management fee and utilities of US$0.08 million and other operating expenses of US$0.4 million, offset by the decrease in depreciation on right-of-use assets of US$0.09 million, and overseas travelling expense of US$0.08 million. The depreciation on right-of-use assets and the interest expense on lease liabilities were mainly attributed to the commercial operating lease entered with an independent third party for the use of an office premises in Hong Kong. The lease has original terms exceeding one year, but not more than three years with an option to renew for a further term of three years. Loss from Operations Loss from operations decreased by US$1.2 million, or 10.23%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was mainly attributable to the decrease in operating expenses of US$8.9 million, offset by the decrease in revenues of $7.8 million. Other Income (Expense), net Interest Income Interest income increased by US$0.3 million for the three months ended September 30, 2024. Foreign Exchange Gain (Loss), net Foreign exchange gain (loss), net 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$2.0 million or 227.89% for the three months ended September 30, 2024, as compared to the net foreign exchange loss for the three months ended September 30, 2023, due to the continuous strong Sterling exchange rate. 53 Investment Loss, Net Investment loss decreased by US$0.8 million, or 100.00%, for the three months ended September 30, 2024, as compared to the three months ended September 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$0.2 million. Change in fair value of warrant liabilities We classified the SPAC Private Warrants, Warrant – Class A, and Common Warrants as liabilities at their fair value and adjust them to fair value at each reporting period. These warrant liabilities are subject to re-measurement of each balance sheet date until exercised. For the three months ended September 30, 2024 and 2023, we recognized the change in fair value in aggregate of $0.6 million and nil in our condensed consolidated statements of operations and comprehensive loss. Net Loss Net loss decreased by US$3.5 million, or 27.10% for the three months ended September 30, 2024, as compared to three months ended September 30, 2023, primarily due to the decrease in operating expense of US$8.9 million, offset by the decrease in total revenues of US$7.8 million and increase in other income of US$2.3 million. Nine months ended September 30, 2024 vs nine months ended September 30, 2023 Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Revenues: Interest income: Loans $ 123 $ 118 5 4.24 Total interest income 123 118 5 4.24 Non-interest income: Commissions 15,661 38,507 (22,846 ) (59.33 ) Recurring asset management service fees 1,503 2,301 (798 ) (34.68 ) Recurring asset management service fees, related party 730 725 5 0.69 Total non-interest income 17,894 41,533 (23,639 ) (56.92 ) Total revenues 18,017 41,651 (23,634 ) (56.74 ) Operating expenses: Interest expense (1,723 ) (806 ) 917 113.77 Commission expense (7,697 ) (28,196 ) (20,499 ) (72.70 ) Sales and marketing expense (606 ) (3,125 ) (2,519 ) (80.61 ) Research and development expense (1,354 ) (2,678 ) (1,324 ) (49.44 ) Personnel and benefit expense (18,364 ) (22,672 ) (4,308 ) (19.00 ) Legal and professional fee (4,707 ) (12,423 ) (7,716 ) (62.11 ) Legal and professional fee, related party (750 ) (78 ) 672 861.54 Office and operating fee, related party (3,281 ) (5,089 ) (1,808 ) (35.53 ) Provision for allowance for expected credit losses (1,878 ) (661 ) 1,217 184.12 Other general and administrative expenses (3,441 ) (2,242 ) 1,199 53.48 Total operating expenses (43,801 ) (77,970 ) (34,169 ) (43.82 ) Loss from operations (25,784 ) (36,319 ) (10,535 ) (29.01 ) Other income (expense): Interest income 390 385 5 1.30 Foreign exchange gain, net 826 41 785 1,914.63 Investment (loss) income, net (37 ) 489 (526 ) (107.57 ) Change in fair value of warrant liabilities (4,281 ) 3 (4,284 ) (142,800.00 ) Change in fair value of forward share purchase liability — (82 ) (82 ) (100.00 ) Loss on settlement of forward share purchase agreement — (379 ) (379 ) (100.00 ) Rental income 14 217 (203 ) (93.55 ) Sundry income 121 122 (1 ) (0.82 ) Total other (expense) income, net (2,967 ) 796 (3,763 ) (472.74 ) Loss before income taxes (28,751 ) (35,523 ) (6,772 ) (19.06 ) Income tax expense (98 ) (56 ) 42 75.00 NET LOSS $ (28,849 ) $ (35,579 ) (6,730 ) (18.92 ) 54 Revenue The following table summarizes the major operating revenues for the nine months ended September 30, 2024 and 2023: Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Business segment Distribution Business $ 15,211 $ 37,569 (22,358 ) (59.51 ) Platform Business 2,806 4,082 (1,276 ) (31.26 ) Fintech Business — — — — Healthcare Business — — — — TOTAL $ 18,017 $ 41,651 (23,634 ) (56.74 ) Distribution Business The Distribution Business contributed 84.43% and 90.20% of the total revenue for the nine months ended September 30, 2024 and 2023, respectively. Income from the Distribution Business mainly related to commissions earned, which significantly decreased by US$22.4 million, or 59.51%, from US$37.6 million in 2023 to US$15.2 million in 2024. The largest segment of the Distribution Business is our FA Business, operated under the “Focus” brand name. The decrease in revenue primarily attributed from the economic recession and outward migration in Hong Kong. Summarized revenue breakdown by product and type of contracts: Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % By product: Life insurance $ 13,811 $ 35,286 (21,475 ) (60.86 ) Property-casualty insurance 1,034 1,523 (489 ) (32.11 ) Mandatory provident fund and related revenues 366 760 (394 ) (51.84 ) 15,211 37,569 (22,358 ) (59.51 ) By the type of contracts: - New and or current year 15,130 36,944 (21,814 ) (59.05 ) - Recurring 81 625 (544 ) (87.04 ) TOTAL $ 15,211 $ 37,569 (22,358 ) (59.51 ) 55 Platform Business The Platform Business contributed 15.57% and 9.80% of the total revenue for the nine months ended September 30, 2024 and 2023, respectively. Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Commission $ 450 $ 938 (488 ) (52.03 ) Recurring service fees 2,233 3,026 (793 ) (26.21 ) Loans 123 118 (5 ) (4.24 ) TOTAL $ 2,806 $ 4,082 (1,276 ) (31.26 ) Operating Expenses Commission Expense Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Business segment Distribution Business $ 7,124 $ 27,133 (20,009 ) (73.74 ) Platform Business 573 1,063 (490 ) (46.10 ) Fintech Business — — — — Healthcare Business — — — — TOTAL $ 7,697 $ 28,196 (20,499 ) (72.70 ) The Distribution Business contributed 92.56% and 96.23% of the total commission expense for the nine months ended September 30, 2024 and 2023, respectively. Commission expense for the Distribution Business decreased by US$20.0 million, or 73.74%, from US$27.1 million in 2023 to US$7.1 million in 2024. As a result of the decrease in revenue associated with the Distribution Business, commission expense decreased correspondingly. Sales and Marketing Expense Sales and Marketing expense decreased by US$2.5 million or 80.61%, from US$3.1 million in 2023 to US$0.6 million in 2024. 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. Research and Development Expense Research and development expense decreased by US$1.3 million or 49.44%, from US$2.7 million in 2023 to US$1.4 million in 2024. The decrease was primarily due to decreased in headcounts. Personnel and Benefit Expense Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Personnel and benefit $ 12,987 $ 18,719 (5,732 ) (30.62 ) Share-based compensation to employees 5,377 3,953 1,424 36.02 TOTAL $ 18,364 $ 22,672 (4,308 ) (19.00 ) 56 Personnel and benefit cost decreased by US$4.3 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was primarily due to the decrease in headcounts in both Platform Business and Distribution Business. Share-based compensation for employees increased by US$1.4 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The increase was primarily due to the issuance of common stocks to our independent directors under the 2024 Equity Incentive Plan and issuance of common stocks to our officers and employees to compensate for their contributions of services and performance, offset by the decrease in the amortization of the fair value of the restricted share units due to the vested and forfeited shares in 2024. The fair value of the restricted share units is recognized over the period based on the derived service period (usually the vesting period), on a straight-line basis. Legal and Professional Fees Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Legal and professional fees $ 3,612 $ 4,396 (784 ) (17.83 ) Legal and professional fees, related party 750 78 672 861.54 Consulting fees (share-based related) 1,095 8,027 (6,932 ) (86.36 ) TOTAL $ 5,457 $ 12,501 (7,044 ) (56.35 ) Legal and professional fees in aggregate decreased by US$7.0 million, or 56.35%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was primarily attributed to the decrease in the consulting fees incurred during the period, which settled by the issuance of our common stocks. Legal and professional fees, related party of $0.8 million for the nine months ended September 30, 2024 represented the advisory service fee paid to a related company which owned by the Chairman of the Company. Consulting fees under share-based compensation for the nine months ended September 30, 2024 was mainly related to the corporate strategic consultancy, intelligence technology consultancy, and business marketing service rendered by certain third party consultants, equal to 6,078,488 shares of common stock at the market price ranging from US$0.339 to US$2.5111 per share. Other General and Administrative Expenses Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Depreciation on property and equipment $ 69 $ 238 (169 ) (71.01 ) Depreciation on right-of-use assets 1,386 594 792 133.33 Financial data subscription expense 254 294 (40 ) (13.61 ) Interest expense on lease liabilities 542 266 276 103.76 Building management fee and utilities 749 633 116 18.33 Overseas travelling expense 256 350 (94 ) (26.86 ) Other operating expenses 185 (133 ) 318 239.10 TOTAL $ 3,441 $ 2,242 1,199 53.48 Total other general and administrative expenses increased by US$1.2 million, or 53.48%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The net increase was mainly due to the increase in depreciation on right-of-use assets of US$0.8 million, interest expense on lease liabilities of US$0.3 million, building management fee and utilities of US$0.1 million, and other operating expenses of $0.3 million, offset by the decrease in depreciation on property and equipment of US$0.2 million. The depreciation on right-of-use assets and the interest expense on lease liabilities were mainly attributed to the commercial operating lease entered with an independent third party for the use of an office premises in Hong Kong. The lease has original terms exceeding one year, but not more than three years with an option to renew for a further term of three years. 