Business Context and Reporting Period
This Form 6-K filing by AGM Group Holdings, Inc. covers the month of September 2018. The Company, a foreign private issuer, reports a significant strategic shift involving the cessation of its forex trading brokerage services and the sale of a controlling interest in its subsidiary, AGM Group Ltd. ("AGM Belize"), to its Chairman, Zhentao Jiang.
Key Financial Metrics
The filing provides specific historical data regarding AGM Belize as of December 31, 2017, but does not provide current consolidated revenue, profit, or cash flow figures for the Company as of September 2018.
- Transaction Value: The Company agreed to sell a 90% equity interest in AGM Belize for US$450,000.
- Historical Revenue Contribution: AGM Belize accounted for approximately 1% of total revenue in fiscal year 2017 and 11% in fiscal year 2016.
- Historical Assets (AGM Belize): Approximately $16.3 million as of December 31, 2017, including $12.5 million in transaction monetary assets held for clients.
- Historical Liabilities (AGM Belize): Approximately $12.7 million as of December 31, 2017, primarily consisting of $12.5 million in deposits payable.
- Balance Sheet Impact: As of December 31, 2017, AGM Belize's assets and liabilities represented approximately 63% and 76% of the Company's total assets and liabilities, respectively.
Material Changes
The most significant change is the voluntary cessation of forex trading brokerage services and the suspension of the AGMTrade social trading network platform effective September 5, 2018. This decision was driven by a policy change by the central government of the People's Republic of China that no longer supports forex-trading related businesses. Consequently, access to certain accounts holding customer deposits has been restricted by local regulators. The Company has entered into an agreement to sell 90% of AGM Belize to its Chairman, retaining only a 10% interest.
Outlook, Risks, and Management Commentary
Outlook and Strategy: The Company expects to no longer generate revenue from forex trading. It plans to focus on two remaining core businesses: (i) online trading platform application and computer program technical support, and (ii) program trading application technology and management services. New initiatives include a commodity trading system product expected to complete R&D by October 2018, a back-office management system for private equity firms, and online financial education services.
Risks and Contingencies: The Company remains liable for customer deposits payable. There is no assurance that the Company will regain access to the restricted accounts in the near future, which could have a material adverse effect on operations. The transaction is subject to regulatory approvals, including from Nasdaq, and an investment bank opinion on fairness.
Investor Verification Checklist
- Verify the status of the $12.5 million in customer deposits payable and the Company's ability to access restricted accounts.
- Confirm the completion of the $450,000 equity acquisition agreement and receipt of payment from the Chairman.
- Monitor regulatory approvals from Nasdaq and the Audit Committee regarding the related party transaction.
- Assess the timeline and viability of the new revenue streams (commodity trading system, back-office management, and financial education) to replace lost forex revenue.
- Review the forthcoming information statement containing the investment bank's fairness opinion.