F-1/A: GLAMOORE Capital Group Reports Q4 Loss Amid Surging Underwriting Costs, Pursues Nasdaq Listing

GLAMOORE Capital Group Company Limited, a Hong Kong-based financial services provider, reported a net loss for the nine months ended December 31, 2024, despite a significant revenue increase, primarily driven by a surge in commission expenses related to its placing and underwriting services, as it continues its efforts to list on the Nasdaq Capital Market.

Summary

• GLAMOORE Capital Group Company Limited (GCGCL) is a Cayman Islands holding company operating primarily in Hong Kong through its subsidiaries, GLAM Capital Limited (GCL) and Grand Moore Capital Limited (GMCL).
• GCL holds Type 1 (dealing in securities), Type 4 (advising on securities), and Type 9 (asset management) licenses, while GMCL holds Type 1 (dealing in securities) and Type 6 (advising on corporate finance) licenses from the SFC.
• For the nine months ended December 31, 2024, total revenue increased by 1.9 times to HK$47,197,500 (US$6,076,122) from HK$16,414,283 in the prior year period.
• The increase in revenue was primarily driven by a HK$40,443,997 (52.9 times) increase in placing and underwriting services revenue, reaching HK$41,207,891 for the nine months ended December 31, 2024.
• Net income shifted from a profit of HK$2,598,364 for the nine months ended December 31, 2023, to a net loss of HK$1,960,411 (US$252,381) for the nine months ended December 31, 2024.
• Operating costs and expenses increased by 2.5 times to HK$49,285,441 (US$6,344,921) for the nine months ended December 31, 2024, mainly due to a HK$37,548,062 (217.9 times) increase in commission expenses.
• Commission expenses for the nine months ended December 31, 2024, totaled HK$37,720,408, with HK$37,548,533 paid to Glam Finance Limited, a related party, for referral services.
• The company is offering 2,000,000 Ordinary Shares, and selling shareholders are offering 1,750,000 Ordinary Shares, at an expected IPO price of US$4 per share on the Nasdaq Capital Market under the symbol GMCG.
• Net proceeds to the company from the offering are estimated at approximately US$4,670,821, to be used for strengthening corporate finance and placing/underwriting (30%), enhancing asset management (30%), brand enhancement and office expansion (10%), and working capital/loan repayment (balance).
• The company's top five clients accounted for 88.8% of total revenue for the nine months ended December 31, 2024, indicating significant client concentration.
• An SFC investigation against GCL and two responsible officers (Mr. Chu Chun Yi and Mr. Chow Ka Keung) was concluded for Mr. Chu with no further action, but remains ongoing for Mr. Chow.
• The company is a Cayman Islands holding company with primary operations in Hong Kong, and is subject to legal and operational risks associated with evolving PRC laws and regulations, particularly concerning data security and overseas listings, despite not having operations in mainland China.
• The company's auditor, Audit Alliance LLP, is headquartered in Singapore and is inspectable by the PCAOB, mitigating immediate delisting risks under the HFCA Act, but future uncertainties remain.
• The company identified material weaknesses in internal control over financial reporting related to inadequate segregation of duties and a lack of independent directors and an audit committee, with remediation plans in place.
• The company relies on dividends from its Hong Kong subsidiaries for cash requirements, and there are no restrictions on cash transfers or dividend distributions from Hong Kong to the Cayman Islands or U.S. investors.
• The investment management arrangement between GCL and Xi Yue Cultural Industry Investment Fund L.P. was terminated in September 2023, leaving GCL reliant on GLAM-HKCFC MBS Fund for its asset management business.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the shift from profit to loss, driven by significantly increased operating costs, particularly related party commissions. While revenue growth in placing and underwriting is strong, its non-recurring nature and high associated costs raise concerns. High client concentration and ongoing regulatory investigation against a key executive also contribute to a cautious outlook, despite the positive step of pursuing a Nasdaq listing.

