Tenet Fintech Group, Inc. (PKKFF) CEO Johnson Joseph on Q1 2022 Results - Earnings Call Transcript

May 31, 2022 11:30 AM ETTenet Fintech Group Inc. (PKKFF)
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Tenet Fintech Group, Inc. (OTCPK:PKKFF) Q1 2022 Earnings Conference Call May 31, 2022 8:00 AM ET

Company Participants

Raji Wahidy - VP of Operations

Johnson Joseph - President and CEO

Jean Landreville - CFO

Mark Schwalenberg - MZ Group

Conference Call Participants

Raji Wahidy

Hi, everyone. Good morning. Thank you and welcome to Tenet Group's First Quarter 2022 Financial Results Conference Call. My name is Raji Wahidy, I’m your VP of Operations for Tenet Group and I will be your host for today's call.

I'm joined this morning by Johnson Joseph, President and CEO of Tenet Group; Jean Landreville CFO of Tenet Group; Liang Qiu, known as Golden CEO of Tenet, China; and Mark Schwalenberg from MZ Group.

Before we begin, kindly note that some statements or comments made on this conference call may be forward-looking statements, which may include, but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations or intentions.

At this point, I'll turn the call over to Johnson Joseph, who will discuss our first quarter results. With further input on our financials from Jean Landreville followed by a Q&A session, which will be moderated by Mark Schwalenberg. Over to you, Johnson.

Johnson Joseph

Thank you, Raji. Good morning, everyone and as Raji said welcome to our Q1 2022 financial results. So I'm just going to give a brief summary of what took place in the first quarter of this year, then I will pass it on to as Raji mentioned to Jean Landreville, our CFO, who is going to talk about some specific points related to the results. And then I will come back and discuss the circumstances that led to the revision of our guidance for 2022.

Okay. So, very briefly our business is continuing to expand very well in China. The first quarter is typically the slowest quarter for us in terms of revenue generated, because obviously there is the Chinese New Year break that last for anywhere between three weeks to a month. So all in all, we're very pleased we generated $34.7 million during the quarter. Once again, the supply chain business was very strong for us, so there is a continuously strong appetite from retailers, distributors and everyone that use our services to manage their cash flows and become more efficient. So as far as demand is concerned, there are no issues there. So for how much we can grow our business in China. So again, first quarter was very good on the consumer goods supply chain aspect, which remains, kind of, like the bread and butter of our business.

Now what we were trying to focus on in the first quarter is to get into other verticals, a verticals that have more interesting profit margins for us. For example, we did a little bit more -- we had a little bit more activity in the oil and gas sector, which is good. We want to put more emphasis on insurance and eventually getting more involved in the clean energy space.

Now on the clean energy front, what took place during the quarter was not necessarily revenue-generating activities, but it was more strategic for us. So we worked on a couple of pilot projects with China Engineering Energy Corporation, who we are establishing a very good relationship with, so we anticipate eventually having an agreement in place with CEEP that will allow us to become a relevant player in China on the clean energy front, but not only in China, but potentially in other parts of the world as well.

So in addition, other than or desire to enter different markets, we also want to round off our offering on the business hub. So right now we provide finance – financing, purchase order, but we also want to control every aspect of what goes on in -- on the business hub. So for instance when it comes to the transfer of funds, settlement of financial settlements, that's why we have -- we're able to use the China Union Pay network to open virtual bank accounts, but now we also have an agreement with CIB that will allow us to also provide fund transfer and payment processing services, so controlling every aspect of the transaction, so something gets done company gets finance they get the funds required for their business. We'd like to be involved in the transfer of funds, settlement of accounts when they want to pay their bills, we want to be involved in that as well.

Now most of the transactions that occur on the business hub generate shipping opportunities. So in the first quarter, we launched a platform called Yun fleet, which will allow us to provide shipping services. Before we're outsourcing those services shipping and warehousing, but now we want to take control as much as possible of every aspect of the transactions that goes on -- that go on within our business hub. So anything that needs shipping, we'd like to be able to send that over to our Yun fleet platform, so we're getting shippers involved to joining the business hub, transactions that may require insurance as well, so we have the heartbeat platform, the heartbeat insurance brokerage platform, we're going be customizing specific insurance products to go along with the transactions that we facilitate through the platform.

