Triller Group Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with our audited consolidated financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements based upon our current expectations, estimates and projections, and involves numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements due to, among other considerations, the matters discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Overview We are a global, artificial intelligence (“ AI ”) powered technology platform (“ Technology Platform ”) that serves a broad constituency of Creators and Brands around the world. “ Creators ” include influencers, artists, athletes, other individuals and public figures that utilize or have utilized our Technology Platform to create and publish content. Numerous famous Creators use our Technology Platform, including influencers like Charli D’Amelio and Bryce Hall and music artists like The Weeknd. “Brands” are companies, products or product lines which are active on our Technology Platform and utilize or have utilized one or more of our products or services offered through our Technology Platform (“ Direct Brands ”), or companies, products or product lines whose associated data we track, report on and make available to our clients as part of one or more of our product offerings (“ Tracked Brands ,” and collectively with Direct Brands, “ Brands ”). Brands that have utilized or continue to utilize our platform include McDonalds, Pepsi, Walmart, L’Oréal, Puma, Charmin and Major League Baseball. 98 We help both Creators and Brands build relationships with their audiences to create awareness, drive content consumption, generate commerce and build culture. Our Triller app is a short-form video app similar to TikTok, Instagram Reels, YouTube shorts and other video apps that allow users to access both user generated and professionally generated content from Creators around the world. Since our inception through September 30, 2023, we have raised more than $420 million in capital and established more than 327 million Consumer Accounts on the Triller app and a total of 436 million Consumer Accounts on our Technology Platform. “Consumer Accounts” are included when consumers create accounts on a Triller brand or owned property and also when we employ our Technology Platform to create accounts on behalf of our Brands and Creators. We define Consumer Accounts as the total number of individual Consumer Accounts recorded in databases across the Triller app and TrillerTV (whether they are active or inactive on our Technology Platform) at or around the time of measurement, that we track and that are able to benefit from the services and features offered through our Technology Platform during the reported period. Users that simply accessed or viewed our content or partner content on our platform or any other social media platform are not included in the total number of Consumer Accounts above. Consumer Accounts that were created prior to acquisition by us are not included in the total number of Consumer Accounts above. Recently, we elected to take a proactive approach to the way in which we report our Consumer Accounts, which we believe is uncommon in our industry. While we believe that many social media companies include a significant number of “bot” accounts or “duplicate” accounts in their user metrics, we undertook a robust process to purge as many duplicate and bot accounts as practicable with our resources and in doing so we purged in excess of 200 million Consumer Accounts from our total user accounts metric. Alongside the Triller app, Triller has dramatically expanded its portfolio of offerings through organic growth and strategic acquisitions becoming a diversified Technology Platform for the creation, distribution, measurement and monetization of digital, live and virtual content. It also produces content under its own and third-party Brands, including trendsetting music, sports, lifestyle, fashion and entertainment media that creates cultural moments, attracts users to Triller’s offerings and drives social interaction that serves as a cultural wellspring across digital society. We operate within the global digital content marketplace, which is estimated to reach $577.4 billion in 2023 according to Statistica’s August 2023 report on worldwide digital media, and we focus our efforts on the $250 billion creator economy, as forecasted in a recent Goldman Sachs report on the creator economy. Goldman Sachs Research estimated the creator economy could reach $480 billion by 2027 in its April 2023 report titled “The creator economy could approach half-a-trillion dollars by 2027.” Our revenue was $27.5 million and $54.2 million in the fiscal years ended December 31, 2024 and 2023. We have incurred net losses in each year since our inception, including $1,138.0 million and $49.2 million for the fiscal years ended December 31, 2024 and 2023, respectively. Through our subsidiaries in Hong Kong, we are also a leading wealth management and healthcare institution 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. In addition to operating our Technology Platform, we currently operate in four market-leading businesses: our Platform Business, Distribution Business, Healthcare Business, and Fintech Business (collectively as “Financial Services Business”). Since 2019, we have implemented a strategy to expand and upgrade our long-standing broker-dealer business into a platform business and a distribution business. Today, we offer unique product and service offerings: - B2B: tech-enabled broker management platform for advisors (“ Platform Business ”); and - B2C: market leading portfolio of wealth and health products (“ Distribution Business ”). We also have a market leadership in our healthcare business through our 4% stake in and a strategic partnership with HCMPS. It is one of the most reputed healthcare brands in Hong Kong. It has a network of over 700 healthcare service providers. Finally, we are an established operator and successful investor in the FinTech industry. We have carefully built out investment positions in FinTech, WealthTech and HealthTech businesses, applying lessons learned from our own distribution, platform and healthcare businesses. 