SEC Form 20-F filed by AMTD Digital Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

OR

☒ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from May 1, 2023 to October 31, 2023

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission File Number: 001-40463

AMTD Digital Inc.

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

66 rue Jean-Jacques

Rousseau

75001 Paris

France

(Address of Principal Executive Offices)

Feridun Hamdullahpur, Chairman of Executive Management Committee

Telephone: +33 (0) 1 4236 4597

66 rue Jean-Jacques

Rousseau

75001 Paris

France

(Name, Telephone, Email and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the transition report: 11,308,207 Class A ordinary shares, par value US$0.0001 per share, and 65,650,000 Class B ordinary shares, par value US$0.0001 per share, as of October 31, 2023.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards^† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17  ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

TABLE OF CONTENTS

INTRODUCTION

In this transition report, unless otherwise indicated or unless the context otherwise requires:

Presentation of Financial Data

We changed our basis of accounting from International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS, to U.S. Generally Accepted Accounting Principles, or U.S. GAAP. Our consolidated financial statements for the years ended April 30, 2021, 2022 and 2023 and the six months ended October 31, 2023 and as of April 30, 2021, 2022 and 2023 and October 31, 2023 included elsewhere in this transition report have been prepared in accordance with U.S. GAAP. Historical financial results for the years ended April 30, 2021, 2022 and 2023 and historical financial results as of April 30, 2021, 2022 and 2023 have also been adjusted based on U.S. GAAP.

Rounding and Currency

Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding. Our reporting currency is United States dollars.

EXPLANATORY NOTE

On April 30, 2024, the board of directors of AMTD Digital Inc. approved a change of fiscal year end from April 30 to October 31. The change resulted from the continual global expansion of AMTD Group Inc., the Controlling Shareholder, and its need to realign the various fiscal calendar year-end dates of its subsidiaries.

As a result of the change of fiscal year end, we are required to file this transition report on Form 20-F for the six-month transition period from May 1, 2023 to October 31, 2023. After filing this transition report, our next full fiscal year will be the fiscal year ending October 31, 2024. Unless otherwise noted, all references to “fiscal year” in this transition report refer to the fiscal year which, prior to the transition period, ended on April 30. Our consolidated financial statements for the transition period from May 1, 2023 to October 31, 2023 prepared in accordance with U.S. GAAP are unaudited. We note that this transition report is filed pursuant to Rule 13a-10(g)(4) of the Securities Exchange Act of 1934, as amended, which permits us to respond to only Items 5, 8.A.7., 13, 14 and 17 or 18 of Form 20-F.

FORWARD-LOOKING INFORMATION

This transition report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “might,” “will,” “would,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” “potential,” “continue,” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

You should read this transition report and the documents that we refer to in this transition report and have filed as exhibits to this transition report completely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this transition report discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this transition report relate only to events or information as of the date on which the statements are made in this transition report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Part I

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction with, our consolidated financial statements and the related notes included in this transition report on Form 20-F. This report contains forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” of our annual report on Form 20-F filed with the United States Securities and Exchange Commission on August 23, 2023, or our 2023 Annual Report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

We changed our basis of accounting from IFRS to U.S. GAAP. Our consolidated financial statements for the years ended April 30, 2021, 2022 and 2023 and the six months ended October 31, 2023 and as of April 30, 2021, 2022 and 2023 and October 31, 2023 included elsewhere in this transition report have been prepared in accordance with U.S. GAAP.

Operating Results

We are a comprehensive digital solutions platform headquartered in France with businesses spanning multiple verticals, including digital solutions services, digital media, content and marketing services, digital investments as well as hotel operation, hospitality and VIP services.

We generate revenue primarily from fees and commissions from our digital solutions services, digital media, content and marketing services business, digital investments, as well as hotel operation, hospitality and VIP services business. Our revenue was US$25.3 million, US$25.3 million and US$33.1 million for the fiscal years ended April 30, 2021, 2022 and 2023, and US$13.9 million and US$8.7 million for the six months ended October 31, 2022 and 2023, respectively. Our net profit was US$22.1 million, US$25.8 million and US$40.8 million for the fiscal years ended April 30, 2021, 2022 and 2023, and US$10.7 million and US$30.8 million for the six months ended October 31, 2022 and 2023, respectively. We continue to deepen and monetize our relationship with clients by cross-selling solutions that fill their unique needs.