So essentially, that's what we want to do. We want to continue to round off our offering, business has grown in China and obviously like, I mean, it takes more capital. I'm going to get into that a little bit later, but overall that's what took place in the quarter to very, very strong demand continued -- strong demand for our services in China. Looking at entering new verticals being more proactive in the -- particularly in the insurance and oil and gas sector with an eye on the clean tech sector. The clean tech sector, the clean energy sector, we anticipate that we're going to be more active in the second part of 2022 with our revenues to be generated probably in Q3 in that sector and then ramping up from there.

So essentially, that's the round off of what took place in Q1. Now I'm going take it -- I'm going to send it over to Jean Landreville our CFO, who is going to talk about some specific numbers and then I'm going to come back and discuss the reason for our revised guidance. Jean?

Jean Landreville

Thank you, Johnson. Good morning and welcome everybody to this presentation. So we put a small slide that resumes -- to compare the results between Q1 of 2022 and Q1 of 2021. In summary, revenue that was mentioned $34.7 million in Q1 ’22, compared to $14.2 million last year, that's an increase of $20 million in one quarter, so and preserve revenue increase and some good takeaway there. So the increase of $20 million is coming mainly from our GoldRiver platform, which is the ASST subsidiaries, so it's a plus $25 million, compared to last year.

AGP the petroleum subsidiary, who is making the supply chain revenue and the platform is plus $7 million that was not there last year, so there is a good improvement and with further margin in that. And we take away some revenue from ASST, which was low margin last year the world around 2%, so we reduced that to almost zero in 2022 quarter, so that's good for the margin and it's a company that we own at 51%. So we switch revenue to our platform that we own at 100%, which is good news.

The other thing just to finish on revenue as we start in the first quarter remember we made the acquisition of Heartbeat last year there was almost no revenue at the end of the year, there was some delays all which kick-in, in Q1 for $0.05, not much, but it's increasing. So it was one of the question myself and it's began in the first quarter of 2022, which is good.

Cost of service to deliver the supply chain $30 million versus $12 million, well, it’s in line with the revenue. The good thing there is that the margin difference between the margin that we have in Q2 of 2022 -- Q1 of 2022, sorry, and Q1 of 2021 is higher by 6.7%. So we're closer to 9% to 10%, we’re 8.8% in the quarter versus 2% of last year, so that's a good news there also.

Salaries and remuneration and fringe benefits, while we're actually seeing the number of headcount, so that the difference to year-over-year is 92% more, mainly while half and half 50, 45 headcount additional in Canada and the same about in China with all the acquisition and the increases of business that we've done year-over-year in China and Canada. Canada is the Cubeler into [indiscernible] business that were following our plan and increasing our workforce there. We also introduced at the beginning of the year to make sure to attract people in -- especially in Canada. We introduce some group insurance and to get calculation to RSP for our employee, we need to attract people and as you know, it's a very tough market, very competitive. So we have to be competitive to attract people. So that's increased the salary from $1.7 million.

Consulting fees we're aiming to get to singular market -- exchange market in Europe and we need to have some consultation there. So we’ve put some investment in the first quarter in that consulting fees to get to the market and to know better and to make sure a good introduction to our capital market. Professional fees increased, well the business increasing so audit fees, legal fees increasing, this is normal. And additional to that we want to make sure that we have very good internal control base to get close to a SOX compliance by the end of the year. So we hire in China and Canada, we hire professional from the big four company in order to help us to develop our ethanol control process. And this is also in line to -- for our future growth in anywhere in the world, so we can take this system that we're building in North America and China and we're going to be able to replicate this and have good internal control all over the world we're going to be, and I think it's important that the investment, but at the end that cost, you can get payback on this very quickly with your internal control.

Finance cost increased by 400,000 the -- what I want to point out there is that it's not cash out, it’s only an accretion over the acquisition of Heartbeat. So we're going to make payment in the future based on revenue and profit that we're going to have in Heartbeat. So we make a natural acquisition of these future payment. So when we're getting closer and closer to the payment date there is an acquisition between the difference of the actual rate that we are using versus the actual rate of the market and you called that acquisition. So it's an accounting expense, but it's not cash out and this is the only difference this year for the 400,000 you're going to see that in the next quarter. That's going to be recurring for the next two years depending on the amount of contingency, we are going to pay. For now Heartbeat is going well, so I think is we're going to pay what we forecast last year, so this is going to be there for the next quarter at the same level around.

Amortization of intangible assets $1.4 million more again, so this is not cash item. Amortization of the Cubeler platform that we acquired last year and the Orbit platform that we acquired, and we continue to invest in our platform in China. So when they start using the platform we're starting to make amortization on it and that's why the -- we have this increase of $1.4 million, this is not cash [indiscernible], all others -- all the other expense that we have.