99 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 December 31, 2024, there were around 1,231 financial advisors at “Focus”, organized into 26 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. 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 year ended December 31, 2024, the Company made $22.4 million from commission in the financial services business. The revenue attributed to the Company during 2024 only captured an insignificant portion of the revenues actually generated by the financial advisors currently associated with Focus. 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. Key Factors Affecting Our Results of Operations and Future Performance We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part I, Item 1A of this Form 10-K. 100 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023: The following tables set forth our results of operations by segment for the years ended December 31, 2024 and 2023 presented in U.S. dollars (in thousands): For the year ended December 31, 2024 Social media Sports streaming Financial services Corporate Elimination Consolidated Revenue Loans interest income — — 151 — — 151 Commission — — 20,348 — — 20,348 Recurring asset management service fees — — 1,887 — — 1,887 Advertising revenue 275 1 — — — 276 SaaS fees 707 — — — — 707 Subscription fees and paid-per-view fees 19 4,088 — — — 4,107 Total revenue 1,001 4,089 22,386 — — 27,476 Operating expenses Operating expenses for social media and streaming platform (522 ) (3,491 ) — — — (4,013 ) Commission expense — — (10,531 ) — — (10,531 ) Sales and marketing expenses (921 ) (426 ) (219 ) — — (1,566 ) Research and development expenses (1,193 ) (135 ) (1,853 ) — — (3,181 ) Personnel and benefit expenses (2,091 ) (86 ) (38,106 ) (44,603 ) — (84,886 ) Legal and professional fee (3,048 ) (70 ) (2,321 ) (16,931 ) — (22,370 ) Legal and professional fee, related party — — — (949 ) — (949 ) Office and operating fee, related party — — (4,303 ) — — (4,303 ) Provision for allowance for expected credit losses 5 (10 ) (2,544 ) — — (2,549 ) Other general and administrative expenses (1,659 ) (109 ) (4,287 ) (253 ) — (6,308 ) Total operating expenses (9,429 ) (4,327 ) (64,164 ) (62,736 ) — (140,656 ) Other income (expense), net Interest income 6 — 19 765 (339 ) 451 Interest expense (2,581 ) (132 ) (785 ) (4,778 ) 339 (7,937 ) Foreign exchange (loss) gain, net — 16 (717 ) — — (701 ) Impairment on property and equipment — — (104 ) — — (104 ) Impairment on intangible assets (621 ) (210 ) (369 ) — — (1,200 ) Impairment on goodwill (1,000,002 ) (5,776 ) (1,005,778 ) Impairment on right-of-use assets — — (1,664 ) — — (1,664 ) Investment loss, net — — (15,971 ) — — (15,971 ) Change in fair value of convertible debts 4,447 — — — — 4,447 Change in fair value of warrant liabilities — — — 3,463 — 3,463 Sundry income 31 6 101 — — 138 Total other expense, net (998,720 ) (6,096 ) (19,490 ) (550 ) — (1,024,856 ) Income tax expense — — — — — — Net loss (1,007,148 ) (6,334 ) (61,268 ) (63,286 ) — (1,138,036 ) 101 Year ended December 31, 2023 Financial services Corporate Elimination Consolidated Revenue Commission 50,069 — — 50,069 Asset management service fees 3,963 — — 3,963 Loans interest income 157 — — 157 Total revenue 54,189 — — 54,189 Operating expenses Commission expense (37,288 ) — — (37,288 ) Sales and marketing expenses (2,496 ) (1,213 ) — (3,709 ) Research and development expenses (949 ) (3,608 ) — (4,557 ) Personnel and benefit expenses (128 ) (27,090 ) — (27,218 ) Legal and professional fee (11,767 ) (1,834 ) — (13,601 ) Legal and professional fee, related party — (333 ) — (333 ) Office and operating fee, related party — (6,040 ) — (6,040 ) Provision for allowance for expected credit losses (1,004 ) (73 ) — (1,077 ) General and administrative (5,085 ) 1,658 — (3,427 ) Total operating expenses (58,717 ) (38,533 ) — (97,250 ) Other income (expense), net Interest income 39 345 — 384 Interest expense (388 ) (396 ) — (784 ) Others 6,715 (12,173 ) — (5,458 ) Total other income (expense), net 6,366 (12,224 ) — (5,858 ) Income tax expense (280 ) (7 ) — (287 ) Net income (loss) 1,558 (50,764 ) — (49,206 ) Revenues The following table summarizes the major operating revenues for the years ended December 31, 2024 and 2023: Years ended December 31, 2024 2023 Variance (US$ in thousands) $ % Business segment Social media $ 1,001 $ — 1,001 N/A Sports streaming 4,089 — 4,089 N/A Financial services 22,386 54,189 (31,803 ) (58.69 ) TOTAL $ 27,476 $ 54,189 (26,713 ) (49.30 ) Social media and Sports streaming On October 15, 2024, we completed the merger transaction pursuant to the merger agreement, through which we acquired all of the equity interests of Triller Corp. Following the acquisition, Triller Corp.’s operations have been consolidated into the Group, consisting of two major business segments: social media and sports streaming. 