Key Factors Affecting Our Results of Operations

Our businesses are materially affected by conditions in the financial markets and economic conditions. The global macroeconomic environment still faces numerous challenges. Financial markets and economic conditions could be negatively impacted by many factors beyond our control, such as difficulties in accessing capital markets, control of foreign exchange, changes in exchange rates, rising interest rates or inflation, slowing or negative growth rate, government involvement in allocation of resources, difficulties in meeting financial commitments in a timely manner, terrorism, political uncertainty, epidemic or pandemic, civil unrest, fiscal or other economic policy of governments, and the timing and nature of any regulatory reform. The global spread of coronavirus disease (COVID-19) in a significant number of countries around the world and the traveling restrictions due to COVID-19 have previously resulted in global economic distress. The recent geo-political uncertainties has also given rise and are expected to continue to give rise to uncertainties in global economic conditions and adversely affect general investor confidence.

The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The credit and financial markets have experienced extreme volatility and disruptions due to the conflict between Ukraine and Russia. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. The conflict is also expected to have further global economic consequences, including the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and uncertainty about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia may resort to retaliatory actions, including the launching of cyberattacks.

Unfavorable financial markets and economic conditions could negatively affect our clients’ businesses and materially reduce demand for our products and services and increase price competition, and thus could materially and adversely affect our business, financial condition, and results of operations.

Rate of adoption of digital solutions services — financial services in Asia

Consumers in Asia are rapidly embracing digital banking, insurance, and other digital finance services. This shift was further accelerated by the COVID-19 pandemic, which forced a large part of the population to adopt digital means for work, education, and commerce and to conduct their financial transactions electronically as they were subjected to various social distancing measures and travel restrictions. Furthermore, globalization and digitalization have enabled greater movements of people, goods, and services across borders. There has been increasing trade among the economies of Asia, which will benefit financial institutions like us that can provide seamless, comprehensive digital financial solutions across borders.

The revenue that we generate from our digital solutions services-financial services business will depend in a large part on the rate at which the global population embraces digital solutions services-financial services. We anticipate rapid growth in our future digital solutions services-financial services, contributing to the growing scale of our revenue. However, should the global markets not embrace digital solutions services-financial services as rapidly as we anticipate, our future results of operation could be affected.

Our ability to expand into new markets and offer new products and services

Digital solutions services-financial services business is a highly regulated industry, and digital financial licenses are generally regulated separately across different product types and different regions. In order to provide one-stop cross-regional digital solutions services — financial services that meet the evolving needs of clients, it is important for us to obtain licenses from multiple regulatory regimes. In the future, we may consider to apply for banking licenses in Asia, as regulations allow, and may also consider to obtain financial licenses in other areas, such as digital insurance, digital assets exchange, and digital payment. If we are unable to expand into new markets, our future results of operations could be affected.

At the same time, it is imperative for us to continue to offer new products and services in order to attract new customers and retain our existing customers. If we are unable to offer new products and services to attract and retain our clients, our future results of operation could be affected.

Our ability to compete in the hospitality market and seasonality

The market to provide hospitality services is highly competitive and fragmented. The barriers to entry are low and new competitors may enter the market at any time. Our current or potential competitors include global hotel brands, regional hotel chains, independent hotels, online travel agencies and home-sharing and rental services and short term/vacation rental. It is crucial for us to respond quickly and effectively to new or changing opportunities, technologies, standards or customer requirements. Our success depends on our ability to maintain our brand reputation and the quality of our services and to differentiate our business or services from those of our competitors.

The hospitality industry is also subject to fluctuations in revenues due to seasonality. The periods during which our properties experience higher revenues depend principally upon their locations, types of property and competitive mix within the specific locations.

Our ability to attract, retain, and motivate talents

It is essential for us to attract, retain, and motivate talent because our businesses are human capital intensive. We believe that it is necessary and customary to invest in talents, arguably our most important assets, with attractive compensation packages, as we compete to attract, retain, and motivate qualified employees. Key members of our management are also shareholders of our company, ensuring that interests and incentives are aligned with our performance. Our staff costs (including directors’ emoluments) for the fiscal years ended April 30, 2021, 2022, and 2023 were US$6.2 million, US$9.3 million, and US$9.9 million, respectively, representing 24.5%, 36.8%, and 29.8% of our total revenue for the corresponding periods. Our staff costs have historically been comprised of cash-based and share-based compensation and benefits. Nevertheless, highly incentivized professionals and other talents could potentially enable us to achieve great business prospects and results of operations.

Key Components of Results of Operations

Revenue

Our revenue consists of (i) digital solutions services-financial services income, (ii) digital solutions services — non financial services income, (iii) hotel operations, hospitality and VIP services income, and (iv) digital media, content, and marketing services income.