So at the end net profit $3.3 million loss for the quarter, if you compare to 400,000 last year, now a lot of non-cash item like the finance cost in the -- for the contingency and the amortization, depreciation of the intangible asset.

So this is was my quick revenue of Q1. Coming back and giving back slide to Mr. Joseph. Thank you.

Johnson Joseph

Okay. Thank you, Jean. Okay, now briefly I wanted to talk about the revised guidance. I think the best way for me to do that is I'll start by telling you what the original plan was, okay. So for those of you who are familiar with the company you know that we closed a prospectus financing last summer and we got on -- we were listed on the NASDAQ, I think and September, if I'm not mistaken, okay. So when we listed on the NASDAQ, obviously there is a reason why we wanted to list on the NASDAQ visibility, liquidity in the stock, but it was also to access the U.S. capital markets, right.

So the plan was to list on the NASDAQ, file a base shelf prospectus in the U.S. and raise $30 million shortly thereafter, after the listing. And then we use that capital to continue to execute our business plan. Now that was part of the original plan and we had commitments that we had in China. So the numbers that we had forecasted and I'm talking about the $300 million this year and revenue $300-plus million plus in revenue this year. The EBITDA everything was based on that plan, so a huge part of that plan was having $30 million, which is roughly between CAD35 and CAD40 million and our bank account at some point late summer, early fall and then we proceed with the plant, right. We proceed with our plan.

Unfortunately what ended up happening was we received a notice from the SEC telling us that they had new guidance for companies that had operations in China or were controlled by Chinese interest. We're not a company that's controlled by Chinese interest, but still we felt under the new guidelines. So the notice that we received was basically just a review of our registration statement our 40-F Form. So when we looked at the notice and we looked at the questions that were being asked, we figured that, okay, you know, what this is a process that's going to take a week maybe a couple of weeks. And then we'll get the situation cleared up, we'll get back on the NASDAQ and then we'll proceed with the capital raise that we intend to do. Unfortunately that's not what happened. So we got the questions from the SEC, we came back with some answers, there was more questions and so on and so forth. So make a long story short, what we believed was going to be a matter of a week or a couple of weeks ended up taking -- what we're six months, seven months later into the process and there has been no resolution.

Now looking from the outside you may say, hey, you know what like this you should have realized that this was not going to happen and you need to have adjusted your plans accordingly quicker. Our response to that is the exchanges, the dialog that we've had with the SEC, let us to believe that this was something that was going to have a resolution in fairly short order. So every time we had an exchange with the SEC they had questions, we came back or whatever, we always felt that, okay, we're almost there, okay. So we did not think it was necessary for us to make any adjustments, sort of, speak to the forecast back then, right. But at the same time the commitments that we needed to make to for example, to ShopEx, right. So I know that a lot of our shareholders have questions about ShopEx, how come you didn't get more of other clients onto the business hub. There is also an agreement that we had announced with, I think it was Melo Coffee or something like that, where this was a great opportunity for us to generate coffee on exceeding the revenue on the supply chain related to coffee, not just in China, but outside of China as well.

The point I'm trying to make is that all of those things required financial commitments from us and financial commitments that we basically we couldn't comfortably make anymore given the situation with the SEC. But at the same time in terms of when it comes to generating revenue for the company, our business in China is more about resource allocation, okay. So we could always say, okay, you know what, we're not going to have this amount of money, but if the money comes later then we will allocate the resources, we will allocate the funds to something else. And then we're going to be able to come close to the revenue forecast that we had made up. So we kept monitoring the situation month-after-month until they got to a point where we're at the stage right now even on up until three weeks ago, okay. So there was believe it or not there was still an opportunity for us to come close to the revenue figures the $300 million that we had forecasted and this is something that -- this is a discussion that I had with our China, the CEO of our Chinese operations Liang Qiu, who is on this call right now, so we've had discussions and so, okay, you know, what where do we allocate the funds?

So do we go for the revenue and then the short-term revenue, I should say. And then basically sacrifice what we ultimately want to do both in China and outside of China, or do we make some tough decisions, and say, okay, you know, what we're going to forgo the revenue, but we're going to invest into the areas that are going to be more beneficial to the company long-term. I can't get into the details of specifically what it is that we want to do what we decided to do. But all I can say is that ultimately the business, the business hub and the company itself Tenet is not about supply chain business, okay. It is not about oil and gas or anything or the consumer goods supply chain, everything that we're doing right now in China, which generates revenue and profit for us. It is a means to an end, I mentioned that in the past, but I realize that shareholders are not catching on or for some reason, everybody is still focused on what's going on with China, the supply chain and the verticals that we're working on in China.

