S-1/A: Aureus Greenway Holdings Inc. Files Amendment No. 2 to Form S-1 for IPO

Aureus Greenway Holdings Inc. updates its S-1 registration statement for an initial public offering of common stock, including shares offered by the company and selling stockholders.

Summary

• Aureus Greenway Holdings Inc. filed Amendment No. 2 to its Form S-1 registration statement with the SEC.
• The filing pertains to a proposed initial public offering of 3,000,000 shares of common stock by the company and 750,000 shares by selling stockholders.
• The company expects the initial public offering price to be in the range of $4.00 to $6.00 per share.
• The company has reserved the symbol AGH for purposes of listing its common stock on the Nasdaq Capital Market (Nasdaq) and has applied to list its common stock on the Nasdaq.
• The closing of this offering is conditional upon Nasdaqs final approval of our listing application.
• The company is authorized to issue 500,000,000 shares of capital stock, consisting of 450,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, par value $0.001.
• 20,000,000 shares of our preferred stock are designated into shares of series A preferred stock (the Series A Preferred Stock).
• Each share of our common stock is entitled to one vote, and each share of Series A Preferred Stock is entitled to twenty (20) votes on any matter on which action of the stockholders of the corporation is sought, respectively.
• Shares of our Series A Preferred Stock vote together with shares of our common stock.
• Shares of our common stock and Series A Preferred Stock are not convertible into each other.
• Holders of Series A Preferred Stock are not entitled to receive dividends.
• Ace Champion Investments Limited, Trendy View Assets Management, and Chrome Fields Asset Management LLC, each of which are controlled in part by Mr. S. Cheung our designated executive director, Mr. Y. C. Cheung and Ms. C. Lee, and Mr. C. P. Cheung our executive director, respectively beneficially own Series A Preferred Stock and common stock of the Company and will each be able to exercise 49.2%, 9.6%, and 39.4% of our voting power and will be able to determine all matters requiring approval by our stockholders, immediately after the consummation of this offering, assuming the sale of 3,000,000 and 750,000 shares of common stock by us and the Selling Stockholders respectively, and no exercise of the underwriters over-allotment option under this offering.
• The company does not intend to avail themselves of the corporate governance exemptions afforded to a controlled company under the Nasdaq Marketplace Rules.
• The company is an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.
• The company estimates net proceeds from the offering to be approximately $9.4 million if the underwriter does not exercise its over-allotment option, and $11.1 million if the underwriter exercises its over-allotment option in full.
• The company plans to use the net proceeds we receive from this offering (assuming no exercise of the underwriters over-allotment option) (i) approximately $1.4 million, or 15% of the net proceeds we receive from this offering, for renovation and upgrading of our golf courses, clubhouse and facilities; (ii) approximately $0.2 million, or 2.5% of the net proceeds we receive from this offering, for repayment of two loans due to South State Bank and two promissory notes due to the Kissimmee Bay Community Association, Inc.; (iii) approximately $1.0 million, or 11% of the net proceeds we receive from this offering, for marketing, promotion and brand building activities; (iv) approximately $1.3 million in an aggregate, or 13.5% of the net proceeds for repayment of balances with shareholders including (1) two loans made by each of Mr. S. Cheung, Mr. C. P. Cheung and Mr. Y. C. Cheung to us in connection with the acquisition of Kissimmee Bay and Remington (the 2014 Loans) (As of March 31, 2024, we had an outstanding balance under the 2014 Loans with each of Mr. S. Cheung, Mr. C. P. Cheung and Mr. Y. C. Cheung for amounts of $387,369, $309,996, and $77,474, respectively.); and (2) a loan made by each of Mr. S. Cheung, Mr. C. P. Cheung and Mr. Y. C. Cheung to us in connection with the repayment of a Paycheck Protection Program (the PPP Loan) due to the United States Small Business Administration (the 2024 Loan) (As of the date of this prospectus, the outstanding amount due to Mr. S. Cheung, Mr. C. P. Cheung, and Mr. Y. C. Cheung under the 2024 Loans is an aggregate amount of approximately $500,000, which is interest-free and due to each of the three parties in proportions of 50%, 40% and 10%.) and (v) the balance, or approximately 58% to fund working capital and for other general corporate purposes.
• Revere Securities, LLC is acting as the underwriter for the offering.
• The underwriter has a 45-day option to purchase up to 450,000 additional shares to cover over-allotments.
• The company, its directors, executive officers, and certain stockholders have agreed to a 180-day lock-up period.

Sentiment

Score: 6

Explanation: The document presents a mix of positive and negative aspects. The IPO and growth strategies are positive, but the risks and financial performance for Q1 2024 are concerning. The sentiment is neutral to slightly positive.

