6. Convertible Bond Investment – related party

On March 27, 2026, the Company received a convertible bond investment from True Partners Capital Holding Limited (“True Partners”), a publicly listed company on the Hong Kong Stock Exchange and a related party of the Company. The bond has a face value of $2,450,000, bears interest at 3.0% per annum, was registered on March 27, 2026, and matures on March 26, 2028, unless earlier converted, redeemed, or otherwise settled in accordance with its terms. Interest accrues daily on a 365-day basis and is payable annually in cash. At maturity, the outstanding principal balance is mandatorily and automatically convertible into ordinary shares of True Partners.

True Partners is considered a related party because the Company holds a significant equity investment in True Partners and has determined that it has the ability to exercise significant influence over True Partners. This determination is based on the Company’s equity ownership, and the election of the Company’s Executive Chairman and significant stockholder, Heng Fai Ambrose Chan, to True Partners’ board of directors. Accordingly, the Company’s receipt of the convertible bond is considered a related party transaction.

The bond is convertible into ordinary shares of True Partners at a conversion price of HKD $0.10 per share, which was approximately USD $0.01 per share as of both March 27, 2026 and March 31, 2026, based on the applicable exchange rate or rounded U.S. dollar equivalent used by the Company. Based on the bond’s fixed currency conversion rate, the bond is convertible into approximately 190,684,000 ordinary shares of True Partners.

The Company accounts for the convertible bond investment at fair value and has elected the fair value option under ASC 825, Financial Instruments. Based on a valuation performed as of March 27, 2026, the estimated fair value of the convertible bond was approximately $8,648,000, consisting of a $127,000 debt-like component related to the present value of contractual cash interest payments and an $8,521,000 equity-like conversion feature related to the value of the shares issuable upon conversion of principal. Based on a valuation performed as of March 31, 2026, the estimated fair value of the convertible bond was approximately $8,520,000, consisting of a $129,000 debt-like component and an $8,391,000 equity-like conversion feature. The Company recorded the convertible bond investment at March 31, 2026 estimated fair value of approximately $8,520,000.

The fair value of the convertible bond investment was determined in accordance with ASC 820, Fair Value Measurement. The valuation considered, among other factors, the contractual interest rate, maturity date, mandatory conversion terms, conversion price, market price of the underlying True Partners ordinary shares, foreign currency exchange rates, issuer credit risk, expected term, liquidity, discount rates, and conversion economics. The investment is classified as a Level 3 asset within the fair value hierarchy because there is no quoted price in an active market for the identical convertible bond and the valuation requires significant unobservable inputs, including issuer credit risk, expected term, liquidity assumptions, discount rates, and conversion economics.

Because the convertible bond was received from a related party, the Company evaluated the substance of the transaction, including the relationship between the parties, the nature of the consideration exchanged, and whether the fair value of the bond exceeded the stated face amount or consideration transferred. Because the convertible bond was issued in connection with the Company’s additional investment in True Capital Holdings and the parties are related, the Company evaluated the difference between the fair value of the convertible bond and the consideration transferred in accordance with the applicable U.S. GAAP guidance. Based on the Company’s assessment of the economic substance of the transaction, the Company determined that the excess of the fair value of the convertible bond over the consideration transferred represented a capital contribution and recorded approximately $6,198,000 in additional paid-in capital. Subsequent changes in fair value are recognized in earnings in accordance with the Company’s election of the fair value option under ASC 825. As of March 31, 2026 the Company recognized a loss of approximately $128,000 on the condensed consolidated statement of operations. 

On April 29, 2026, True Partner International Limited, a subsidiary of the Company, delivered a conversion notice to True Partners to convert the full outstanding principal amount of the $2,450,000, 3.0% convertible bond. Pursuant to the notice, the bond was converted at a conversion price of HKD $0.10 per share, resulting in the issuance of 190,683,500 ordinary shares of True Partners. Accrued interest of approximately $6,000 remained payable in cash and was not converted into shares. Immediately prior to conversion, the Company remeasured the convertible bond to fair value. Based on a valuation performed as of April 29, 2026, the estimated fair value of the convertible bond was approximately $8,647,000, consisting of a $131,000 debt-like component and an $8,516,000 equity-like conversion feature. The Company recognized an increase in fair value of approximately $127,000 from March 31, 2026 through the conversion date in the condensed consolidated statement of operations. Upon conversion, the Company derecognized the convertible bond investment and recorded the ordinary shares received as part of its equity method investment in True Partners. Following the conversion, the Company owned approximately 45% of the issued and outstanding shares of True Partners and continues to account for its investment in True Partners under the equity method of accounting.