102 For the post-acquisition period from October 16, 2024 to December 31, 2024, these segments contributed revenues of approximately $1.0 million and $4.1 million, respectively, or aggregate 18.53% of the Group’s total revenue. Social media business segment mainly comprises of revenues from the provision of advertising services and SaaS services. The technology platform integrated from Triller Corp. provides brands a variety of advertising services including AI-powered conversations and the augmentation and execution of advertising campaigns. In additions, the SaaS platform provides our customers a detailed dashboard to measure all creator driven marketing campaigns as well as a marketplace allowing e-commerce brands to automate the process of on-boarding creators with per-transaction incentives for enabling e-commerce transactions. Revenue from the SaaS platform subscriptions is recognized ratably over the life of a subscription. Sports streaming business segment mainly comprises of revenues from subscriptions for streaming services and pay-per-view (“PPV”) services for premium content and events. The technology platform provides streaming services that acquires content licensing from various sport and entertainment franchises to provide a content rich environment for both subscription based and pay-per-view consumption both across a variety of platforms including mobile phones, tablets, PCs, streaming devices, set-top-boxes and connected TVs. Revenue from streaming subscriptions is recognized ratably over the life of a subscription and revenue from streaming pay-per-view events is recognized at the time the event airs. Financial services Financial services business segment mainly comprises of commission income, recurring assets management service income, and interest income. Income from financial services decreased by $31.8 million or 58.69% from $54.2 million for the year ended December 31, 2023 to $22.4 million for the year ended December 31, 2024. The decrease in revenue is primarily attributed to the economic recession and outward migration in Hong Kong. Operating Expenses Operating expenses for social media and streaming platform For the post-acquisition period from October 16, 2024 to December 31, 2024, the aggregate operating expenses for social media and streaming platform was $4.0 million, or 2.85% of the Group’s operating expenses. The operating expenses for social media primarily consisted of expenses related to talent and influencers for brand activations. The operating expenses for streaming platform are related to license fees, event rights fees, revenue sharing costs, production costs, and influencer costs, among others. Commission expense The commission expense related to financial services decreased $26.8 million, or 71.76% from $37.3 million for the year ended December 31, 2023 to $10.5 million for the year ended December 31, 2024. As a result of the decrease in revenue associated with the financial services, commission expense decreased correspondingly. 103 Sales and marketing expenses Social media and Sports streaming Sales and marketing expenses of social media and sports streaming segments primarily consist of marketing costs related to talent and influencers that are not directly tied to revenue-generating activity. These costs represent expenditure incurred to attract users to the Triller app. For the post-acquisition period from October 16, 2024 to December 31, 2024, aggregate sales and marketing expenses for these segments totaled $1.3 million, representing 86.02% of the Group’s total sales and marketing expenses. Financial services and Corporate Sales and marketing expenses of financial services and corporate segment primarily consist of brand promotion and spending on marketing programs to launch the insurance and investments products distributed by our consultants. The aggregate sales and marketing expenses for these segments decreased $3.5 million, or 94.11% from $3.7 million for the year ended December 31, 2023 to $0.2 million for the year ended December 31, 2024. The decrease was mainly attributed to lower spending associated with “AGBA” corporate branding and associated product campaigns for celebrating the successful listing. Research and development expenses Social media and Sports streaming Research and development expenses of social media and sports streaming segments primarily consist of personnel costs and related expenses, internet hosting costs, as well as third party tools and labor. For the post-acquisition period from October 16, 2024 to December 31, 2024, aggregate research and development expenses for these segments totaled $1.3 million, representing 41.75% of the Group’s total research and development expenses. Financial services and Corporate Research and development expenses of financial services and corporate segment primarily include personnel-related costs attributable to our IT team, technology contractors, server facilities expenses, telecommunications expenses, software and hardware expenses to support and maintain the technology platform infrastructure for financial services. The aggregate research and development expenses for these segments decreased $2.7 million, or 59.34% from $4.5 million for the year ended December 31, 2023 to $1.8 million for the year ended December 31, 2024. The decrease was mainly attributed to decreased in headcounts Personnel and benefit expenses Personnel and benefit expenses primarily consist of personnel-related costs and benefits and