We derive fee income primarily from four business lines: (i) digital solutions services-financial services, which currently consists entirely of insurance brokerage income, where we charge fees and commissions from insurance purchasers, which are paid either directly to us or through insurance provider partners, (ii) digital solutions services — non financial services, where we recognize our fee income over the period of contracts, (iii) digital media, content, and marketing services business income in which we create and promote digital content by investing in and developing multimedia channels to provide users and audiences access to content medium through a comprehensive library of traditional and digital movies, podcasts, webinars and live videos offered by content providers and online media platforms, and (iv) hotel operations, hospitality and VIP services, which represents hotel and property investments and hotel operations and management since the acquisition of AMTD Assets in February 2023.

Changes in fair value on financial assets measured at fair value through profit or loss (FVTPL)

We record changes in fair value on financial assets measured at FVTPL with respect to our digital investments and movie investments.

Employee benefits expenses

Our employee benefits expenses mainly consist of staff salaries, bonus and director fee.

Premises and office expenses

Our premises and office expenses mainly consist of premises cost, office utilities and other miscellaneous office expenses.

Legal and professional fee

Our legal and professional fee mainly consist of audit services, professional liability insurance and professional and legal expenses in connection with our continuous building and refining of organizational structure.

Depreciation and amortization

Our depreciation and amortization mainly consists of amortization of intangible assets.

Advertising and promotion expenses

Our advertising and promotion expenses mainly consist of expenses incurred to promote and enhance our branding.

Finance costs

Our finance costs mainly consist of interest expenses on bank borrowings and amount due to a non-controlling shareholder.

Other expenses

Our other expenses mainly consist of traveling and business development expenses, donation, and other miscellaneous expenses.

Other income

Other income consists of interest income, and other non-recurring miscellaneous income.

Other gains and losses

Other gains and losses consist of (i) net exchange gain or loss, (ii) recovery of accounts and other receivables written off, and (iii) gain on disposal of subsidiaries.

Taxation

We had income tax expense of US$3.2 million, US$3.0 million, US$4.5 million and US$2.0 million for the fiscal years ended April 30, 2021, 2022 and 2023 and six months ended October 31, 2023, respectively. The following summarizes our applicable tax rates in the Cayman Islands and Hong Kong.

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations outside of the Cayman Islands based upon profits, income, gains, or appreciation. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments.

Hong Kong

Our Hong Kong subsidiaries are subject to an 8.25% Hong Kong profit tax on the first HK$2,000,000 of the taxable income generated from operations in Hong Kong. Any taxable income above HK$2,000,000 will be subject to a 16.5% Hong Kong profit tax. Under the Hong Kong tax laws, our Hong Kong subsidiaries are exempted from the Hong Kong income tax on our foreign-derived income. In addition, payments of dividends from our Hong Kong subsidiaries to us are not subject to any Hong Kong withholding tax.

Results of Operations

Segment Information

We report our results of operations in four reportable segments: digital solutions services - financial services, digital solutions services - non financial services, hotel operations, hospitality and VIP services, and digital media, content and marketing services and others, which correspond to our business lines. The following table sets forth certain financial information of our reportable segments for the periods presented.

Note:

Six Months Ended October 31, 2023 compared to Six Months Ended October 31, 2022

Digital solutions services - non financial services segment

The revenue of the digital solutions services - non financial services segment decreased from US$12.8 million for the six months ended October 31, 2022 to US$1.3 million for the six months ended October 31, 2023 and the segment profit decreased from US$9.9 million for the six months ended October 31, 2022 to US$0.5 million for the six months ended October 31, 2023, primarily due to the focusing of our efforts into generating long-term and stable values out from the global intellectual property titles we acquired, and thereby the reengineering of our cooperation and relationship with global business partners, although all of these steps would take time to realise.

Digital solutions services - financial services segment

The revenue of the digital solutions services - financial services segment decreased from US$0.6 million for the six months ended October 31, 2022 to US$0.5 million for the six months ended October 31, 2023 and the segment results change from a profit of US$39 thousand for the six months ended October 31, 2022 to a loss of US$0.7 million for the six months ended October 31, 2023, primarily due to the increase in operating expenses incurred during the six months ended October 31, 2023.

Hotel operations, hospitality and VIP services segment

We acquired the hotel operations, hospitality and VIP services business in February 2023. The revenue of the hotel operations, hospitality and VIP services segment was US$6.9 million for the six months ended October 31, 2023 and the segment loss was US$2.2 million for the six months ended October 31, 2023.

Digital media, content, and marketing services and others

The profit of digital media, content, and marketing services and others segment, which mainly consisted of changes in fair value on financial assets measured at FVTPL from our investments in innovative companies and movies, was US$16.3 million for the six months ended October 31, 2023, compared to US$0.4 million for the six months ended October 31, 2022, primarily due to the gain from the disposal of movie income rights.

For reconciliation of segment revenue to consolidated revenue and reconciliation of segment results to consolidated profit before tax, see note 6 to our consolidated financial statements included elsewhere in this transition report.

