Alset Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. The filing provides annual results, not standalone fourth-quarter results. Alset is a diversified holding company with real estate, digital transformation technology, biohealth, and other activities across the U.S. and Asia.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $4.48 million | $19.80 million |
| Gross profit | $0.75 million; 16.7% gross margin | $8.50 million; 42.9% gross margin |
| Operating loss | $7.09 million | $14.99 million |
| Net loss | $46.21 million | $119.02 million |
| Net loss attributable to common stockholders | $40.49 million | $103.32 million |
| Net loss per share, basic and diluted | $6.22 | $73.85 |
| Net cash used in operating activities | $31.86 million | $16.68 million |
| Net cash used in investing activities | $15.12 million | $56.04 million |
| Net cash provided by financing activities | $6.06 million | $103.42 million |
- Revenue fell 77% year over year. Real estate revenue decreased to $3.09 million from $14.21 million, and biohealth revenue fell to $0.75 million from $5.54 million. Rental revenue grew to $1.81 million from $0.33 million; digital transformation technology revenue was $69,915, and other revenue was $0.57 million.
- The company attributed lower revenue mainly to fewer property sales as Ballenger Run neared completion and lower HWH World direct sales. The gross margin decline reflected lower property and biohealth contribution.
- Net loss narrowed substantially, primarily as 2021 included $50.87 million of financing costs from amortization of a beneficial conversion feature. In 2022, other expense was $39.12 million, including $23.56 million of unrealized losses on related-party securities, $7.79 million of other unrealized securities losses, and $7.31 million of realized securities losses.
- At year-end, cash was $17.83 million and restricted cash $0.69 million, compared with cash of $56.06 million and restricted cash of $4.74 million a year earlier. Total assets were $153.49 million, down from $184.21 million; total liabilities were $4.83 million, down from $13.92 million. Current assets were $95.42 million and current liabilities $3.24 million.
- Real estate assets totaled $54.62 million, including $31.17 million of rental properties and $23.45 million of properties under development. The company completed acquisition of 132 Texas rental homes for an aggregate purchase cost of approximately $31.0 million.
- Notes payable were $181,846, principally vehicle loans; the Ballenger Run revolving loan had no balance outstanding. Operating lease liabilities totaled $1.63 million. Cash and restricted cash declined by $40.92 million during the year.
Material changes and significant transactions
- Alset increased its ownership of Alset International from 76.8% to 85.4%, including a purchase of additional shares from CEO Chan Heng Fai for newly issued Alset shares. The company also completed a 1-for-20 reverse stock split in December 2022.
- Alset sold its True Partner shares to DSS for DSS shares; the transaction closed in May 2022. It also exchanged an $8.35 million related-party loan receivable from American Medical REIT for DSS shares, recording a $1.09 million loss.
- Alset Capital Acquisition Corp. completed its $86.25 million SPAC IPO in February 2022. Alset’s reported ownership fell to 23.4%, and it deconsolidated the SPAC. A proposed business combination with HWH International was announced in September 2022; the filing does not report that it had closed by year-end.
- After year-end, on January 13, 2023, Alset completed an internal reorganization under which it became the direct owner of the subsidiaries holding 112 rental homes. The stated consideration was $26.25 million, including debt forgiveness, a promissory note, and $1.0 million cash.
- After year-end, a February 2023 stock offering generated approximately $3.3 million net proceeds. In March 2023, Black Oak’s seller agreed to sell approximately 110 lots for an anticipated $6.59 million and 189 lots for an anticipated $10.02 million, subject to inspections, improvements, and other closing conditions.
Outlook, risks, contingencies, and unusual items
- Management said available cash, debt, and equity financing were sufficient to fund operations for at least the next 12 months. No specific earnings or revenue guidance was provided. Management expects rental revenue to grow as homes are leased and views diversification into rentals, technology, biohealth, and acquisitions as a way to reduce reliance on property development.
- The company reported a material weakness in internal controls because its limited staffing prevents adequate segregation of duties and timely review of financial disclosures. The weakness remained unremediated at December 31, 2022; management plans to add qualified accounting and SEC-reporting personnel.
- Foreign exchange movements are a significant risk. Intercompany loans, mostly between Singapore and U.S. entities, were approximately $51 million at year-end, and management expects currency volatility to continue affecting 2023 results; it does not expect near-term repayment.
- Investment valuations create earnings volatility: equity securities are largely marked to market, and management reported substantial realized and unrealized losses in 2022. The filing also describes significant related-party investments and transactions. The independent auditor issued an unqualified opinion on the financial statements but emphasized that related-party transactions cannot be presumed to be at arm’s length.
- Other risks include sustained losses, operating cash outflows, concentrated property-development customers, project completion and sale conditions, real estate market and financing risks, international and regulatory exposure, and reliance on key management. The CEO beneficially owned approximately 51.1% of common stock as of March 31, 2023.
- The previously disclosed litigation involving iGalen and Gara Group was settled in April 2022. The company stated that it did not believe the disclosed legal matters would have a material adverse effect.
Most important facts for investors to verify
- Whether operating cash use and declining cash are consistent with management’s 12-month liquidity assessment, and whether the February 2023 offering proceeds materially extend the runway.
- Leasing, occupancy, rental income, and operating costs for the 132 Texas homes, including the effects of the post-year-end ownership reorganization.
- Progress, required development spending, and actual closings and proceeds for the Black Oak lot agreements; the announced amounts are conditional, not reported completed sales.
- The status and financial implications of the proposed Alset Capital–HWH transaction and the valuation and liquidity of Alset’s public-company investments.
- Remediation of the material weakness, the treatment and governance of related-party transactions, and the effects of foreign exchange exposure from approximately $51 million in intercompany loans.