stock-based compensation costs for our administrative, legal, human resources, information technology, corporate development, finance and accounting employees and executives. Social media and Sports streaming For the post-acquisition period from October 16, 2024 to December 31, 2024, aggregate personnel and benefit expenses for social media and sports streaming segments totaled $2.2 million, representing 2.56% of the Group’s total personnel and benefit expenses. Financial services and Corporate Years ended December 31, 2024 2023 Variance (US$ in thousands) $ % Personnel and benefit $ 14,964 $ 23,926 (8,962 ) (37.46 ) Stock-based compensation 67,745 3,292 64,453 1,957.87 TOTAL $ 82,709 $ 27,218 55,491 203.88 104 Personnel and benefit cost for these segments decreased by $9.0 million, or 37.46% from $23.9 million for the year ended December 31, 2023 to $15.0 million for the year ended December 31, 2024. The decrease was mainly attributed to the decreased headcount. Stock-based compensation for executive directors and employees increased by $64.4 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was primarily due to the settlement of accrued salaries to certain executive directors and employees of the Company and the amortization of the fair value of restricted share units. 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 fee Legal and professional fees mainly consisted of certain professional consulting services in legal, audit, accounting and taxation, and others. Social media and Sports streaming For the post-acquisition period from October 16, 2024 to December 31, 2024, the legal and professional fee for social media and sports streaming segments totaled $3.1 million, representing 13.97% of the Group’s total legal and professional fee. Financial services and Corporate Years ended December 31, 2024 2023 Variance (US$ in thousands) $ % Legal and professional fees $ 9,223 $ 5,090 4,082 80.20 Stock-based compensation 10,029 8,511 1,569 18.43 TOTAL $ 19,252 $ 13,601 5,600 41.17 Legal and professional fees increased by $4.1 million, or 80.20%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was primarily attributed to the increase in the US legal counsel fees and the consulting fees incurred during the year. Consulting fees under stock-based compensation increased by $1.6 million or 18.43% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was mainly attributed to the increase in corporate strategic consultancy and business marketing service rendered by certain third party consultants. Legal and professional fee, related party Legal and professional fee, related party increased by US$0.6 million from $0.9 million for the year ended December 31, 2024 to $0.3 million for the year ended December 31, 2023. The increase was primarily from the advisory services rendered by a related company which owned by the former Chairman of the Company whom resigned in December 2024. 105 Provision for allowance for expected credit losses In accordance with Accounting Standards Codification (“ASC”) Topic 326 “Credit Losses – Measurement of Credit Losses on Financial Instruments” (ASC Topic326), the Company utilizes the current expected credit losses (“CECL”) model to determine an allowance that reflects its best estimate of the expected credit losses on accounts receivable, loans receivable, notes receivable, and deposits, prepayments and others receivable which is recorded as a liability to offset the receivables. For the years ended December 31, 2024 and 2023, the aggregated provision for allowance for expected credit losses on accounts receivable, loans receivable, notes receivable, and other receivables was $2.5 million and $1.1 million, respectively. Other general and administrative expenses Social media and Sports streaming Other general and administrative expenses of social media and sports streaming segments primarily consist of professional service fees, business process outsourcing costs, music licensing, and insurance premiums. For the post-acquisition period from October 16, 2024 to December 31, 2024, aggregate other general and administrative expenses for these segments totaled $1.8 million, representing 28.03% of the Group’s total other general and administrative expenses. Financial services and Corporate Other general and administrative expenses of financial services and corporate segments primarily consist of rent and facilities expenses allocated based upon total direct costs, depreciation and amortization expenses, allowance for expected credit losses, professional services fees, allocated overhead expenses, and other corporate expenses that are not allocated to the above expense categories. The aggregate other general and administrative expenses for these segments increased $1.1 million, or 32.48% from $3.4 million for the year ended December 31, 2023 to $4.5 million for the year ended December 31, 2024. Other Income (Expense), net The following table summarizes the other income (expense), net for the years ended December 31, 2024 and 2023: Years ended December 31, Other income (expense), net 2024 2023 Variance (US$ in thousands) $ % Business segment Social media $ (998,720 ) $ — 998,720 N/A Sports streaming (6,096 ) — 6,096 N/A Financial services (19,490 ) 6,366 (25,856 ) (406.16 ) Corporate (550 ) (12,224 ) (11,674 ) (95.50 ) TOTAL $ (1,024,856 ) $ (5,858 ) 1,018,998 17,394.98 Other income (expense), net consist of interest income, change in fair value of convertible debts, change in fair value of warrant liabilities, sundry income and offset by interest