Positives

• The company is pursuing an IPO to raise capital for renovations, marketing, debt repayment, and working capital.
• The company is an emerging growth company and will comply with reduced reporting requirements.

Negatives

• The company is a controlled company, which may reduce corporate governance oversight.
• The company has a limited operating history.
• The company is concentrated in a specific geographic state, Florida.

Risks

• The company's reliance on dividends from subsidiaries for cash needs.
• Severe weather patterns may adversely affect the ability for our customers play at our golf courses, create damage to our course greens and properties and may adversely affect the value of our golf courses or negatively impact our business and results of operations.
• Economic downturns could negatively affect our business, financial condition and results of operations.
• The company has a limited operating history and may not be able to operate our business successfully or generate sufficient cash flows to accomplish our business objectives.
• Increasing property taxes, Association fees, and insurance costs may negatively affect results of operations.
• The company's property is subject to a CCR that may unreasonably restrict our ability to operate on and use our property.
• The company may not be able to attract and retain customers that consistently utilize our golf country clubs and pay green fees, which could harm our business, financial condition and results of operations.
• The company's property is part of the Association, and we are subject to the rules and regulations the Association, which are subject to change and which may be arbitrary or restrictive, and violations of such rules may subject us to additional fees and penalties and litigation with the Association, which would be costly.
• Changes in consumer spending patterns, particularly discretionary expenditures for leisure, recreation and travel, are susceptible to factors beyond our control that may reduce demand for our products and services.
• The company has significant operations concentrated in a specific geographic state and any disruptions or highly successful competitor in this limited region could harm our results of operations.
• The company's business operation is subject to seasonality.
• The company's golf course maintenance is highly dependent on a third-party golf-club consultant which subjects us to risks, including disruptions in our business and increased costs.
• The company's golf courses and facilities are subject to future renovation projects which may result in in an extended period of continued partial or full business disruption and timing, budgeting and other risks could delay our efforts to renovate our properties all of which could reduce our profits or impair our ability to compete effectively.
• Negative publicity could reduce sales at some or all of our golf country clubs and adverse litigation against us could materially affect our financial condition and results of operations.
• The company relies on a small number of suppliers, supplier concentration may expose us to significant financial credit or performance risk.
• Increases in our cost of equipment rentals, consultant services, insurance premiums, Association fees, food vendors and taxes could reduce our operating margins and harm our business, financial condition and results of operations.
• Timing, budgeting and other risks could delay our efforts to develop, redevelop or renovate the properties that we own, or make these activities more expensive, which could reduce our profits or impair our ability to compete effectively.
• The company's success is dependent on the continued service of our senior management and key employees.
• Competition in the industry may have a material adverse effect on our business and results of operations.
• Certain market opportunity data and forecasts in the Frost & Sullivan Report, contained in this prospectus were obtained from third-party sources and were not independently verified by us. We believe the estimates of market opportunity data and forecasts of market growth included in this prospectus are reliable, but may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, if at all.
• Navigating workforce challenges is an inherent aspect of our operations, exposing us to potential risks associated with the historical rise in labor costs.
• The company may seek to expand through acquisitions of, or investments in, other businesses and properties each of which may divert our managements attention, result in additional dilution to our stockholders, increase expenses, disrupt our operations and harm our results of operations.
• Accidents or injuries at our golf country clubs or in connection with our operations may subject us to liability, negatively affect our reputation and attendance at our golf country clubs, which could harm our business, financial condition and results of operations.
• The company may need to defend ourselves against patent or trademark infringement, or other intellectual property claims, which may be time-consuming and cause us to incur substantial costs.
• Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, misappropriation of assets and damage to our business relationships, all of which could negatively impact our business and results of operations.
• The company's insurance coverage may be inadequate for the claims asserted or in relation to the risks associated with our business operations.
• The company's properties are subject to environmental regulation.
• The company's current debt obligations may limit our ability to secure additional capital, hinder adaptability to economic and industry changes, which may impede meeting such debt obligations.
• The company may experience material weaknesses in our internal controls and financial reporting may limit our ability to prevent or detect financial misstatements or omissions. As a result, our financial reports may not be in compliance with U.S. GAAP. Any material weakness, misstatement or omission in our financial statements will negatively affect the market and the price of our stock, which could result in significant loss to our investors.
• The company will incur substantial costs as a result of being a public company and become subject to the periodic reporting requirements of the Securities Exchange Act of 1934, which will require us to incur audit fees and legal fees in connection with preparation of reports. These additional costs could reduce or eliminate our ability to operate profitability.
• The company is controlled by Ace Champion Investments Limited, Trendy View Assets Management, and Chrome Fields Asset Management LLC, whose interests may be different than the interests of other investors.
• We cannot predict the impact our multi-class structure may have on the stock price of our common stock.
• Holders of our Series A Preferred Stock will continue to have significant influence over us after this offering, including control over decisions that require the approval of stockholders of our common stock.
• There has been no public market for our common stock prior to this offering, and you may be unable to resell our common stock at or above the price you pay for them, or at all.
• The market price of our common stock may be volatile, may not be indicative of prices that will prevail in the trading market, or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
• The price of the shares of our common stock could be subject to rapid and substantial volatility.
• Because our public offering price per share is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution.
• We may be unable to maintain the listing of our shares on the Nasdaq Capital Market.
• Substantial future sales of our common stock or the anticipation of future sales of our shares of common stock in the public market could cause the price of our shares of common stock to decline.
• If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding our common stock, the price of our common stock and trading volume could decline.
• Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance our results of operations or the price of our shares.
• We do not intend to pay dividends for the foreseeable future.
• We are an emerging growth company and a smaller reporting company under the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
• As a controlled company under the Nasdaq Listing Rules, we may choose to exempt our Company from certain corporate governance requirements that could have an adverse effect on our public stockholders.
• Anti-takeover provisions in our charter documents and Nevada law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

