Quantitative and qualitative disclosure about market risk

12 Months Ended

Dec. 31, 2023

Quantitative and qualitative disclosure about market risk

Quantitative and qualitative disclosure about market risk

Note 20 - Quantitative and qualitative disclosure about market risk

Concentration of credit risk

Credit risk is one of the most significant risks for the Company’s business and arise principally in lending activities.

Credit risk on loans receivable is controlled by the application of credit approvals, limits and monitoring procedures. To minimize credit risk, the Company requires collateral primarily in the form of rights to property.

The provision for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the provision. The provision is based on the Company’s past loan loss history, known and inherent risks of the borrower, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The Company originates loans to customers located primarily in Hong Kong. This geographic concentration of credit exposes the Company to a higher degree of risk associated with this economic region. Prior to January 1, 2020, the Company mainly reflects the “probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the exposures to the customer and its likely future development. For individual customers, the Company uses standard approval procedures to manage credit risk for personal loans.

The Company adopted Accounting Standard Update (ASU) 2016-13, Financial Instruments-Credit Losses (codified as Accounting Standard Codification Topic 326), since January 1, 2020, which requires measurement and recognition of current expected credit losses for financial instruments held at amortized cost. The Company’s loans receivable and interest receivable are within the scope of ASC Topic 326.

The reversal of provision for loan losses of $0.05 million and $0.97 million, provision for loan losses of $1.39 million was recognized for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company’s accounts receivable, loans receivable, interest receivable, other receivables and prepayments and deposit for acquisition of a subsidiary are within the scope of ASC Topic 326.

To estimate expected credit losses as of December 31, 2023, the Company has conducted an assessment of expected credit loss of loan and interest receivables (“Financial Assets”) held by the Company and together with its subsidiaries. The Financial Assets are outstanding loans receivable, net of reversal of provision for loan losses, from the money lending business in a total amount of $19.68 million (“Principal”) and $0.04 million (“Interest”) respectively.

Movement of the provision for loan losses and interest receivable are as follows:

	For the years ended December 31,
	2023		2022
Balance as of January 1	$	2,072	$	3,558
Provisions for doubtful accounts
Personal loans		51		1
Corporate loans		236		1
Write offs		—		(513)
Recoveries of amounts previously charged off		(336)		(975)
Balance as of December 31		2,023		2,072

Movement of the provision for account receivable, other receivables and prepayments, deposit for acquisition of a subsidiary are as follows:

	For the years ended December 31,
	2023		2022
Balance as of January 1	$	135	$	132
Provisions for doubtful accounts		8		3
Write offs		—		—
Recoveries of amounts previously charged off		(135)		—
Changes due to foreign exchange		—		—
Balance as of December 31		8		135

As of December 31, 2023, the loans receivable due from 2 customers accounted for 17% and 21% of total loan receivable. As of December 31, 2023, no other customer accounted for more than 10% of total loan balance.

As of December 31, 2022, the loans receivable due from 4 customers accounted for 11%, 14%, 20% and 23% of total loan receivable. As of December 31, 2022, no other customer accounted for more than 10% of total loan balance.

Concentration of customer

Revenue from 2 major customers accounted for 23% and 11% of the Company’s total revenues, for the year ended December 31, 2023. No other single customer accounted for more than 10% of the Company’s total revenues, for the year ended December 31, 2023.

Revenue from 2 major customers accounted for 18% and 13% of the Company’s total revenues, for the year ended December 31, 2022. No other single customer accounted for more than 10% of the Company’s total revenues, for the year ended December 31, 2022.

Concentration of geographic area

The Company does not allocate its assets located and expenses incurred outside Hong Kong to its reportable segments because these assets and activities are managed at a corporate level (Note 17).

Geographic area data is based on product shipment destination. In accordance with the enterprise-wide disclosure requirements of the accounting standard, the Company’s net revenue from external customers by geographic areas is as follows:

	For the year ended December 31,
	2023		2022		2021
Hong Kong		3,442		3,595		3,489
Australia		127		278		194
Total	$	3,569	$	3,873	$	3,683

Concentration of supplier

Cost from 1 major supplier accounted for 15% of the Company’s total cost of revenues, for the year ended December 31, 2023. No other single supplier accounted for more than 10% of the Company’s total cost of revenues, for the year ended December 31, 2023.

Cost from 1 major supplier accounted for 14% of the Company’s total cost of revenues, for the year ended December 31, 2022. No other single supplier accounted for more than 10% of the Company’s total cost of revenues, for the year ended December 31, 2022.

Concentration of deposit institution of cash and bank deposit

As of December 31, 2023 and 2022, majority of the Company’s cash is deposited in banks located in Hong Kong. In Hong Kong, Deposit Protection Scheme is in place which protects eligible deposits held with banks in Hong Kong. Hong Kong Deposit Protection Board will compensate up to a limit of HKD500,000 to each depositor if the bank which hold eligible deposits fails.

As of March 31, 2024, the Company had $2.28 million cash and bank deposits. The Company held seven bank accounts with total amount of $0.31 million cash deposited in Alpen Baruch Bank Limited which is an international bank situated in Vanuatu. There is no Deposit Protection Scheme in place which protects eligible deposits held with banks in Vanuatu. As of December 31, 2023, the Company had $3.11 million cash and bank deposits. The Company held seven bank accounts with total amount of $0.42 million cash deposited in Alpen Baruch Bank Limited which is an international bank situated in Vanuatu. There is no Deposit Protection Scheme in place which protects eligible deposits held with banks in Vanuatu.

Eligible deposits include all types of ordinary deposits such as current accounts, savings accounts, secured deposits and time deposits with a maturity not exceeding five years. Eligible deposits are protected regardless of the currency in which the deposits are denominated.

Foreign currency risk

Certain transactions of the Company are denominated in HKD which is different from the functional currency of the Company, and therefore the Company is exposed to foreign currency risk. As the HKD is currently pegged to the USD, management considers that there is no significant foreign currency risk arising from the Company’s monetary assets denominated in USD.

The Company currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign exchange exposure should the need arise.