Company: MEGL
Filing Date: 2025-06-09
Form Type: F-1/A
Source: 0001641172-25-014301
Chunk: 186

Company: Magic Empire Global Ltd
Filing Date: 2025-06-09
Form: F-1/A
Chunk 186
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 have readily determinable fair value and is recorded at cost less impairment, if any.

In June 2023, the Group made an investment of HK$1,963,000 (US$253,000) in Simple agreement for future equity (“SAFE”) of a private company (“Company C”) in which the Group does not have any significant influence. Company C is an AI company dedicated to bettering insights through technology and application of AI. SAFEs are commonly used instruments that allow early investors to invest in a startup company, in exchange for the anticipated potential of future equity, in terms of preferred stock, at some undefined date in the future, when the first priced preferred stock financing round occurs. This is not a transaction of a creditor, but rather that of an early equity investor. Considering the substance and reality of that (i) the SAFE holders could never force redemption of their SAFEs (nor accrual of interest or maturity), (ii) the SAFE holders do not have any significant influence, and (iii) the conversion does not meet the fixed-for-fixed criterion under ASC 815-40, the Group considers that SAFE should be accounted for as a derivative asset.

The Company has performed the investment analysis, the equity investment is determined as equity investment without a readily determinable fair value (as defined under ASC 321-10-35), therefore the equity investment shall measure at cost less impairment, if any, adjusted plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer. As of December 31, 2023, the total cost, net of provision, of long-term investment is HK$38,647,738 (US$4,975,442).

During the year ended December 31, 2023, the Group recorded loss due to mark-to-market of a derivative asset of HK$1,963,000 (US$252,713). The Group considered the likelihood of the triggering event to share conversion is uncertain and determined the fair value of the investment was less than its carrying value.

During the year ended December 31, 2024, the Group has new investment of HK$8,500,000 (US$1,094,275) in a private company (“Company D”), representing 1.9% equity ownership of Company D, in which the Group does not have any significant influence and such investment does not have readily determinable fair value. Company D is a contract manufacturer of affordable luxury leather goods. During the year ended December, 31 202