Future Outlook

The company plans to continue to promote, market, manage and operate its golf country clubs with the intent to (i) attract and retain customers across a number of demographic groups to further develop customer loyalty and capture a greater share of customers in the greater Orlando Florida region and (ii) increase revenue from managing and operating our golf country clubs.

Industry Context

The document references the Frost & Sullivan Report, indicating that Orlando, Florida is a popular destination for leisure travelers, suggesting a favorable market for golf country clubs.

Comparison to Industry Standards

• The document mentions that the company competes with other golf country clubs in the Orlando region, including Royal St. Cloud Golf Links, Ritz-Carlton Orlando Grande Lakes, Disneys Magnolia Golf Course, Shingle Creek Golf Club, Waldorf Astoria Golf Club Signia, and Celebration Golf Club.
• The document states that in 2022, there were more than 1,200 golf-courses in Florida, which collectively host more than 48 million rounds on a yearly basis.

Related Party Transactions

• As of the three years ended December 31, 2023, the Company owed two loans each dated April 24, 2014 for $1,447,739.16 and $1,307,619.69 and referenced to as the 2014 Loans to each of Mr. S. Cheung, Mr. C. P. Cheung and Mr. Y. C. Cheung in proportions of 50%, 40%, and 10% consisting of loans from (i) Mr. S. Cheung for an unsecured, non-interest-bearing loan with a principal balance of $723,869.58, and $653,809.85, respectively, (ii) Mr. C. P. Cheung for an unsecured, non-interest-bearing loan with a principal balance of $579,095.66, and $523,047.87, respectively, and (iii) Mr. Y. C. Cheung for an unsecured, non-interest-bearing demand loan with a principal balance of $ 144,773.91, and $ 130,761.97, respectively.
• On September 7, 2023, the Company entered into a loan facility agreement or the Expense Loan with Mr. S. Cheung for a loan facility of up to $1,000,000.
• On April 15, 2024, the Company entered into a loan facility agreement or the 2024 Loan with each of Mr. S. Cheung, Mr. C. P. Cheung and Mr. Y. C. Cheung in proportions of 50%, 40%, and 10% for a loan facility of up to $500,000 consisting of loans from (i) Mr. S. Cheung for an unsecured, non-interest-bearing loan with a principal balance of $250,000, (ii) Mr. C. P. Cheung for an unsecured, non-interest-bearing loan with a principal balance of $200,000, and (iii) Mr. Y. C. Cheung for an unsecured, non-interest-bearing demand loan with a principal balance of $50,000.

Stakeholder Impact

• Shareholders: Potential for capital appreciation, but also risk of dilution and market volatility.
• Employees: Potential for growth and development, but also risk of job security due to market conditions.
• Customers: Potential for improved services and facilities, but also risk of price increases.
• Suppliers: Potential for increased business, but also risk of payment delays.
• Creditors: Potential for increased financial stability, but also risk of default.

Next Steps

• The company intends to list its common stock on the Nasdaq Capital Market.
• The company plans to use the net proceeds from the offering for renovations, marketing, debt repayment, and working capital.

Key Dates

Keywords

IPO, common stock, Aureus Greenway Holdings, initial public offering, golf country clubs, Revere Securities, registration statement, securities, Nasdaq