expense, impairment on property and equipment, impairment on intangible assets, impairment on goodwill, impairment on right-of-use assets, and investment loss, net. 106 Social media and Sports streaming For the post-acquisition period from October 16, 2024 to December 31, 2024, aggregate other expense, net for these segments totaled $1,004.8 million, representing 98.04% of the Group’s total other expense, net, primarily comprised of impairment on goodwill of $1,005.8 million, impairment on intangible assets of $0.8 million, and offset by positive change in fair value of convertible debts of $4.4 million. Financial services and Corporate For the years ended December 31, 2024 and 2023, the aggregate other expense, net for financial services and corporate segments was $20.0 million and $5.9 million, respectively, an increase of $14.2 million or 242.10%. The increase was mainly attributed to the impairment on property and equipment, impairment on intangible assets, impairment on right-of-use assets, and investment loss of $0.1 million, $0.4 million, $1.7 million and $16.0 million, respectively and offset by the change in fair value of warrant liabilities of $3.5 million. Net Loss Net loss increased by $1,088.8 million, or 2,212.80% for the year ended December 31, 2024, as compared to December 31, 2023. The increase was primarily due to the increase in operating expenses of $43.4 million and increase in other expense, net of $1,019.0 million. Liquidity and Capital Resources Sources of Liquidity We have a history of operating losses and negative operating cash flows. For the year ended December 31, 2024, we reported a net loss of $1,138.0 million and reported a negative operating cash flow of $29.0 million. As of December 31, 2024, our cash balance was $3.1 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, we continually monitor our 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 consolidated financial statements attached to this Form 10-K do not include any adjustments that might result from the outcome of these uncertainties. 107 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 2025 will be to fund capital expenditures for the repayment of debts and obligation and the businesses operations. 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 consolidated financial statements provided with this Form 10-K. However, these forecasts involve risks and uncertainties, and actual results could vary materially. Our management has based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. See “ Liquidity and Going Concern ” below. 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 financing. 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. Cash Flows As of December 31, 2024, we had cash and cash equivalents totaling $3.1 million, and $14.2 million in restricted cash. As of December 31, 2023, we had cash and cash equivalents totaling $1.9 million, and $16.8 million in restricted cash. Comparison of the year ended December 31, 2024 and 2023 The following table summarizes our cash flows for the years presented: Year ended December 31, 2024 2023 (US$ in thousands) Net cash used in operating activities (29,037 ) (42,283 ) Net cash provided by investing activities 3,740 10,792 Net cash provided by (used in) financing activities 24,046 (1,040 ) Effect on exchange rate change on cash and cash equivalents (166 ) (85 ) Net change in cash, cash equivalents and restricted cash (1,417 ) (32,616 ) Cash, cash equivalents and restricted cash, at the beginning 18,678 51,294 Cash, cash equivalents and restricted cash, at the end 17,261 18,678 Representing as:- Cash and cash equivalents 3,065 1,861 Restricted cash – fund held in escrow 14,196 16,817 17,261 18,678 108 The following table sets forth a summary of our working capital: Years ended December 31, 2024 2023 Variance (US$ in thousands) $ % Total Current Assets $ 24,089 $ 25,619 (1,530 ) (5.97 ) Total Current Liabilities 295,738 47,840 247,898 518.18 Working Capital Deficit (271,649 ) (22,221 ) 249,428 1,122.49 Working Capital Deficit The working capital deficit as of December 31, 2024 amounted to approximately $271.6 million, as compared to approximately $22.2 million as of December 31, 2023, an increase of $249.4 million or 1,122.49%. The increase was mainly attributed to the increase in current liabilities related to the acquisition of Triller Corp. during the year. Cash Flows from Operating Activities Net cash used in operating activities was $29.0 million for the year ended December 31, 2024, as compared to net cash used in operating activities of $42.3 million for the year ended December 31, 2023. Net cash used in operating activities for the year ended December 31, 2024 was primarily the result of a net loss of $1,138.0 million, a decrease in escrow liabilities of $2.6 million, operating lease liabilities of $1.9 million, and income tax payable of $0.3 million. These amounts were partially offset by the decrease in accounts receivable of $2.5 million, increase in accounts payable and accrued liabilities of $4.1 million, and non-cash adjustments consisting of stock-based compensation of $77.8 million, lease expense of $2.6 million, depreciation and amortization of $0.3 million, interest expense on borrowings of $7.9 million, impairment on goodwill of $1,005.8 million, impairment on intangible assets of $1.2 million, impairment on right-of-use assets of $1.7 million, investment loss, net of $16.0 million, provision for allowance for expected credit losses of $2.5 million, change in fair value