Genius Group Limited Form 6-K Summary
Filing date: September 5, 2023. Reporting period: Month of September 2023. This filing primarily describes the approved spinoff of Entrepreneur Resorts Limited (ERL) and does not provide a new quarterly or annual operating report for Genius Group.
Business Context and Spinoff
- Genius Group intends to separate its approximately 95% subsidiary, ERL, so Genius Group can focus on education and ERL can operate as a standalone hospitality and campus-venue company.
- Shareholders approved the transaction by more than 93% of votes cast at the May 16, 2023 extraordinary general meeting. The Singapore High Court approved the spinoff on August 1, 2023.
- The distribution involves a capital reduction and distribution in specie of ERL shares to eligible Genius Group shareholders. The stated distribution value is approximately $38.4 million at market value and approximately $31.0 million to $31.8 million at book value, depending on the referenced transaction measure.
- The record date for determining shareholder entitlements was August 31, 2023. The expected distribution date was on or about September 29, 2023.
- The filing states an entitlement ratio of 0.1832 ERL shares for each GNS share. Other sections provide illustrative ratios rounded to approximately 0.18 or 0.26, reflecting differing assumptions and presentation dates.
- ERL was listed on the MERJ Exchange in Seychelles and was expected to transfer its listing to Upstream, a MERJ Exchange market. Genius Group expected to remain listed on NYSE American and to be dual listed on Upstream.
Financial Metrics and Operating Information
| Metric | Amount or description |
|---|---|
| ERL FY2021 revenue | $3.1 million |
| ERL FY2022 revenue | $4.6 million, stated as approximately 17% of pro forma Group revenue |
| ERL FY2022 profit before tax | Loss of approximately $2.29 million; loss attributable to the Relevant ERL Shares was approximately $2.19 million |
| ERL net asset value at December 31, 2022 | Approximately negative $73,863; negative $70,568 attributable to the Relevant ERL Shares |
| ERL market value | Approximately $38.4 million based on a $2.75 one-month volume-weighted average price before March 31, 2023 |
| ERL ownership before distribution | 13,334,017 shares, or approximately 95.37% of ERL |
| Genius Group FY2022 earnings | Loss of $56.315 million before the transaction; pro forma loss of $48.299 million |
| Genius Group FY2022 total equity | $13.955 million before the transaction; pro forma $17.814 million in one pro forma presentation |
| Genius Group FY2022 debt | $8.515 million of short-term and long-term debt, unchanged in the stated gearing analysis |
| Gross gearing | 0.61 times before the transaction and 0.84 times pro forma, based on shareholders’ equity attributable to the Company |
| Pro forma total assets | $91.260 million before and $80.701 million after the transaction |
| Pro forma total liabilities | $77.305 million before and $70.532 million after the transaction |
The filing does not provide a clear current-period figure for Genius Group revenue, operating profit, cash flow, cash balance, or liquidity as of September 2023. Management stated that continuing operating cash flow and financial resources were expected to support foreseeable near-term needs after the distribution.
Material Changes Versus the Prior Comparable Period
- ERL revenue increased from $3.1 million in FY2021 to $4.6 million in FY2022, although ERL reported a FY2022 loss before tax.
- After completion, Genius Group will no longer own ERL, and ERL will no longer be a subsidiary of the Group.
- The transaction is expected to reduce Genius Group’s assets and liabilities and, under the filing’s pro forma analysis, improve reported earnings and total equity because of the accounting treatment of the distribution and related reserves.
- Pro forma FY2022 loss per share improves from $2.27 to $1.95, assuming the transaction occurred at the beginning of FY2022. Pro forma net tangible assets increase from $6.038 million to $9.898 million in the stated analysis.
- Genius Group and ERL intend to continue arms-length commercial arrangements, including ERL providing venues, accommodation, food and beverage services for Genius Group events and courses.
Guidance, Outlook, Risks, Contingencies and Unusual Items
- ERL plans to expand its café, central venue and resort models through company-operated and licensed locations. Its stated long-term vision is five entrepreneur resorts and 50 entrepreneur beach clubs within five years.
- The transaction was subject to shareholder approval, court approval, filing of the court order with Singapore’s ACRA, compliance with financing documents, and other required approvals. The Board retained the ability not to complete the transaction if it determined that doing so was not in the Company’s best interests.
- Shares distributed to shareholders are restricted. They may become eligible for trading on Upstream six months after the distribution date if Rule 144 and other requirements are satisfied.
- U.S. shareholders are required to complete Upstream KYC procedures and establish an account with Boustead Securities to activate securities trading. Overseas shareholders in excluded jurisdictions may receive cash proceeds instead of ERL shares.
- Key risks include uncertain liquidity and price discovery for ERL shares, potentially less extensive disclosure and investor protection than under NYSE and SEC requirements, foreign-exchange and regulatory risks, operating risks in Singapore, Indonesia and South Africa, and the risk that ERL may require additional financing or issue dilutive equity.
- ERL may not pay dividends. After separation, ERL will no longer have access to Genius Group’s capital resources and may incur additional costs operating independently.
- The filing states that directors were not aware of material pending or threatened litigation as of the latest practicable date.
- The filing contains inconsistent descriptions of the distribution amount, entitlement ratio, and pro forma equity figures. Investors should rely on the final court-approved transaction documents and subsequent completion filings.
Facts Investors Should Verify
- Whether the ERL spinoff and capital reduction were ultimately completed, including the effective date and filing of the court order with ACRA.
- The final ERL share entitlement ratio, the number of shares distributed, and the treatment of options, excluded overseas shareholders and fractional entitlements.
- Whether ERL completed its transfer from MERJ to Upstream and the actual liquidity, trading price and restrictions applicable to ERL shares.
- Genius Group’s post-transaction cash balance, operating cash flow, debt maturities, covenant compliance and ability to fund operations.
- ERL’s standalone audited financial statements, profitability, liquidity, financing needs and dividend policy after separation.
- The final accounting treatment and reconciliation of the stated $31.0 million, $31.8 million and $38.4 million book-value and market-value figures.