Again these verticals are very interesting, they are big revenue generators for us, decent profit margins, some sectors have more interesting profit margins, but ultimately what Tenet is about, it's about analytics and artificial intelligence. Now had we've been successful in our U.S. raise the $30 million that I mentioned earlier? We would be talking about -- we will be having a completely different conversation today, because people would have realized that the company is not all about China and it's not all about supply chain. We would have been in a position to launch business hub in Canada, which basically provides more visibility and to the sorts of activities that we will be engaging.

Now we tried, well, not tried we published an investor presentation our Q1 2022 Investor Presentation, where we tried to put this forth, right. We try to tell people the investment community, the market, this is what the company is going to be about in the future, not so much about China and supply chain, but more about the analytics, the data that we're accumulating throughout the business hub and the business hub itself is not China, it's not just China, it's not just Canada, this is a global concept, right? So this more of a social network that we're building for small and medium-sized businesses all over the world.

So transactions facilitated through the hub, the data that we accumulate we're going to be more of a market research, market intelligence company, we're going to be able to use this information to develop artificial intelligence analytical tools for stock trading for capital markets professionals, for governments, this is where this company is headed. And again had we been successful and capital raise in the U.S. all of these things would have been more apparent. So we would have had revenue coming from the Canadian operations, we’d be talking more about the business hub itself, the business model outside of China, more than we would be talking about the business model in China.

Unfortunately, things occurred that basically we're not necessarily in our control. So we've had to deal with the situation that we have right now with the SEC. Thanks, hopefully, like I mean the situation gets resolved, but the good news is that we are taking measures, we have taken measures working with our financial advisers and some consultants to be in a position to raise capital outside of the U.S., okay. So we're talking about potentially raising more capital here in Canada, which will require us to get on a senior exchange, we're taking measures to be able to do that quick -- sooner rather than later. We're also taking -- looking at listing our securities on the London Stock Exchange to access the European capital markets, which should also help us raise capital in Europe, right.

So we have a plan right now, we're very confident that we're going to be successful in raising the capital we need to continue to execute our business plan by raising the capital in Canada and in Europe, rather than in U.S. Again we're not throwing in the towel by the way, with the U.S. market, we still believe that the U.S. in terms of capital by the way, okay. We are still planning on having a hub in the U.S., after we launch the hub in Canada, but just from a capital market standpoint. So we are still planning on eventually getting on the capital markets, again the discussions that we have had with the SEC are still very positive, it’s just the process is taking much longer than anyone expected, I think including the SEC. So we're trying to work our way through this, but meanwhile we are going to access our capital markets outside of the U.S. to be able to continue with our business.

Now, specifically, what does that mean for us in terms of the revision of our guidance, so we will go this year from $340 million that we're forecasting in terms of revenue to about $210 million, again it's not the financial resources at our disposal had a lot to do with that, but also in China, because China right now is still generating the bulk of our revenue. So the fact that the country was essentially in lock down for the better part of two months during this quarter that we're in the second quarter that were actually in right now. Obviously, we’ll have a significant impact on our operations. So the allocation of resources, the fact that China was locked down for two months basically it was too much for us to overcome in terms of the revenue side -- that we're forecasting for this year, but also on the EBITDA side.

Now what I'm going to say about the significant drop off in EBITDA is the following. I mentioned the resource allocation and I mentioned our desire both and shut well, particularly in China to get into some verticals that have better profit margins for us. So getting into those verticals has been shifted, right by several quarters. We're talking about insurance, we're talking about what we wanted to do on the Clean Tech space. These are business lines that have much more interesting profit margins for us. So the fact that the revenues that were supposed to come from those lines has been pushed back several quarters means that the profitability for the business has also been shifted. So that's why you see the big difference in the EBITDA. Combine that with the fact that the operations outside of China are expected to generate much better profit margins than the current operations in China. So we're talking about profit margins of between 50% to 60%, okay, for our operations outside of China. So Canada, the U.S. eventually once we get to Europe and South America, the business will generate much more interesting profit margins, like I said between 50% to 60%, so again the fact that those revenue streams were delayed or the reasons why you see such a big drop-off in terms of EBITDA and profitability along with the reduction in our top line numbers. So essentially in a nutshell, that's the reason for the revised forecast.

Now, I'm going to turn it over to Mark, who will be getting on the Q&A portion of this presentation. Mark?