of warrant liabilities of $(3.5) million, change in fair value of convertible debts of $(4.4) million, and impairment on property and equipment of $0.1 million. Net cash used in operating activities for the year ended December 31, 2023 was primarily the result of the net loss of $49.2 million, an increase in accounts receivable of $1.2 million, increase in deposits, prepayments, and others receivable of $2.5 million, decrease in escrow liabilities of $12.7 million, and decrease in lease liabilities of $1.1 million. These amounts were partially offset by the increase in accounts payable and accrued liabilities of $6.9 million, increase in income tax payable of $0.5 million, and non-cash adjustments consisting of share-based compensation expense of $11.2 million, non-cash lease expense of $1.5 million, depreciation of property and equipment of $0.3 million, interest income on notes receivable of $0.03 million, interest expense on borrowings of $0.8 million, net foreign exchange gain of $0.9 million, net investment loss of $6.9 million, allowance for credit losses on financial instruments of $1.1 million, gain on disposal of property and equipment of $0.7 million, loss on settlement of forward share purchase agreement of $0.4 million, and reversal of over-accruals in prior year of $3.6 million. 109 Cash Flows from Investing Activities Net cash provided by investing activities for the year ended December 31, 2024 of $3.7 million was primarily due to proceeds from sale of long-term investments of $2.5 million and cash from acquisition of Triller Corp. of $1.2 million. Net cash provided by investing activities for the year ended December 31, 2023 of $10.8 million was primarily due to proceeds from sale of investments of $4.0 million, dividend received from long-term investments of $1.7 million, proceeds from sale of property and equipment of $6.1 million, offset by the purchase of notes receivable of $0.6 million, purchase of long-term investments of $0.3 million, and purchase of property and equipment of $0.1 million. Cash Flows from Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 of $24.0 million was primarily due to advances from stock holder of $15.6 million, proceeds from convertible debts of $28.7 million, and proceeds from borrowings of $7.4 million, offset by the repayments of convertible debts of $23.9 million, and repayments of borrowings of $3.9 million. Net cash used in financing activities for the year ended December 31, 2023 of US$1.04 million was primarily due to advances from stockholder of US$9.34 million, proceeds from borrowings of US$7.75 million, proceeds from private placement of US$1.85 million, offset by the settlement of forward share purchase agreement of US$13.95 million, and repayments of borrowings of US$6.03 million. Liquidity and Going Concern Our 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 consolidated financial statements were made available to be issued. For the year ended December 31, 2024, we reported a net loss of approximately $1,138.0 million. With a significant increase in our operating costs, described in the paragraph below, we had an accumulated deficit of approximately $1,203.6 million as of December 31, 2024. However, coupled with the economic recession and migration outflow in Hong Kong, we reported significant sales decline with annual revenue of approximately $27.5 million during 2024 (2023: $54.2 million), and resulting with an operating loss of approximately $113.2 million (2023: $43.1 million). These circumstances give rise to substantial doubt that we will continue as a going concern and these consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 110 Our ability to continue as a going concern is dependent on the management’s ability to successfully implement its plans. Our management team believes that we will be able to continue to grow our revenue base and control our expenditures. In parallel, our management team will continually monitor our capital structure and operating plans and search for potential funding alternatives in order to finance our business development activities and operating expenses. These alternatives may include borrowings, raising funds through public equity or debt markets. However, we cannot predict the exact amount or timing of the alternatives, or guarantee those alternatives will be favorable to our stockholders. Any failure to obtain financing when required will have a material adverse impact on our business, operation and financial result. With these funding initiatives, our management believes that we would be able to strengthen our financial position, improve our liquidity, and enhance our ability to navigate the challenging market conditions. Material Cash Requirements We reported a net loss during the year ended December 31, 2024. However, we expect to generate profitable operating results within the foreseeable future, after getting access to the collective sales capabilities force of the sale channels associated with our financial services business. As a result, management expects our net cash position to expand in 2025. As of December 31, 2024, we had an accumulated deficit of $1,203.6 million. Our material cash requirements are highly dependent upon additional financial support associated with our business operations for the next 12 to 18 months. Capital commitments Details of capital commitments are disclosed in Note 25 in the accompanying consolidated financial statements. 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. 