Positives

• Significant revenue growth (1.9 times) for the nine months ended December 31, 2024, primarily driven by placing and underwriting services.
• Successful engagement in 12 bond issues for five PRC state-owned enterprises, demonstrating strong capabilities in this niche.
• Established reputation and market presence in the Hong Kong financial services industry with approximately nine and six years of operating history for GMCL and GCL, respectively.
• Experienced management team and well-qualified professional workforce, including Mr. Law Chun Ming Johnny (Chairman) and Mr. Chu Chun Yi (CEO), with extensive industry experience.
• Streamlined management structure allowing for fast and efficient services tailored to small and medium-sized enterprises.
• Strong regulatory compliance and risk management framework, with dedicated compliance personnel and regular reviews.
• Successful completion of two IPO sponsorship projects by GMCL during the fiscal years ended March 31, 2024 and 2023, and five IPO projects since July 2019.
• SFC investigation against Mr. Chu Chun Yi (CEO) and GCL concluded with no further action, reducing a potential regulatory overhang.
• Auditor (Audit Alliance LLP) is inspectable by the PCAOB, mitigating immediate delisting risks under the HFCA Act.
• No restrictions or limitations under Hong Kong law on the conversion of HKD into foreign currencies and remittance of currencies out of Hong Kong, or on distributing earnings to the holding company and U.S. investors.

Negatives

• Shift from a net profit of HK$2,598,364 to a net loss of HK$1,960,411 for the nine months ended December 31, 2024, compared to the prior year period.
• Substantial increase in operating costs and expenses (2.5 times), primarily due to a significant rise in commission expenses.
• High client concentration risk, with top five clients accounting for 88.8% of total revenue for the nine months ended December 31, 2024.
• Significant portion of revenue derived from related parties, including a HK$37,548,533 commission payment to Glam Finance Limited (a related party) for referral services.
• Revenue from corporate finance and placing/underwriting is non-recurring and project-based, leading to unpredictable profitability.
• Asset management business relies heavily on a single fund (GLAM-HKCFC MBS Fund) after the termination of the Xi Yue Cultural Industry Investment Fund L.P. engagement.
• Ongoing SFC investigation against Mr. Chow Ka Keung (CFO) related to potential SFO offenses by a former staff member, which could result in regulatory actions and reputational harm.
• Identified material weaknesses in internal control over financial reporting, including inadequate segregation of duties and lack of independent directors/audit committee, which could affect financial reporting accuracy and fraud prevention.
• Vulnerability to poor investment performance and market competition in the asset management business, potentially decreasing Assets Under Management (AUM).
• Exposure to business risk in placing and underwriting if securities are undersubscribed or placements fail, potentially requiring the company to purchase undersubscribed portions.
• Reliance on a limited number of key clients and related parties for a significant portion of revenue, amplifying concentration risk.
• Uncertainties regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations, which could lead to unforeseen regulatory changes or interventions.
• Potential for trading errors in securities brokerage services, leading to financial losses and reputational damage.
• Lack of cybersecurity insurance, meaning the company will bear full costs of any cyber-attacks or security breaches.
• The company is a Cayman Islands holding company with most assets and management outside the U.S., potentially making it difficult for U.S. shareholders to enforce judgments.