Question-and-Answer Session

A - Mark Schwalenberg

Thanks. Johnson. We've got a bunch of good questions here, so I'll kick things off with following up about Heartbeat. So what sort of, you talked about how that's being pushed back or and also how it has better margin profile. Can you just expand on like what, so what type of time period do you see that ramping up leading to significant revenue generation? And also, could you clarify on like what about that particular vertical is generating higher margins and elaborate on that a little bit more?

Johnson Joseph

Okay. I'll start and then I'll pass it over to Golden to elaborate on Heartbeat. So the good news about Heartbeat is we did have to delay the decisions, the investments that we needed to make last year to get the platform really going. The good news is that we have since made those investments and Heartbeat actually generated -- started to generate revenue in the latter part of Q1. Jean, correct me if I'm wrong. Golden, but I think we generated about $0.05 million.

Liang Qiu

Like I mentioned --

Johnson Joseph

Okay, so it's not huge amounts, but it is a start right? So Heartbeat should be kicking in to not only generate revenue, but allow us to have better profit margins overall for the company. Golden, do you want to elaborate a little bit on the potential behind Heartbeat going forward?

Liang Qiu

Yes. Okay, thank you. So what's really happened is insurance is really a very important parcel for the business hub, okay. So business hub, I think to be like more like -- in the more like appropriate description is really like a lot of business is doing business together. So that's why some basic fundamental elements, such as payment, insurance, shipping is every business day-to-day operation needed. So Heartbeat we will see it's a very important not only revenue generator in the future, but also a key element for the business hub. So that's why when we actually launching the platform is unfortunately there are some various reasons we delay for two callers, okay. But following the Q1 performance and potentially Q2 we're pretty much on the schedule. So this is really what’s happened. It’s really the whole plan Heartbeat was pushed back two quarters, that's pretty much we have.

Mark Schwalenberg

Okay. Yes, thanks for that, Golden. I'd like to get into cost of service and sort of these are more financial oriented in terms of margin, overall margin profile. So there's been a lot of question about exactly what the margin profile will look like i.e., last call, we said it would be about 10% as a target. Prior to that, there has been talk about due to GoldRiver and reducing outsourcing fees that would decrease cost by up to 30%. So there is some confusion concern about like what is the margin profile? And what happened to these cost savings from GoldRiver did that not pan out? So any clarification on that you can provide would be helpful?

Johnson Joseph

Sure. One thing I would encourage our shareholders to do is we understand like, I mean, there's different verticals, the business model in China is little bit complicated. But one thing I would encourage our shareholders to do is to download the presentation, the Q1 2022 presentation that we published yesterday where we try to give what the maximum margins are for each of the lines of businesses that we operate, right. Okay, so answering -- to answer the question, okay, I'm going to give you an example, okay, of a typical transaction related to the supply chain, the consumer goods supply chain. Hopefully that will help clarify things for people, okay. So when somebody comes in now, they come in through GoldRiver, okay. GoldRiver is call it the interface that allows consumer goods supply chain clients to place orders on the business hub, right. So they want to purchase a product from an authorized supplier on the business hub.

So let's say the order is for $100, we’re going to use simple numbers here. So the orders for $100 and they're going to need, we offer them financing for that purchase order, we offer them to ship the product to a location of their choice and if they want inventory to be able to track the inventory warehousing, they can do that through GoldRiver and we will charge them for those services. We will charge them, let's say, 2% of the value of the order, okay. So that 2%, let's call it $2, okay, so it’s a $100 for the order we charge them 2%, excuse me, $2 and that $2, so we have our fees for financing, we have our fees for shipping and for the use of the GoldRiver platform, okay. So that's what revenue, that's what we recognized in our books as revenue, okay.

Before in that 2%, okay, when we were outsourcing what GoldRiver is serving as right now, okay. So in that $2, our margin would be call it like 2%, okay. From that 2% we would get 2% margin, so we would make initially, right. We would make call it that’s 2% of what’s 2% of $2. So --

Jean Landreville

$0.04.

Johnson Joseph

$0.40.

Jean Landreville

$0.04.

Johnson Joseph

$0.04, okay. Right, so $0.04, right so it was completely negligible when we started up, because we outsourcing everything, okay. Now, what we're doing with GoldRiver, okay, is that instead of outsourcing the use of the application for logistics and for shipping we're taken that over. So we are keeping much more of what we're spending over to wrong Yutong. So instead of sending -- excuse me instead of having 2% margin, we're now increasing that to about 10% that we're making, okay 10%. So from 2% we go to 10% and that's the increase that's the benefit that GoldRiver is providing. But right now, okay, so the logistics, the warehousing and shipping, we're still outsourcing that right now. So what we're doing also when I talked earlier about rounding off the offering for the business hub. The shipping itself now that we’re outsourcing to a third-party through Yun fleet -- through the Yun platform, we're keeping that. So eventually as Yun fleet comes in also we're going to be able to keep greater margins, okay, a greater portion of the revenue that were generated on each transaction.