Six Months Ended October 31, 2023 compared to Six Months Ended October 31, 2022

Revenue

Our revenue from contracts for the six months ended October 31, 2023 was US$8.7 million as compared to US$13.9 million for the six months ended October 31, 2022. 

Changes in fair value on financial assets measured at FVTPL

Our changes in fair value on financial assets measured at FVTPL was US$0.4 million for the six months ended October 31, 2022 compared to US$16.3 million for the six months ended October 31, 2023. The difference is primarily attributable to the realization from gain of certain movie income right investments during the six months ended October 31, 2023.

Employee benefits expense

Our employee benefits expense decreased by 18.3% from US$3.8 million for the six months ended October 31, 2022 to US$3.1 million for the six months ended October 31, 2023, primarily due to the tightening of cost control measures as a result of the global economic slowdown and rising geopolitical uncertainties.

Advertising and promotion expense

Our advertising and promotion expense decreased by 44.3% from US$0.3 million for the six months ended October 31, 2022 to US$0.2 million for the six months ended October 31, 2023 mainly due to the decrease in promotional activities during the six months ended October 31, 2023.

Premises and office expenses

Our premises and office expenses increased by 208.3% from US$0.5 million for the six months ended October 31, 2022 to US$1.5 million for the six months ended October 31, 2023 mainly due to the incremental costs attributable to the post-acquisition operations of AMTD Assets.

Legal and professional fee

Our legal and professional fee remained relatively stable at US$1.2 million to US$1.3 million for the six months ended October 31, 2023 and 2022.

Depreciation and amortization

Our depreciation and amortization expenses increased by 242.3% from US$0.4 million for the six months ended October 31, 2022 to US$1.4 million for the six months ended October 31, 2023 primarily attributable to the hotel properties of AMTD Assets.

Other expenses

Our other expenses increased by 820.9% from US$0.5 million for the six months ended October 31, 2022 to US$4.6 for the six months ended October 31, 2023 primarily attributable to (i) the addition of hotel operation expenses of US$2.8 million incurred by AMTD Assets, and (ii) the share of losses of joint ventures of US$1.4 million.

Finance costs

Our finance costs increased from nil for the six months ended October 31, 2022 to US$3.4 million for the six months ended October 31, 2023, primarily attributable to our incremental borrowings and to the consolidation of AMTD Assets which had outstanding bank loans financing the underlying real estate properties.

Other income

Our other income increased by 85.2% from US$4.9 million for the six months ended October 31, 2022 to US$9.0 for the six months ended October 31, 2023, primarily due to (i) an increase in bank interest income as we generated additional interest income from deposits with banks, and (ii) an increase in the net average outstanding balance due from our Controlling Shareholder, which was interest bearing.

Other gains and losses, net

We recorded other losses of US$42 thousand for the six months ended October 31, 2022 as compared to other gains of US$14.3 million for the six months ended October 31, 2023. The difference is primarily attributable to the gain on disposal of subsidiaries which are engaged in digital solutions services – non financial services of US$14.7 million.

Income tax expense

We incurred income tax expense of US$1.7 million and US$2.0 million for the six months ended October 31, 2022 and 2023, respectively. The increase in our income tax expense resulted from increase in assessable profits in the fiscal year ended April 30, 2023.

Profit for the year

As a result of the foregoing, our profit increased from US$10.7 million for the six months ended October 31, 2022 to US$30.8 million for the six months ended October 31, 2023.

Fiscal Year Ended April 30, 2023 Compared to Fiscal Year Ended April 30, 2022

Digital solutions services - financial services segment

The revenue and segment profit of the digital solutions services - financial services segment remained stable at US$1.5 million and US$0.1 million, respectively, for the fiscal year ended April 30, 2023.

Digital solutions services - non financial services segment

The revenue of the digital solutions services - non financial services segment increased from US$23.7 million for the fiscal year ended April 30, 2022 to US$28.0 million for the fiscal year ended April 30, 2023 and the segment profit increased from US$17.5 million for the fiscal year ended April 30, 2022 to US$21.5 million for the fiscal year ended April 30, 2023, primarily due to the increase in fee income as the result of the higher contracts sum for the renewed contracts of existing clients and new contracts of new clients in general during the fiscal year ended April 30, 2023.

Hotel operations, hospitality and VIP services segment

The revenue of the hotel operations, hospitality and VIP services segment was US$2.2 million for the fiscal year ended April 30, 2023 and the segment loss was US$1.2 million since the completion of our acquisition of AMTD Assets in February 2023.