Risks

• The SFC in Hong Kong has broad regulatory authority, and any non-compliance could lead to investigations, fines, license suspension/revocation, or other disciplinary actions.
• Operations are concentrated in Hong Kong, making business performance highly susceptible to capital and financial market conditions in Hong Kong, Mainland China, and globally.
• Susceptibility to regulatory changes relevant to companies listed on the Hong Kong Stock Exchange and other exchanges, which could affect demand and scope of services.
• Risk of breach of licensing requirements if regulated activities have less than two responsible officers, potentially jeopardizing license status.
• Revenue from corporate finance and placing/underwriting is non-recurring, leading to highly unpredictable profitability.
• Exposure to business risk from placing and underwriting if securities are undersubscribed or placing exercises fail, potentially requiring the company to purchase undersubscribed portions.
• Asset management business may be adversely affected by poor investment performance and market competition, leading to decreased AUM.
• Investment funds managed by GCL can be redeemed by investors with prior notice, potentially forcing rapid liquidation of positions and reducing fund value.
• Inability to receive mandated payments in a timely manner or in full if milestone events for IPO sponsorship, corporate financial advisory, and placing/underwriting services are not achieved or if clients terminate transactions.
• Substantial risks if clients using securities dealing and brokerage services default on or delay payments, potentially affecting liquidity.
• High competition in the Hong Kong securities dealing and brokerage business, potentially leading to decreased commission rates.
• Requirement to maintain sufficient funding and liquidity to meet minimum capital requirements under the Securities and Futures (Financial Resources) Rules (FRR), with failure leading to license suspension or disciplinary actions.
• Vulnerability to deficiencies or inherent limitations in internal control systems, potentially leading to financial loss, disciplinary actions, or fraud.
• Risk of not fully detecting money laundering and other illegal/improper activities, leading to liabilities and penalties.
• Exposure to potential disruptions and risks from unforeseen disasters or crises (e.g., natural disasters, pandemics, cyberattacks).
• Potential conflicts of interest that, if not properly addressed, could adversely affect business and reputation.
• Losses resulting from trading errors in securities brokerage services.
• PRC government may exercise significant oversight and discretion over Hong Kong operations due to long-arm provisions, potentially intervening in or influencing operations and restricting money movement.
• Uncertainties regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations, which can be vague and subject to change with little notice.
• Adverse regulatory developments in China may subject the company to additional regulatory review and compliance requirements, increasing costs.
• Potential for PRC laws and obligations regarding data security and foreign investment in China-based issuers to apply to Hong Kong-based issuers, hindering ability to offer securities or causing value decline.
• Risk of delisting from U.S. exchanges under the HFCA Act if the auditor is not subject to PCAOB inspections for two consecutive years, despite current inspectability.
• Increased scrutiny and stringent criteria applied to emerging market companies by U.S. regulators, adding uncertainties to the offering and business.
• Impact of the Hong Kong Autonomy Act (HKAA) and other U.S. government policies in response to the Hong Kong National Security Law, potentially affecting business operations.
• Reliance on dividends from subsidiaries for cash and financing requirements, with limitations on subsidiaries' ability to pay dividends materially affecting business.
• Lack of effective internal controls over financial reporting may affect accurate reporting or fraud prevention, impacting share price.
• If applicable listing requirements are not met, Nasdaq may delist shares, reducing liquidity and market price.
• Immediate and substantial dilution in book value for new investors purchasing shares in the offering.
• If a limited number of participants purchase a significant percentage of the offering, the effective public float may be smaller and share price more volatile.
• Board of Directors may decline to register the transfer of Ordinary Shares in certain circumstances.
• Shareholders must rely on price appreciation for return on investment as dividend distribution is at the discretion of the Board and not anticipated in the foreseeable future.
• Management has broad discretion over the use of offering funds, which may not always enhance results or share price.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Securities analysts may not publish favorable research or reports, causing share price or trading volume to decline.
• Difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in Hong Kong against the company or management due to location of assets and personnel outside the U.S.

Future Outlook

The company intends to enhance and expand its existing business capabilities by recruiting additional experienced personnel, improving remuneration, and deploying more resources to client sourcing and service delivery. It plans to strengthen its placing and underwriting services by extending industry networks and exploring opportunities for more significant project engagements. The company also aims to broaden its client network by enhancing brand visibility and expanding marketing/sales capabilities, with an openness to exploring emerging markets beyond Hong Kong, such as mainland China, the United States, Singapore, and Malaysia. Furthermore, it plans to enhance and broaden its asset management services by diversifying schemes and partnering with SFC-licensed intermediaries, while strictly adhering to regulatory requirements. The company expects the adverse effects of COVID-19 to continue to diminish in 2024 and into 2025.

Management Comments

• "We are a specialized financial services provider based in Hong Kong with operations conducted by the Operating Subsidiaries GCL and GMCL."
• "We believe the following competitive strengths differentiate us from our competitors: Established reputation and market presence in the financial services industry; The Operating Subsidiaries have an experienced management team and a well-qualified professional workforce; Established and strong relationship with clients and stable client base; and Strong regulatory compliance and risk management framework."
• "Our management monitors the cash position of the Operating Subsidiaries regularly and prepares budgets on a monthly basis to ensure it has the necessary funds to fulfil its obligations for the foreseeable future and to ensure adequate liquidity."
• "We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future."
• "We believe that the Operating Subsidiaries and we have complied with all applicable laws and regulations in connection with the engagement with PRC clients in Mainland China in all material respects."
• "We believe that the above facilities are adequate to meet we are our subsidiaries needs for the immediate future and that, should it be needed, suitable additional space will be available on commercially reasonable terms to accommodate any expansion of our operations."
• "We believe that the Operating Subsidiaries maintain a good working relationship with its employees, and it has not experienced any significant problems with our employees or any disruption to our operations due to labor disputes, nor have we and the Operating Subsidiaries experienced any material difficulties in the recruitment and retention of experienced core staff or skilled personnel during the nine months ended December 31, 2024 and the fiscal years ended March 31, 2024 and 2023."
• "We will continue to closely monitor the situation throughout 2024 and beyond." (referring to COVID-19 impact)