So instead of the -- instead of going from 2% to 10%, which is what we're making right now, we're going to be able to increase that to 15% or 20%, okay. Now there are certain transactions, if they don't require warehousing or shipping whatever we have reduced bundled services where we make more interesting margins. So in the presentation that we published yesterday, you're going to take off -- you're going to be able to see that we can go up to, I think on the supply chain, consumer goods financing, we can go up to 30% margin. And again, the margin is not on the total value of the order, it is really on our portion that we charge for the service that we provide through business hub.

Mark Schwalenberg

Okay, great. That's super helpful. Sort of along similar lines in terms of some of it -- the supply chain transactions. On the statement of cash flows there’s a couple of line items deposits made the third-parties and prepayments to third-parties, which are fairly significant amounts. Can you just clarify what are those four? What are some of the terms on that, like how much do they support revenue? And just kind of go over that those two lines? John or Golden or you Johnson.

Johnson Joseph

Okay, again I'll get started on the explanation. For business -- our business in China, we do business with several different financial institutions, okay, banks or finance companies. Now business hub is still fairly new to these financial institutions, right. So they depend on our analytics in order to determine whether or not they should lend to our clients, right, these business of clients. Now for certain orders, these financial institutions are asking us basically to put a 5% guarantee, so to speak 5% to 10% guarantee on the total amount that they are financing that they are lending throughout the platform. And basically we put that as a guarantee. But what we do is we also secure our guarantee that we provide with the products that are being met or being ordered throughout the platform, okay.

So our capital is never really at risk, so we use this amount basically to provide additional comfort, so to speak to the financial institutions that are making loans on our platform. This amount is not an expense for us. There is no -- there are no terms, essentially, there is no interest being charged one way or another. So it's kind of like a revolving line of credit that we use in order to help facilitate transactions throughout the platform. So this is our money and it's not really at risk, if I can put it that way.

Golden, Jean feel free to add anything if you want to add to what I just said.

Jean Landreville

No, I think it's a good summary and an important point is I know that the amount is significant what the amount of transaction is also significant that support. And the good part of it is that the management team and China make sure that all these money is secured. So by the customer, by the bank or somebody that was third-party will guarantee these amount, so we're not at risk to lose that money and we never since we began this process lose any money on that, so we would not have any bad debt with [Multiple Speakers] it’s secured right, it’s like revolving line of credit that we’re not charging interest, but it's bringing transaction -- profitable transaction on the platform and it’s secured.

Johnson Joseph

Yes.

Mark Schwalenberg

Okay.

Jean Landreville

One little point, sorry, Mark, is that during the operation, we also will decreased the percentage that we have to put up in the -- what we so called security deposit and because more and more financial institutions and client trust us, so we see that this number is actually decreasing. So in terms of percentage, okay. Before we start with some supply chain was -- that was planning 25%, 15%, and during some time it reduced to 10% and after some time it reduced to 5%. So with the same amount of money we can leverage more trust from the financial institutions and from big clients. So this is pretty much what happened.

Mark Schwalenberg

Okay, awesome. Yes, Golden while we have you here. Could you talk a little bit about BDC Link Steel, Yun fleet and just kind of maybe even the China industrial bank, bank accounts and just what you see -- how you see that ramping up over time in China?

Liang Qiu

Okay, so what really happened, okay, I saw some questions regarding people concerned BDC and also CIB and also Yun fleet, okay. So first of all I want to give everybody a kind of like one on the supply chain, okay. So what's really happened is in the supply chain there are three major, major like basic components, basically without this three components you can’t do supply chain, okay. So talking about people buying at daily basis, okay, a payment is a key, okay. So without payment, we can see business hub is a hub for people know each other, but no concrete transaction is happening, because there is no payment, you don't control payment, people know each other on your platform they make deal offline, okay. So payment is the key to put people doing business online. So CIB, Union Pay and you will see in the future other payments institutions come and join the platform is all about this, okay. And so this is the main reason we are very excited about Union Pay, CIB partnership, because essentially those are bank account, okay. People open our platform, those are [indiscernible] bank account very, very serious like you open bank accounting in RBC and TD Bank, okay.

