Business context and reporting period
TROOPS, Inc. filed an audited Form 20-F for the fiscal year ended December 31, 2023, prepared under U.S. GAAP. This is an annual report; the filing does not provide separate fourth-quarter results. The Hong Kong-headquartered group operates money-lending, property-investment and fintech/API-services businesses. It ceased its LCD/LED product business effective January 1, 2023.
Financial performance and position
Amounts below are U.S. dollars; financial-statement figures are rounded to millions unless indicated otherwise.
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $3.57 million | $3.88 million |
| Gross profit / gross margin | $0.78 million / 21.7% | $0.82 million / 21.2% |
| Operating loss | $1.80 million | $0.54 million |
| Net loss / loss per share | $1.72 million / $0.02 | $0.35 million / $0.01 |
| Operating cash flow | $(6.54) million | $(0.37) million |
| Cash and cash equivalents, year-end | $3.11 million | $2.95 million |
| Total assets / liabilities / equity | $70.35 million / $9.77 million / $60.58 million | $69.69 million / $7.48 million / $62.20 million |
Revenue comprised loan interest of $2.31 million, property lease and management of $1.07 million, and fintech/API services of $0.19 million. Net loans receivable were $19.68 million, against a $2.02 million allowance; two borrowers represented 17% and 21% of the loan balance. The filing reports working capital of $5.95 million. Current assets were $10.67 million and current liabilities $4.72 million.
Year-end obligations included a $1.92 million unsecured, non-interest-bearing shareholder loan repayable on demand and $0.54 million of advances from unrelated parties with no fixed repayment terms. The company reported no outstanding bank borrowings. Net property, plant and equipment was $46.77 million, including the Hong Kong property portfolio.
Material changes versus the prior comparable period
- Revenue fell 8.0%, as loan-interest revenue declined 5.6% and property revenue declined modestly; fintech/API revenue fell from $0.32 million to $0.19 million.
- Net loss widened to $1.72 million from $0.35 million. General and administrative expenses rose 25.6% to $2.75 million, including higher IT consulting and support costs. The loan-loss provision reversal was much smaller than in 2022 ($0.05 million versus $0.97 million), reducing the prior-year benefit to earnings.
- Operating cash use increased to $6.54 million, principally reflecting a $7.08 million increase in loans receivable. Investing cash flow was positive $4.78 million, largely from the $5.00 million refund of an acquisition deposit; financing provided $1.92 million from the shareholder loan.
- Liabilities rose by $2.28 million, primarily reflecting the new shareholder loan and higher other payables. Equity decreased by $1.63 million, mainly due to the annual net loss.
Outlook, risks, contingencies and unusual items
- No quantified earnings or revenue guidance is provided. Management states that cash and available financing are expected to meet anticipated needs for at least 12 months, but cautions that additional financing may not be available on acceptable terms.
- The company identifies lending credit risk, borrower concentration, loan-collection uncertainty, Hong Kong property-market exposure, competition, regulatory and data-privacy risks, and restrictions that could affect cross-border cash transfers. It reported $0.42 million of deposits at a Vanuatu bank without deposit-protection coverage as of December 31, 2023. Cash and bank deposits were $2.28 million as of March 31, 2024.
- Internal controls over financial reporting were deemed ineffective; the auditor issued an adverse opinion on internal control. Reported weaknesses include inadequate control documentation and testing, gaps in loan monitoring and overdue-loan procedures, and insufficient qualified accounting personnel. Remediation is ongoing, with no assurance of success.
- A Hong Kong civil lawsuit remains in trial. Certain asset-disposal injunctions were discharged in 2023, but restrictions remain on specified property and subsidiary shares. The company says it cannot estimate a potential loss, if any, and intends to defend the case.
- The company terminated a proposed acquisition of TROOPS InsurTech after due diligence and received the $5.00 million deposit refund in August 2023. A separate January 2024 letter of intent to acquire Riches Holdings is disclosed; the filing does not report a completed transaction.
- The 2018 convertible notes matured on April 17, 2023. The filing says that as of April 22, 2024 the company had not issued shares to the noteholder and was still discussing issuance details.
- The financial-statement audit opinion was unqualified. The auditor identified expected credit losses on receivables and property, plant and equipment impairment assessment as critical audit matters.
Important facts for investors to verify
- Loan portfolio collectability, collateral values, borrower concentration and delinquency reporting. The filing’s loan-aging disclosures include a separate reference to $1.154 million over one year past due despite the aging table showing no balance in that category; clarify the underlying schedule and allowance treatment.
- Cash-flow sustainability and liquidity, including the demand repayment terms of the shareholder loan, advances without fixed repayment terms, and the lower cash balance reported at March 31, 2024.
- Progress and independently testable effectiveness of internal-control remediation, particularly loan monitoring and financial reporting controls.
- Status, remaining asset restrictions and potential financial exposure from the ongoing Hong Kong litigation.
- Resolution and accounting treatment of the matured convertible notes, and status of the proposed Riches Holdings acquisition.