57 Loss from Operations Loss from operations decreased by US$10.5 million, or 29.01%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was mainly attributable to the significant decrease in operating expenses of $34.2 million, offset by decrease in revenues of $23.6 million. Other Income (Expense), net Foreign Exchange Gain, net Foreign exchange gain, net mainly represented the unrealized net foreign exchange gain from the translation of long-term investments which are mostly denominated in Sterling. The net foreign exchange gain increased by US$0.8 million or 1,914.63% for the nine months ended September 30, 2024, as compared to the net foreign exchange gain for the nine months ended September 30, 2023, due to continuous strong Sterling exchange rate. Investment (Loss) Income, Net Nine months ended September 30, 2024 2023 Variance (US$ in thousands) $ % Realized gain in marketable equity securities $ 1 $ 1,543 (1,542 ) (99.94 ) Unrealized loss in non-marketable equity securities (38 ) (2,458 ) (2,420 ) (98.45 ) Dividend income — 1,404 (1,404 ) (100.00 ) TOTAL $ (37 ) $ 489 (526 ) (107.57 ) Investment loss decreased by US$0.5 million, or 107.57%, for the nine months ended September 30, 2024, as compared to the investment income for the nine months ended September 30, 2023, mainly because of the decrease in realized gain in marketable equity securities of US$1.5 million, decrease in dividend income of US$1.4 million, and offset by the decrease in unrealized loss in non-marketable equity securities of US$2.4 million. The decrease in realized gain in marketable equity securities and dividend income was mainly due to the disposal of long-term investments. Change in Fair Value of Warrant Liabilities We classified the SPAC Private Warrants, Warrants – Class A, and Common Warrants as liabilities at their fair value and adjust them to fair value at each reporting period. These warrant liabilities are subject to re-measurement of each balance sheet date until exercised. For the nine months ended September 30, 2024 and 2023, we recognized the change in fair value in aggregate of $(4.3) million and $0.003 million, respectively in our condensed consolidated statements of operations and comprehensive loss. Rental Income Rental income was earned from the leasing of our owned office premises. For the nine months ended September 30, 2024, the rental income decreased by US$0.2 million, or 93.55%, as compared to the nine months ended September 30, 2023 was resulted from the sale of one of the office premises in 2023. 58 Income Tax Expense Income tax expense increased by US$0.04 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily attributable to the provision of income tax during the period. Net Loss Net loss decreased by US$6.7 million, or 18.92% for the nine months ended September 30, 2024, as compared to nine months ended September 30, 2024, primarily due to the decrease in operating expenses of US$34.2 million, offset by the decrease in revenue of $23.6 million and other expense, net of US$3.8 million. Liquidity and Capital Resources Sources of Liquidity We have a history of operating losses and negative cash flow. For the nine months ended September 30, 2024, we reported a net loss of US$28.8 million and reported a negative operating cash flow of US$20.7 million. As of September 30, 2024, our cash balance was US$5.1 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. 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, ILLR continually monitors its capital structure and search for potential funding alternatives in order to finance our business development activities and operating expenses. ILLR 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. 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 2024 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 stockholders. 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. 59 Cash Flows As of September 30, 2024, we had cash and cash equivalents totaling $5.1 million, and $13.7 million in restricted cash. As of December 31, 2023, we had cash and cash equivalents totaling $1.9 million, and $16.8 million in restricted cash. Comparison of the nine months ended September 30, 2024 and 2023 The following table summarizes our cash flows for the periods presented: Nine months ended September 30, 2024 2023 (US$ in thousands) Net cash used in operating activities $ (20,742 ) $ (33,365 ) Net cash provided by investing activities 2,580 4,687 Net cash provided by (used in) financing activities 18,254 (415 ) Effect on exchange rate change on cash and cash equivalents (19 ) (26 ) Net change in cash, cash equivalents and restricted cash 73 (29,119 ) Cash, cash equivalents and restricted cash, at the beginning 18,678 51,294 Cash, cash equivalents and restricted cash, at the end $ 18,751 $ 22,175 Representing as: Cash and cash equivalents 5,093 1,622 Restricted cash – fund held in escrow 13,658 20,553 $ 18,751 $ 22,175 The following table sets forth a summary of our working capital: September 30, 2024 December 31, 2023 Variance (US$ in thousands) $ % Total Current Assets $ 52,073 $ 25,619 26,454 103.26 Total Current Liabilities 92,562 47,840 44,722 93.48 Working Capital Deficit $ (40,489 ) $ (22,221 ) 18,268 82.21 Working Capital Deficit The working capital deficit as of September 30, 2024 and December 31, 2023 was amounted to approximately US$40.5 million and US$22.2 million, respectively, an increase of US$18.3 million or 82.21%. The increase was mainly attributed to the issuance of convertible promissory note payable of $32.5 million and warrant liabilities of $4.3 million, offset by the receivable from Triller LLC of $28.3 million and deposit, prepayments, and other receivables, net of $1.8 million. 