And basically TD Bank tell the client, okay, this bank, kind of, if you want to transfer any dollar in and out you have to get a permission from the platform -- GoldRiver platform. This is a huge, huge control handle for us, so that's why we're very excited about press release those exciting news and to do that we have to get 100% trust from the financial institutions and also clients. So that's how about payments, so Union Pay, CIB is all about this, okay. And Yun fleet is on the other side is the [Technical Difficulty]. So once the client pay for the -- did a payment everything, okay. We also want to track what's going on with the logistic, where is the product, okay. It just like you not only control the money, you also control the goods, so this adding another extra layer to the supply chain. So make sure from the financing everything is safe, okay.

And the third layer is we need to be influential on the market and in the industry, okay. So if we are a platform that we do any transaction, okay, and but we're not -- we're a small in each verticals there we’re not important, we only make money on shipping, on loans whatever, but those there’s a cap on that, okay. When I see we’re influential in the verticals means, I want to be something GoldRiver, okay. If you want to do this business you have to do with GoldRiver, okay. It's just like in China before, if you want to sell online you have to go with Alibaba, okay.

So this when we actually until that involving into influential party in some vertical partner -- in some vertical like industries then our margin will increase dramatically, because people use you not only for financings and shipping, whatever, okay. But they use you to do business to enable their business. So this will dramatically increase the -- our visibility and profitability in any like business transactions. So that's why, okay, Johnson talk about, you know, we have verticals, we have different side of the business that we try to struggling on how -- which resource goes where, okay. So this is also explaining the whole situation about the GoldRiver situation. And also on the other side the insurance, okay, adding another layer that on top of this, whatever I just said, okay, insurance is also a basic element for all the supply chain, okay, including shipping, the quality of the product, the financing guarantee insurance and there is a lots of liability, there’s a lots of like, obviously our risk control related insurance policies that can be associated with GoldRiver, okay.

So these are all really all the synergies happen on GoldRiver, that's why it is a company called Asia Energy, okay. So what's really happened on top of that is BDC and other like BDC, by the way, just a client of GoldRiver, okay. So we have many, many client like BDC, like Coffee, like many of this client and partners. So this is pretty much, I want to give, but everybody was pointing on -- on top of what Johnson and Jean already explained to the market.

Mark Schwalenberg

Awesome, thanks for that Golden.

Liang Qiu

Yes.

Mark Schwalenberg

Couple of follow-ups on the finance side. So Johnson could you go over cash burn rate or expectations for, I guess the year or what you see. And then also, since we're talking about raising capital, a lot, I think there's obviously concerns about where the stock is at and potential dilution? So how will the company go about thinking about that as you're looking to raise money in terms of type of financing just your general strategy on that?

Johnson Joseph

Yes, sure. Yes, so obviously we realize that we know that capital, it is -- we need capital to progress, right. So we're very conscious of the fact that the markets have taken turn, a downward turn, so we're not looking to raise like hundreds of millions of dollars at whatever, I don't know what the stock is trading at right now like $2, $3 where ever is -- whatever it is. So we're very conscious of that. So any raise that we would be doing right now would be limited to the amounts that we need in order to continue to go forward, right. So our plan is to do raises and tranches. So we're looking to do a first tranche obviously as quickly as possible and the instrument for that has not yet been determined. So it's not necessarily going to be equity, we're looking at that potentially doing -- having a convertible debenture or doing a straight debt instrument, we haven't determined that yet. We're still in discussions with our financial partners. And once we make that determination obviously we will let it be known to our shareholders and to the market.

But the point is well taken, we realized that, okay. You know what the stock is not at $12 to $14 or whatever it was, when we are first contemplating doing the U.S. raise, so we have to take that into consideration and we'll take that into consideration. As far as like what our burn rate is, listen we're not going to run out of money, like we're not going to run out of capital, we have a plan like I said as soon as we get through this call here this filing -- this Q1 filing, we're going to take or we're going to put our plan and promotion. So announcements related to what we're planning on with the financing, whether it's the filing of a prospectus, that should come fairly quickly and all indications are that the capital is there for us.

Again, we've been talking to our financial partners to gauge the level of potential interest for a raise. There's still quite a bit of interest, obviously for the company for what we're looking to build. So the capital is there, it's just a matter of, okay, what instrument do we use to get that capital, okay. So in any event like, I mean, before we run out of money, if we find ourselves in danger of running out of money, what we're going to do is we're going to cut Jean’s salary and then we're going to save a lot of money, but let me find.