Digital media, content, and marketing services and others

The profit of digital media, content, and marketing services and others segment, which mainly consisted of changes in fair value on financial assets measured at FVTPL from our investments in innovative companies and movies, was US$19.3 million for the fiscal year ended April 30, 2023, compared to US$17.5 million for the fiscal year ended April 30, 2022, primarily due to the realized and unrealized gain in fair value from certain investments and the increase in the digital media, content, and marketing services income during the fiscal year ended April 30, 2023.

For reconciliation of segment revenue to consolidated revenue and reconciliation of segment results to consolidated profit before tax, see note 6 to our consolidated financial statements included elsewhere in this transition report.

Fiscal Year Ended April 30, 2023 Compared to Fiscal Year Ended April 30, 2022

Revenue

Our revenue from contracts with customers increased from US$25.3 million for the fiscal year ended April 30, 2022 to US$33.1 million for the fiscal year ended April 30, 2023, primarily due to the expansion of our digital solutions services - non financial services business and digital media, content, and marketing services business, and the acquisition of the hotel operations, hospitality and VIP services business.

Changes in fair value on financial assets measured at FVTPL

Our changes in fair value on financial assets measured at FVTPL was US$16.9 million in the fiscal year ended April 30, 2022, compared to US$15.4 million in the fiscal year ended April 30, 2023, primarily due to the realized and unrealized gain in fair value from certain investments in the fiscal year ended April 30, 2023.

Employee benefits expense

Our employee benefits expense increased by 6.2% from US$9.3 million for the fiscal year ended April 30, 2022 to US$9.9 million for the fiscal year ended April 30, 2023, primarily due to an increase in staff cost and number of staff in line with our business growth.

Advertising and promotion expense

Our advertising and promotion expense increased by 25.5% from US$0.5 million for the fiscal year ended April 30, 2022 to US$0.7 million for the fiscal year ended April 30, 2023 mainly due to the increase in promotional activities in line with our business expansion in the fiscal year ended April 30, 2023.

Premises and office expenses

Our premises and office expenses increased by 34.4% from US$0.7 million for the fiscal year ended April 30, 2022 to US$1.0 million for the fiscal year ended April 30, 2023 mainly due to our business expansion in the fiscal year ended April 30, 2023.

Legal and professional fee

Our legal and professional fee slightly decreased by 4.0% from US$3.0 million for the fiscal year ended April 30, 2022 to US$2.9 million for the fiscal year ended April 30, 2023.

Depreciation and amortization

Our depreciation and amortization expenses increased by 55.1% from US$0.8 million for the fiscal year ended April 30, 2022 to US$1.3 million for the fiscal year ended April 30, 2023 mainly due to the increase in depreciation arising from the hotel operations, hospitality and VIP services segment which was acquired in February 2023.

Other expenses

Our other expenses increased by 503.0% from US$0.4 million for the fiscal year ended April 30, 2022 to US$2.4 million for the fiscal year ended April 30, 2023 mainly due to the incurrence of hotel operating cost after the completion of the acquisition of AMTD Assets in February 2023 and the increase in administrative expenses after our listing in July 2022.

Finance costs

Our finance costs increased from nil to US$1.2 million for the fiscal year ended April 30, 2023, primarily due to the interest expenses incurred in respect of the loan payables from the hotel operations, hospitality and VIP services business acquired in February 2023.

Other income

Our other income increased by 1,751.4% to US$16.1 million for the fiscal year ended April 30, 2023, primarily due to the interest income arising from certain note receivables and certain receivables from our ultimate holding company after listing in July 2022.

Income tax expense

We incurred income tax expense of US$3.0 million and US$4.5 million for the fiscal year ended April 30, 2022 and 2023, respectively. The increase in our income tax expense resulted from increase in assessable profits in the fiscal year ended April 30, 2023.

Profit for the year

As a result of the foregoing, our profit increased from US$25.8 million for the fiscal year ended April 30, 2022 to US$40.8 million for the fiscal year ended April 30, 2023.

Fiscal Year Ended April 30, 2022 Compared to Fiscal Year Ended April 30, 2021

Digital solution services - financial services segment

The revenue of the digital financial services segment remained stable at US$1.5 million for the fiscal year ended April 30, 2022 and the segment profit remained stable at US$0.1 million for the fiscal year ended April 30, 2022, primarily due to increase in employee benefits expense incurred during the fiscal year ended April 30, 2022.

Digital solutions services - non financial services segment

The revenue of the digital solutions services - non financial services segment remains stable at US$23.7 million during the fiscal year ended April 30, 2021 and 2022 and the segment profit decreased from US$18.6 million for the fiscal year ended April 30, 2021 to US$17.5 million for the fiscal year ended April 30, 2022, primarily due to the increase in employee benefits expense incurred during the fiscal year ended April 30, 2022.

