Alset Inc. — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023; filed April 1, 2024. Alset is a diversified holding company operating primarily in real estate, digital transformation technology, biohealth and other activities across the United States and Asia.
Key financial results
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $22.09 million | $4.48 million |
| Gross profit | $7.51 million | $0.75 million |
| Gross margin | 34.0% | 16.7% |
| Operating loss | $2.87 million | $7.09 million |
| Net loss | $61.28 million | $46.21 million |
| Net loss per share, basic and diluted | $6.52 | $6.22 |
| Net cash from (used in) operations | $7.48 million | ($31.86 million) |
Real estate revenue was $20.96 million, including $18.19 million of property sales and $2.78 million of rental revenue. Property sales accounted for approximately 82% of revenue. Revenue rose 393%, mainly from Lakes at Black Oak lot sales; 335 lots sold in 2023 generated approximately $18.2 million. Biohealth revenue fell to $12,758 from $753,651, while digital technology revenue declined to $28,117 from $69,915. Other-business revenue increased to $1.08 million.
Net loss worsened despite higher revenue and gross profit. Other expense totaled $58.31 million, driven principally by a $24.48 million equity-method investment loss, $21.66 million loss on consolidation of Alset Capital Acquisition Corp., and $11.38 million realized securities loss. These items substantially outweighed the improvement in operating results.
Financial position and liquidity
At year-end, cash and cash equivalents were $26.92 million, restricted cash $0.97 million, total assets $126.31 million and total liabilities $9.07 million. Total assets were down from $153.49 million, primarily reflecting lower real estate assets and equity-method investments. Total real estate assets were $42.14 million, including $31.77 million of rental properties and $10.37 million of properties under development.
Reported notes payable were $156,926, principally vehicle loans. Operating lease liabilities were $1.50 million; current liabilities totaled $8.34 million and included $3.02 million of deferred underwriting compensation. Cash from operations turned positive primarily because of property-sale proceeds and changes in real estate balances. Investing activities used $2.13 million, while financing activities provided $3.19 million, principally from stock issuance. Management stated that available cash and access to debt and equity financing should fund operations for at least 12 months.
Material changes, outlook and risks
- Real estate: Ballenger Run lots are sold and the project is nearing completion. In November 2023, the Company agreed to sell 142 Lakes at Black Oak lots and 63 Alset Villas lots for an anticipated combined total of approximately $11 million, subject to conditions and expected to close in Q2 2024. A separate 95-lot sale closed in January 2024 for approximately $5.03 million.
- Proposed related-party acquisition: Alset signed a term sheet to acquire from CEO and controlling stockholder Chan Heng Fai all shares of NEAPI, which owns 41.5% of New Energy Asia Pacific Limited. Proposed consideration is a $103.75 million, five-year convertible note bearing 3% interest, convertible at $12 per Alset share. Closing is subject to conditions, including stockholder approval and no Nasdaq objection. The filing cites a fairness opinion; definitive documentation was still anticipated.
- HWH transaction: The Alset Capital/HWH International merger closed January 9, 2024. Alset International received 10.9 million shares of the new HWH entity. HWH planned to resume membership sales under a new subscription model around Q2 2024; its marketplace and other offerings were still in development or planning.
- Controls: Management concluded disclosure controls were ineffective and identified an unremediated material weakness caused by limited staff and insufficient segregation of duties. Management planned to add qualified accounting and SEC-reporting personnel. The auditor gave an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
- Other significant risks: Investment valuations and losses, foreign-exchange movements on approximately $23 million of intercompany loans, dependence on property-sale timing, concentrated property customers, limited liquidity in some investee shares, related-party dealings and reliance on key management. The auditor emphasized significant related-party transactions and cautioned they may not be on arm’s-length terms.
- Contingencies and unusual items: The filing describes a historical dispute with Gara Group that was settled in 2022; management did not believe the disclosed legal matters would have a material adverse effect. The filing identifies no material cybersecurity incident. Management reported no material inflation impact in 2023.
Important facts for investors to verify
- Whether the proposed $103.75 million NEAPI acquisition is completed, approved by stockholders and Nasdaq, and what its final terms mean for leverage and potential dilution.
- Whether the pending lot sales and expected reimbursements close as scheduled, and the resulting net cash proceeds after project costs.
- How much reported cash is available for general operations, including any restrictions or trust-account requirements associated with Alset Capital.
- Whether the material weakness is remediated and whether future filings demonstrate improved financial-reporting controls.
- The basis and sensitivity of investment valuations and losses, particularly those involving related parties and equity-method investees.
- The sustainability of positive operating cash flow after the large 2023 lot sales, given the Company’s recurring net losses and limited revenue from several non-real-estate businesses.