Mark Schwalenberg

Okay. All right, I got one more question here for you guys and that's Johnson just pivoting towards the Cubeler in Canada and North American expansion and could you just talk about that. Obviously, we've done a lot of hiring started to attend some trade shows. What's the -- how is the messaging there and like the reception, and could you just talk about how you see that over the next couple of quarters to get us going?

Johnson Joseph

Sure. Listen the launch of our hub in Canada is so important for us for so many reasons. I think we felt that hub being launched, it's difficult for people to see what it is that we're trying to build in terms of this global network, right. Because unfortunately China being what it is you can't really give too much visibility into what's going on in China, whereas in Canada and in the rest of the world people would see that, okay, you know what -- this is more of a social media platform, weren't you -- you have a dashboard, you can post messages, you can network, you see advertisement, like, you know, it’ll bring it home to our shareholders, I believe, once we launch. So that's why, to me, I was very disappointed that we weren't able to, you know, that we still haven't launched the platform yet and I can't wait for us to launch it.

Now to your question about the reception that we've had at these events. And think about offering for a minute, right. So if you are a small business and just the example of restaurant Canada, right, that restaurants Canada was going be [Technical Difficulty] earlier this month, so if you are a restaurant owner you just went through 2.5 years, I can't remember how long this pandemic has lasted now. But you've gone through at least two years of very, very difficult times, right. So if you're a restaurant, you know, that restaurants typically are one of the businesses that have the most difficulty getting the loans from banks. Think about what we're offering here. What we're offering here is an opportunity for these small businesses to have much easier access to credit to be able to manage their cash flows more efficiently, that's one thing, okay. If that was the only offering that -- if that was the only thing that we're offering to the small businesses it will be interesting enough for them to join -- or ecosystem to join our business hub.

But in addition to that, we're also offering them the ability to the possibility to advertise their products and services for free, we're giving them the opportunity to network amongst each other. We're giving them market research information, okay, potentially who's hiring, who’s not hiring, how the industry is doing, there's a lot of insight that we're going to be providing to these businesses that are going to be extremely helpful to their operations, right. And so when you look at the total offering, we're offering to the businesses and a once our representatives at those events had an opportunity to really exchange with these small business owners. These restaurant owners the reception was very positive, okay. So people are excited about the eventual launch of our business hub. We're going to ramp up our pre-registration campaign and hopefully we're going to be able to communicate some information to the market in terms of how well the pre-registration campaign is gone. Now that's on the small business side.

On the financial institution side, the credit union side, again the event was very successful for us. The feedback that I got was, why not if your financial institution this is a way for you to acquire new clients and to get more opportunities to expand your loan book. So we are bringing you perfectly match businesses, okay. Businesses that are perfectly aligned with your lending and credit criteria, so it's a win-win for everybody involved. So the reception has been very good, to answer the question Mark the reception has been very good, and we look forward to wrapping up such activities and get more small businesses pre-registered more financial institutions pre-registered on the platform before we eventually launch it.

Mark Schwalenberg

Awesome, awesome, I can’t wait. That's a pretty good coverage of the questions we've got. So Johnson, I will turn it back to you for some closing remarks.

Johnson Joseph

Okay, thank you. Thank you, Mark, and thank you everyone for attending the call this morning. I know it was early, it's not what we typically do, so we appreciate your presence here. It's been difficult, yes, the last couple of -- the last few months for the company personally for the markets in general we were affected unfortunately negatively by what took place on the U.S. capital markets, but we do believe that we have a plan that will allow us to rebound from there. So we've updated our forecast and we're very, very confident now with the numbers that we put forth. I know for some of you for most of you the numbers are probably disappointing shorter term, but we believe that we're going to benefit down the line, from the revisions that we've done and from the decisions that we've made.

Because ultimately the company is going to be more profitable and we're also looking very much forward to having the Canadian hub launch. So that you have more visibility into this concept that we're putting together. This global concept about making small businesses around the world, getting financial institutions involved and really changing the way SMEs do business around the world and using analytics and artificial intelligence to do that and then developing all these revenue streams for the company.

So I really encourage you to take a look at the presentation and by the way, if it's not already done the Tenet website is also being revamped. I think before the end of today, we will have a new website basically that puts forth. What we're trying to do on the analytics and artificial intelligence front as opposed to just the focus on supply chain in China.

So once again thank you very much for your time. We have a plan basically that we believe you will be happy with. So just hang in there with us for a little while longer. You won't be disappointed. Thank you.

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