Digital media, content, and marketing services and others

The profit of digital media, content, and marketing services and others segment, which mainly consisted of changes in fair value on financial assets measured at FVTPL from our investments in innovative companies, was US$17.5 million for the fiscal year ended April 30, 2022, compared to US$9.1 million for the fiscal year ended April 30, 2021, primarily due to the realized and unrealized gain from certain investments the fiscal year ended April 30, 2022.

For reconciliation of segment revenue to consolidated revenue and reconciliation of segment results to consolidated profit before tax, see note 6 to our consolidated financial statements included elsewhere in this transition report.

Fiscal Year Ended April 30, 2022 Compared to Fiscal Year Ended April 30, 2021

Revenue

Our revenue from contracts with customers remained stable at US$25.3 million for the fiscal years ended April 30, 2021 and 2022.

Changes in fair value on financial assets measured at FVTPL

Our changes in fair value on financial assets measured at FVTPL was US$9.1 million in the fiscal year ended April 30, 2021, compared to US$16.9 million in the fiscal year ended April 30, 2022, primarily due to the realized and unrealized gain from certain investments in the fiscal year ended April 30, 2022.

Employee benefits expense

Our employee benefits expense increased by 50.1% from US$6.2 million for the fiscal year ended April 30, 2021 to US$9.3 million for the fiscal year ended April 30, 2022, primarily due to an increase in staff cost, share-based compensation and number of staff in line with our business growth.

Advertising and promotion expense

Our advertising and promotion expense increased by 59.1% from US$0.3 million for the fiscal year ended April 30, 2021 to US$0.5 million for the fiscal year ended April 30, 2022 mainly due to increase in promotion activities to cope with our business expansion in the fiscal year ended April 30, 2022.

Premises and office expenses

Our premises and office expenses remains stable at US$0.7 million during the fiscal year ended April 30, 2021 and 2022.

Legal and professional fee

Our legal and professional fee increased significantly by 240.9% from US$0.9 million for the fiscal year ended April 30, 2021 to US$3.0 million for the fiscal year ended April 30, 2022 mainly due to legal and professional fee incurred in preparation for our listing.

Depreciation and amortization

Our depreciation and amortization expenses increased by 34.1% from US$0.6 million for the fiscal year ended April 30, 2021 to US$0.8 million for the fiscal year ended April 30, 2022 mainly due to a full year amortization of intangible assets acquired as part of a business combination that took place in August 2020 and certain acquired intangible assets in the fiscal year ended April 30, 2022.

Other expenses

Our other expenses remained stable at US$0.4 million during the fiscal year ended April 30, 2021 and 2022 mainly due to tight cost control in view of the pandemic situation in the fiscal year ended April 30, 2022.

Income tax expense

We incurred income tax expense of US$3.2 million and US$3.0 million for the fiscal year ended April 30, 2021 and 2022, respectively. The decrease in our income tax expense resulted from decrease in assessable profits in the fiscal year ended April 30, 2022.

Profit for the year

As a result of the foregoing, our profit increased from US$22.1 million for the fiscal year ended April 30, 2021 to US$25.8 million for the fiscal year ended April 30, 2022.

Recently Issued Accounting Pronouncements

A list of recently issued accounting pronouncements that are relevant to us is included in note 2 to our consolidated financial statements included elsewhere in this transition report.

A. Liquidity and Capital Resources

Our principal sources of liquidity to finance our operating and investing activities are net cash provided from operating activities, funding from our Controlling Shareholder, historical equity financing activities, bank borrowing and proceeds from public offerings. As of April 30, 2023 and October 31, 2023, we had US$152.9 million and US$134.8 million in cash and cash equivalents, respectively. Our cash and cash equivalents primarily consist of cash on hand and general bank balances excluding cash and cash equivalents of disposal group fiduciary bank balances representing client’s cash, which are unrestricted for withdrawal or use.

Our total bank borrowings was US$65.6 million as of October 31, 2023. One of our bank borrowings of US$50.6 million was secured by a hotel property, carried interest rate at 1.65% above the Hong Kong Interbank Offered Rate with repayment dates from October 2023 to April 2025 and contains repayable on demand clause. Another bank borrowing of US$15.0 million was unsecured, carried interest rate at 0.25% below daily Wall Street Journal Prime Rate and repayable during the year ending October 31, 2024.

We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures at least for the next 12 months. We may from time to time decide to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in an increase in fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated:

Operating Activities

Net cash generated from operating activities for the six months ended October 31, 2023 was US$21.4 million, which consists of our profit before tax of US$32.8 million as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included US$16.3 million of change in fair value on financial assets measured at FVTPL, US$14.7 million of gain on disposal of subsidiaries, US$9.0 million in interest income, as partially offset by US$3.4 million of finance costs and US$1.4 million of share of losses of joint ventures. The principal items accounting for the changes in operating assets and liabilities were (i) US$16.9 million of other payable and accruals, and (ii) US$5.8 million of prepayments, deposits and other receivables.