60 Cash Flows from Operating Activities Net cash used in operating activities was US$20.7 million and US$33.4 million for the nine months ended September 30, 2024 and 2023, respectively. Net cash used in operating activities for the nine months ended September 30, 2024 was primarily the result of the net loss of US$28.8 million, deposits, prepayments, and others receivable of US$0.6 million, decrease in accounts payable and accrued liabilities of US$2.3 million, decrease in escrow liabilities of US$3.2 million, decrease in lease liabilities of US$1.5 million and decrease in income tax payable of US$0.1 million. These amounts were partially offset by the decrease in accounts receivable of US$0.7 million, loans receivable of US$0.05 million, and non-cash adjustments consisting of share-based compensation expense of US$6.4 million, non-cash lease expense of US$1.9 million, depreciation of property and equipment of US$0.07 million, interest income on loans receivable of US$0.1 million, interest income on promissory note receivables of US$0.4 million, interest expense on convertible promissory notes payable of $1.1 million, interest expense on borrowings of $0.6 million, net foreign exchange gain of US$0.8 million, provision for allowance for expected credit losses of US$1.9 million, and change in fair value of warrant liabilities of US$4.3 million. Net cash used in operating activities for the nine months ended September 30, 2023 was primarily the result of the net loss of US$35.6 million, an increase in accounts receivable of US$0.6 million, increase in deposits, prepayments, and others receivable of US$2.9 million, decrease in escrow liabilities ofUS$8.9 million, decrease in lease liabilities of US$0.6 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$0.1 million, increase in accounts payable and accrued liabilities of US$5.5 million, and non-cash adjustments consisting of share-based compensation expense ofUS$12.0million, non-cash lease expense of US$0.9 million, depreciation of property and equipment of US$0.2 million, interest income on loans receivable of US$0.1 million, interest income on notes receivable of US$0.02 million, net foreign exchange gain of US$0.04 million, net investment income of US$0.5 million, allowance for credit losses on financial instruments of US$0.7 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. Cash Flows from Investing Activities Net cash provided by investing activities for the nine months ended September 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. Net cash provided by investing activities for the nine months ended September 30, 2023 of US$4.7 million was primarily due to proceeds from sale of investments of US$4.0 million, dividend received from long-term investments of US$1.4 million, offset by the purchase of notes receivable of US$0.6million and purchase of property and equipment of US$0.1 million. Cash Flows from Financing Activities Net cash provided by financing activities for the nine months ended September 30, 2024 of US$18.3 million was primarily due to advances from the holding company of US$15.6 million, proceeds from convertible promissory note payable of US$23.4 million, offset by repayments of borrowings of US$0.8 million and issuance of promissory notes to Triller LLC of US$20.0 million. Net cash used in financing activities for the nine months ended September 30, 2023 of US$0.4 million was primarily due to advances from holding company of US$6.3 million, proceeds from borrowings of US$7.2 million, offset by the settlement of forward share purchase agreement of US$14.0 million. 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. 61 For the nine months ended September 30, 2024, we reported a net loss of approximately US$28.8 million. With a significant decrease in our revenues, described in the paragraph below, we had an accumulated deficit of approximately US$94.4 million as of September 30, 2024. Coupled with the economic recession in Hong Kong, we reported a sales decline with total revenue of approximately US$18.1 million for the nine months ended September 30, 2024 (nine months ended September 30, 2023: US$41.7 million) and resulting with an operating loss of approximately US$25.8 million (nine months ended September 30, 2023: US$36.3 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 various debt and equity offerings, 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. Capital Commitments 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. On September 25, 2024, the Company and SLS entered into a sixth supplementary agreement to extend the closing date of the transaction from July 31, 2024 to October 31, 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. 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 common stocks 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. 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. 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 2023 Annual Report on Form 10-K. 62 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.