20-F: Roma Green Finance Reports Widening Losses Amid Soaring Operating Costs and Internal Control Weaknesses

Roma Green Finance Limited reported a substantial increase in net loss for the fiscal year ended March 31, 2025, driven by significantly higher sales, marketing, and general and administrative expenses, alongside a disclosed material weakness in internal financial reporting controls.

Summary

• Net loss for the fiscal year ended March 31, 2025, surged to HK$27,773,099 (US$3,560,655), a significant increase from HK$5,840,256 in 2024 and HK$1,011,804 in 2023.
• Revenue increased by 23.2% to HK$12,202,026 (US$1,564,362) in 2025 from HK$9,903,795 in 2024, but remained below the HK$13,635,605 reported in 2023.
• Gross profit margin improved to 37.0% in 2025 from 31.5% in 2024, but was lower than 42.4% in 2023.
• Sales and marketing expenses dramatically increased to HK$17,812,475 (US$2,283,651) in 2025, up from HK$2,150,079 in 2024.
• General and administrative expenses also rose significantly to HK$15,245,266 (US$1,954,521) in 2025, compared to HK$7,062,709 in 2024.
• Net cash used in operating activities was HK$12,588,581 (US$1,613,922) in 2025, an improvement from HK$25,052,544 used in 2024, but still negative.
• The company completed an Initial Public Offering (IPO) on January 11, 2024, raising US$9,799,772 gross proceeds, and two follow-on offerings (PFPO and SFPO) on September 26, 2024, and June 5, 2025, raising additional gross proceeds of US$1,263,600 and US$6,930,000 respectively.
• A material weakness in internal control over financial reporting was identified as of March 31, 2025, due to a lack of sufficient financial reporting and accounting personnel with U.S. GAAP and SEC reporting knowledge, and the absence of a comprehensive U.S. GAAP accounting policies and procedures manual.

Sentiment

Score: 2

Explanation: The company's financial performance is severely deteriorating with a significant increase in net losses and operating expenses. The identified material weakness in internal controls is a major red flag, indicating fundamental issues in financial management. While revenue saw a slight uptick from 2024, it's still below 2023 levels, and the overall financial health is concerning, heavily reliant on dilutive capital raises.

Positives

• Revenue increased by 23.2% in fiscal year 2025 compared to 2024, primarily driven by an increase in new clients.
• Gross profit margin improved to 37.0% in 2025 from 31.5% in 2024.
• Net cash used in operating activities decreased from HK$25.1 million in 2024 to HK$12.6 million in 2025, indicating some improvement in operational cash burn.
• The company successfully completed two follow-on offerings in 2024 and 2025, demonstrating continued access to capital markets.
• The company serves a diverse set of over 100 clients across various industries, with a high client retention rate of 45.7% for recurring clients in 2025.

Negatives

• Net loss significantly widened to HK$27.8 million (US$3.6 million) in 2025, compared to HK$5.8 million in 2024 and HK$1.0 million in 2023.
• Operating costs and expenses more than tripled to HK$33.1 million in 2025, primarily due to a substantial increase in sales and marketing expenses (HK$17.8 million) and professional fees (HK$7.1 million).
• The company incurred net losses for three consecutive fiscal years (2023, 2024, 2025) and continues to have negative cash flows from operating activities, raising substantial doubt about its ability to continue as a going concern.
• Cash and cash equivalents decreased significantly from HK$43.1 million in 2024 to HK$20.9 million in 2025.
• The company identified a material weakness in its internal control over financial reporting as of March 31, 2025, citing insufficient U.S. GAAP and SEC reporting expertise among personnel and a lack of a comprehensive accounting policies manual.
• Revenue in 2025, while up from 2024, is still lower than the revenue reported in 2023, indicating a fluctuating and inconsistent top-line performance.