Industry Context

The company operates in the highly competitive Hong Kong financial and securities services industry, which is influenced by global and Mainland China economic conditions. The industry has seen a steady increase in licensed corporations, but a decline in new listings on the Hong Kong Stock Exchange in recent years. The market benefits from Hong Kong's well-established financial and legal systems, free-flow capital, and its role as an offshore RMB center, attracting PRC investors. The company's focus on corporate finance, underwriting, and asset management aligns with key industry segments. However, the industry faces challenges from intense competition, regulatory changes, and the need for skilled professionals.

Comparison to Industry Standards

• The Hong Kong equity market ranked the eighth largest globally and fifth largest in Asia by market capitalization as of December 31, 2023, indicating a significant market for the company's services.
• The number of new listings on the Hong Kong Stock Exchange decreased from 90 in 2022 to 73 in 2023, reflecting a challenging environment for IPO sponsorship services, which impacts GMCL's business.
• The total turnover of the securities market in Hong Kong increased from HK$17,156 billion in 2014 to HK$30,727 billion in 2022, suggesting a generally active trading environment for GCL's securities brokerage services.
• The increase in licensed corporations in Hong Kong (CAGR of ~6.36% from 2014-2023) indicates growing competition in the financial services sector where the company operates.
• The Hong Kong asset and wealth management business accounted for HK$29,791 billion in 2022, with professional investors contributing 72% of AUM, highlighting a large market for GCL's asset management services, but also intense competition from numerous firms.
• The company's reliance on a limited number of clients (top five accounted for 88.8% of revenue for 9M 2024) is a significant concentration risk compared to a diversified client base typically sought in the financial services industry.
• The company's significant commission expenses to a related party (Glam Finance Limited) for referral services, amounting to HK$37,548,533 for 9M 2024, may raise questions about cost efficiency and arm's length transactions compared to industry best practices for third-party referrals.

Management Changes

Corporate Governance

Legal Proceedings

• An SFC investigation under the SFO was commenced on June 2, 2023, against GCL and two of its responsible officers, Mr. Chu Chun Yi and Mr. Chow Ka Keung, in connection with a former staff member potentially committing offenses contrary to section 383 of the SFO (making false or misleading representations to the SFC).
• As of March 31, 2025, the investigation against Mr. Chu has been concluded with no further action taken against Mr. Chu, GCL, or any of its subsidiaries.
• As of the date of the prospectus, the investigation against Mr. Chow is ongoing, and no regulatory action has been taken against GCL, Mr. Chu, or Mr. Chow in connection thereof. The outcome is uncertain, with potential for reprimands, fines, limitations on business activities, or license suspension/revocation.
• The maximum penalty for an offense under section 383 of the SFO upon conviction on indictment is up to a fine of HK$1,000,000 and imprisonment of 2 years.
• The company is not a party to, and is not aware of any threat of, any other legal proceeding that is likely to have a material adverse effect on its business, financial condition, or operations as of the date of the prospectus.