Net cash generated from operating activities for the fiscal year ended April 30, 2023 was US$15.5 million, which consists of our profit before tax of US$45.3 million as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included US$15.4 million of changes in fair value on financial assets measured at FVTPL, US$15.9 million of bank and other interest income, US$0.2 million of share-based payment, US$0.4 million of share of losses of joint ventures, US$1.2 million of finance costs, and US$1.3 million of depreciation and amortization. The principal items accounting for the changes in operating assets and liabilities were (i) US$4.3 million of increase in account receivables primarily attributable to the digital solutions services - non financial services income rendered, (ii) US$4.5 million of increase in contract liabilities primarily attributable to the upfront fee for received from digital solutions services - non financial services business, (iii) US$1.5 million of decrease in prepayments, deposits and other receivables, and (iv) tax payment of US$4.1 million

Net cash generated from operating activities for the fiscal year ended April 30, 2022 was US$10.3 million, which consists of our profit before tax of US$28.9 million as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included US$16.9 million of changes in fair value on financial assets measured at FVTPL, US$0.7 million of bank and other interest income, US$1.1 million of share-based payment, and US$0.8 million of depreciation and amortization. The principal items accounting for the changes in operating assets and liabilities were (i) US$3.8 million of decrease in account receivables primarily attributable to the increase in settlement of digital solutions services - non financial services income, (ii) US$3.0 million of decrease in contract liabilities primarily attributable to the digital solutions services - non financial services rendered, (iii) US$1.4 million of increase in accruals and other payables primarily due to the increase in accrued expenses for listing, and (iv) tax payment of US$5.3 million

Net cash generated from operating activities for the fiscal year ended April 30, 2021 was US$10.7 million, which consists of our profit before tax of US$25.3 million as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included US$9.1 million of changes in fair value on financial assets measured at FVTPL, US$0.6 million of depreciation and amortization, and US$0.1 million of share-based payment. The principal items accounting for the changes in operating assets and liabilities were (i) US$7.5 million of increase in account receivables primarily attributable to the increase in digital solutions services - non financial services income, (ii) US$1.6 million of decrease in prepayments and other receivables primarily attributable to the decrease in prepayment, (iii) US$2.3 million of decrease in other payables and accruals primarily attributable to the decrease in other payables, and (iv) US$1.2 million of increase in contract liabilities primarily attributable to the receipts in advance of digital solutions services - non financial services income.

Investing Activities

Net cash used in investing activities for the six months ended October 31, 2023 was US$36.0 million, which was mainly attributable to US$36.4 million of net advance to AMTD Group in connection with intra-group treasury fund allocation.

Net cash used in investing activities for the fiscal year ended April 30, 2023 was US$119.5 million, which was mainly attributable to (i) US$179.2 million of net cash outflow from movement in amount due from AMTD Group in connection with intra-group treasury fund allocation, (ii) proceeds from disposal of financial assets at FVTPL of US$58.2 million, (iii) US$3.9 million of net cash inflow on acquisition of AMTD Assets, (iv) consideration paid of US$5.5 million for the acquisition of a movie right investments and (v) interest received of US$3.1 million.

Net cash used in investing activities for the fiscal year ended April 30, 2022 was US$49.1 million, which was mainly attributable to (i) US$47.8 million of net cash outflow from movement in amount due from AMTD Group in connection with intra-group treasury fund allocation, (ii) settlements from a movie income right investment of US$2.7 million, (iii) US$0.2 million of acquisition of intangible assets, and (iv) consideration paid of US$3.8 million for the acquisition of a movie right investment.

Net cash from investing activities for the fiscal year ended April 30, 2021 was US$16.5 million, which was attributable to (i) US$10.0 million of collection of proceeds from disposal of investments and US$6.5 million of payments for additions of financial assets at fair value through profit or loss, (ii) net cash inflow from acquisition of subsidiaries of US$2.7 million, and (iii) US$10.3 million net cash inflow of movement in amounts due from group companies in connection with intra-group treasury fund allocation.

Financing Activities

Net cash used in financing activities for the six months ended October 31, 2023 was US$4.0 million, which was mainly attributable to US$3.4 million of the finance costs paid.

Net cash from financing activities for the fiscal year ended April 30, 2023 was US$243.5 million, which was attributable to (i) US$15.0 million of proceeds from bank borrowings, and (ii) US$229.2 million of net proceeds from issue of shares and IPO listing.

There was no cash from financing activities for the fiscal year ended April 30, 2022.