111 Critical Accounting Policies, Judgements and Estimates Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the audited consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in “Note 2 — Summary of significant accounting policies” of our audited consolidated financial statements included under Item 8 of Part II in this Annual Report, certain accounting policies are deemed “critical,” as they require our management’s highest degree of judgment, estimates and assumptions. While our management believes our judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions. Critical accounting policies When reading our consolidated financial statements, you should consider our selection of critical accounting policies, including revenue recognition, and long-term investments, net, of which the details are set out in our audited consolidated financial statements. Critical accounting estimates You should also consider the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. ● Business Combinations We include the results of operations of businesses acquired as of the date of acquisition. Fair values of the assets acquired and liabilities assumed are determined based on the estimated fair values as of the respective date of acquisition. The excess purchase price over the fair values of identifiable assets and liabilities acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgments and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and comparison to peer companies. Estimates of fair value are based on assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Certain information that is indeterminable at the time of the acquisition becomes subject to a subsequent measurement period, which is generally limited to one year. During the measurement period, which may be up to one year from the acquisition date, adjustments to the value of the assets acquired and liabilities assumed may be recorded with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations and comprehensive loss. 112 Transaction costs associated with business combinations are expensed as incurred and are generally included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. ● Impairment of long-lived assets We review long-lived assets, including property and equipment, intangible assets and ROU assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future pre-tax cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is generally determined by discounting the cash flows expected to be generated by the asset (asset group), when the market prices are not readily available. The adjusted carrying amount of the asset is the new cost basis and is depreciated over the asset’s remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. ● Impairment of intangible assets Intangible assets with definite lives are stated at cost less accumulated amortization. Amortization is calculated on a straight-line basis over their estimated useful lives. Intangible assets with definite lives are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists. If the asset is determined to be impaired, the impairment loss is measured based on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of carrying value or net realizable value. ● Impairment on goodwill Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. We review goodwill for impairment at least annually at the reporting unit level or when a triggering event occurs that indicates that the fair value of the reporting unit may be below its carrying amount. We perform annual impairment test of goodwill in the fourth quarter of each fiscal year. First, we assess qualitative factors to determine whether a quantitative impairment test is necessary. If that qualitative assessment indicates that it is more likely than not that goodwill is impaired, we perform a quantitative test to compare the fair value of the reporting unit with the carrying amount, including goodwill, of the reporting unit. If the qualitative assessment indicates that it is not more likely than not that goodwill is impaired, no further testing is necessary. The goodwill impairment loss, if any, represents the excess of the carrying amount of the reporting unit over the fair value of the reporting unit. 113 ● Warrant liabilities We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Equity-classified For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. Warrants classified as equity instruments are initially recognized at fair value and are not subsequently remeasured. We account for its (i) Public Warrants and (ii) Replacement Warrants of Triller Group Warrants as equity. Liability-classified For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations and comprehensive loss. We account for its (i) SPAC Private Warrants, (ii) Common Warrants, and (iii) Warrants – Class A of Triller Group warrants as liabilities.Warrants classified as liabilities are recorded at fair value and are remeasured at each reporting date until settlement. Changes in fair value is recognized as a component of change in fair value of warrant liability in the consolidated statements of operations and comprehensive loss. Transaction costs allocated to warrants that are presented as a liability are immediately expensed in the consolidated statements of operations and comprehensive loss. 114 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to make disclosures under this Item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our financial statements and the notes thereto begin on page F-1 of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.