Related Party Transactions

• For the nine months ended December 31, 2024, GCL incurred commission expenses of HK$37,548,533 to Glam Finance Limited (a related party controlled by Mr. Yeung Wan Yiu, a principal shareholder) for referral services related to bond issuances.
• On November 6, 2024, an offsetting arrangement was entered into to net off HK$5,373,643 due from Mr. Yeung Wan Yiu (a shareholder) and HK$4,019,039 due to Team Plus International Limited (a related party). The remaining balance due from Mr. Yeung was repaid in cash.
• On November 5, 2024, an offsetting arrangement was entered into to net off HK$2,738,736 due from Mr. Law Chun Ming Johnny (a director) and HK$4,223,839 due to Active Ideal Holdings Limited (a related party). The balance due from Mr. Law is now nil.
• As of December 31, 2024, there are outstanding interest-free loans due to shareholders: Mr. Lei Iat Seng (HK$3,000,000) and Pacific Express Limited (HK$1,500,000).
• As of December 31, 2024, there is an outstanding interest-free loan due to Active Ideal Holdings Ltd. of HK$1,767,094.
• As of December 31, 2024, there are outstanding accounts receivable from related parties: GLAM Finance Limited (HK$585,000 for business development fees), GLAM-HKCFC MBS Fund (HK$1,632,458 for performance fees), and Xi Yue Cultural Investments Fund L.P. (HK$202,873 for management fees).
• As of December 31, 2024, there are outstanding amounts due from related parties: Optimum Lead Limited (HK$5,521), Pacific Express Limited (HK$2,761), GLAM-HKCFC MBS Fund (HK$169,404 for interest-free loan), and Team Plus Intl Ltd. (HK$167,592 for fund advance).

Stakeholder Impact

• **Shareholders (Existing & New):** Existing shareholders will experience immediate and substantial dilution in book value upon IPO. The concentration of ownership by principal shareholders (68.75% post-IPO) means they can control management and affairs, potentially taking actions not in the best interest of other shareholders. The shift to a net loss and high reliance on related party transactions could negatively impact investor confidence and share price. PRC regulatory uncertainties and potential delisting risks under the HFCA Act pose significant threats to investment value.
• **Employees:** Employee benefits expenses decreased for the nine months ended December 31, 2024, due to salary reductions for the majority of staff. The company relies on key management and professional staff, and their retention is crucial. The ongoing SFC investigation against the CFO could create uncertainty for employees.
• **Customers:** The company's ability to secure new mandates and maintain relationships with existing clients, especially PRC state-owned enterprises, is critical for revenue. Any adverse market conditions or regulatory changes affecting clients' fundraising activities could reduce demand for services. The termination of the Xi Yue Cultural Industry Investment Fund L.P. management arrangement impacts investors in that fund.
• **Suppliers/Creditors:** The company's liquidity and ability to meet obligations are influenced by cash flows from operations and financing activities. Related party loans and offsetting arrangements affect the company's financial position. The company's compliance with FRR is crucial for maintaining licenses and client confidence.
• **Regulatory Bodies (SFC, CSRC, Nasdaq, PCAOB):** The company is subject to extensive regulatory oversight. Non-compliance, particularly with SFC and potential PRC regulations, could lead to fines, license suspensions, or other disciplinary actions. The Nasdaq listing application and ongoing PCAOB inspectability are critical for public trading.

Next Steps

• Complete the Nasdaq Capital Market listing process, including receiving a listing approval letter.
• Implement measures to improve internal control over financial reporting, including hiring more qualified staff and appointing independent directors/establishing an audit committee.
• Continue to monitor and respond to the ongoing SFC investigation against Mr. Chow Ka Keung.
• Strengthen and expand corporate finance and capital market advisory business by recruiting additional experienced personnel and deploying more resources.
• Enhance and develop asset management business by diversifying schemes and attracting international professional investors.
• Broaden client network and explore opportunities in emerging markets beyond Hong Kong (e.g., mainland China, U.S., Singapore, Malaysia).
• Manage and diversify client base to reduce concentration risk.
• Monitor and adapt to evolving PRC and Hong Kong regulatory requirements, especially concerning data security and overseas listings.
• Continue to monitor the global economic and geopolitical situation, including the Russia-Ukraine war, for potential impacts on business.

Key Dates

Recommendation

Keywords

Financial Services, Hong Kong, Investment Banking, Corporate Finance, Underwriting, Placing Agent, Asset Management, Securities Brokerage, IPO Sponsorship, SEC Filing, Nasdaq Listing, GLAMOORE Capital Group, GLAM Capital Limited, Grand Moore Capital Limited, PRC Regulations, Risk Management, Related Party Transactions, Financial Performance, Capital Markets