Net cash from financing activities for the fiscal year ended April 30, 2021 was US$1.0 million, which was attributable to (i) US$3.5 million through issuance of ordinary shares, and (ii) US$2.5 million net cash outflow of movement in amounts due to group companies in connection with intra-group treasury fund allocation.

Capital Expenditures

Our capital expenditures was US$22.3 thousand for the fiscal year ended April 30, 2021, US$232.7 thousand for the fiscal year ended April 30, 2022, and US$1.7 thousand for the fiscal year ended April 30, 2023 and US$17.0 thousand for the six months ended October 31 2023. We will make capital expenditure to meet the expected growth of our business. We intend to fund our future capital expenditure with our existing cash and bank balances.

We entered into several movie income right agreements with third party independent production houses, pursuant to which we are entitled to benefits generated from the distribution of certain film programs. Under the agreements, we are obligated to make further contributions in case of budget overrun of film programs and the amount of contribution is subject to the terms of the agreements.

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. Except for the warrants issued in December 2019 and fully exercised in March 2020, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of October 31, 2023.

Holding Company Structure

AMTD Digital Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

B. Research and Development, Patents and Licenses, etc. 

See “Item 4. Information on the Company—B. Business Overview—Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property” in our 2023 Annual Report.

C. Trend Information

Other than as disclosed elsewhere in this transition report, we are not aware of any trends, uncertainties, demands, commitments or events for the period since November 1, 2023 that are reasonably likely to have a material adverse effect on our total revenues, profitability, liquidity, or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

D. Critical Accounting Estimates

The Critical Accounting Estimates are consistent with the disclosure presented in the consolidated financial statements included elsewhere in this transition report.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

We have appended consolidated financial statements filed as part of this transition report.

Legal Proceedings

We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of our business. We are not and have not been, and none of our subsidiaries or joint ventures is or has been, a party to any litigation, arbitration or administrative proceedings that we believe would, individually or taken as a whole, have a material adverse effect on our business, financial condition or results of operations.

Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial costs and diversion of our resources, including our management’s time and attention. For potential impact of legal or administrative proceedings on us, see “Item 3. Key Information—D. Risk Factors-Risks Relating to Our Business and Industries—We may be subject to litigation and regulatory investigations and proceedings and may not always be successful in defending ourselves against such claims or proceedings” and “Item 3. Key Information—D. Risk Factors-Risks Relating to Our Business and Industries—We may face intellectual property infringement claims, which could be time-consuming and costly to defend and may result in the loss of significant rights by us” in our 2023 Annual Report.

Part II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Material Modifications to the Rights of Security Holders

See “Item 10. Additional Information” in our 2023 Annual Report for a description of the rights of securities holders, which remain unchanged.

Use of Proceeds

The following “Use of Proceeds” information relates to the registration statement on Form F-1 (File Number: 333-256322) relating to our initial public offering of 16,000,000 ADSs representing 6,400,000 Class A ordinary shares, and the underwriters’ full exercise of their option to purchase from us 2,400,000 additional ADSs representing 960,000 Class A ordinary shares, at an initial offering price of US$7.80 per ADS. The registration statement was declared effective by the SEC on July 14, 2022. AMTD Global Markets Limited was the representative of the underwriters.

We raised US$129.2 million in net proceeds from our initial public offering, after deducting underwriting discounts and commissions and the offering expenses payable by us, including the net proceeds that we received from the underwriters’ full exercise of their option to purchase from us additional ADSs. The total expenses incurred for our company’s account in connection with our initial public offering was US$14.3 million, which included US$10.0 million in underwriting discounts and commissions for the initial public offering and US$4.3 million in other costs and expenses for our initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.

For the period from July 15, 2022 to October 31, 2023, we have used approximately US$20.6 million of the net proceeds from our initial public offering to support our business expansion and growth, and for general corporate purposes. We still intend to use the proceeds from our initial public offering, as disclosed in our registration statements on Form F-1, to fulfill the capital requirements for future license applications, acquisitions, IT infrastructure, and human resources, support our business expansion and growth, and use the remainder for general corporate purposes.

Part III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements of AMTD Digital Inc. are included at the end of this transition report.

ITEM 19. EXHIBITS

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this transition report on its behalf.

AMTD DIGITAL INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Auditor’s name: Assentsure PAC

PCAOB#: 6783

Address:

180B Bencoolen St

#03-01 The Bencoolen

Singapore 189648

Tel: +65 6980 6300

AMTD DIGITAL INC.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(All amounts in thousands of United States dollars (“US$”), except for share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

AMTD DIGITAL INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONS

(All amounts in thousands of US$)

The accompanying notes are an integral part of the consolidated financial statements.

AMTD DIGITAL INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(All amounts in thousands of US$)