Risks

• Revenues, operating income, and cash flows are likely to fluctuate due to various factors including client engagement types, timing of revenue recognition, labor costs, and economic factors.
• Incurred net losses for fiscal years 2023, 2024, and 2025, and may be unable to generate sufficient operating cash flows and working capital to continue as a going concern.
• Inability to collect accounts receivable in a timely and sufficient manner may adversely affect liquidity and financial condition.
• Reliance on key management and professional staff; loss of these personnel could adversely affect operations and financial performance.
• Revenue is unpredictable due to the project-by-project nature of the business and non-recurring income elements.
• Limited operating history makes future revenue and profit prediction difficult, and past results are not indicative of future growth.
• Inability to successfully implement business strategies and future expansion plans, which may require substantial capital expenditure and additional financial resources.
• Potential adverse impact on business reputation or negative publicity due to substandard quality of work, failure to meet client expectations, or misconduct.
• Lack of long-term contracts with clients exposes the company to revenue uncertainty.
• Potential exposure to professional liabilities arising from negligence, misconduct, or fraudulent acts in providing advisory services.
• Risks of client default on payment, especially from clients experiencing financial distress.
• Exposure to risks related to compliance standards, including changes in regulations and increased compliance costs.
• Risks relating to computer hardware system and data storage, including damage, virus attacks, data leakage, and lack of off-site backup or comprehensive insurance.
• Business may be adversely affected by a downturn in Hong Kong's economy or stock market due to unforeseen circumstances.
• Adverse effects from changes in laws and regulations governing customers and stock exchanges.
• Failure to implement and maintain an effective system of internal controls could lead to inaccurate or untimely financial reporting and fraud.
• Potential for significant oversight and intervention by the PRC government, which could materially affect operations and share value.
• Risk of delisting from a U.S. exchange if the PCAOB is unable to inspect or investigate the company's auditor for consecutive years under the HFCA Act.
• Political risks associated with conducting business in Hong Kong, including the impact of the Hong Kong National Security Law and the HKAA.
• Potential subjection to PRC laws and regulations regarding data security or overseas securities offerings, which could hinder ability to offer shares or devalue them.
• Ordinary Shares may be thinly traded, making it difficult for investors to sell shares.
• Failure to meet applicable Nasdaq listing requirements could result in delisting, reducing liquidity and market price.
• The trading price of Ordinary Shares may be volatile due to broad market factors and company-specific issues.
• Short selling may drive down the market price of Ordinary Shares.
• No expected dividends in the foreseeable future, requiring investors to rely on price appreciation for returns.
• Classification as a passive foreign investment company (PFIC) could lead to adverse U.S. federal income tax consequences for U.S. taxpayers.
• The controlling shareholder has substantial influence, and their interests may not align with other shareholders.
• As a Cayman Islands company, the company follows home country corporate governance practices that differ from Nasdaq standards, potentially affording less protection to shareholders.
• Difficulties in protecting shareholder interests and enforcing rights through U.S. courts due to Cayman Islands incorporation and non-U.S. directors/officers.
• Incurred significantly increased costs and management time as a result of Nasdaq listing and compliance requirements.

Future Outlook

The company intends to continue increasing its market penetration in Hong Kong and Singapore, expand its worldwide footprint, particularly in the US, recruit and retain professionals, and pursue strategic acquisitions. It believes its cash on hand and anticipated cash flows from operations, along with proceeds from recent offerings, will be sufficient to meet working capital requirements for at least the next 12 months.

Management Comments

• Our mission is to provide to our clients a one-stop destination for high-quality and holistic sustainability and climate change related consulting services to support a more sustainable, balanced and inclusive future for our clients organizations and the world.
• We are driven by our passion to help corporates enhance their ESG performance as a means to business sustainability.
• We aim to walk along the sustainability journey with our clients and provide extensive support to them at every point of the journey, from sustainability program development, to ESG reporting, climate change strategies and solutions, environmental audit etc.
• Management believes that it is a market practice that these companies tend not to enter into any long-term agreement or commitment with any such service providers.
• Management periodically monitors the outstanding fees, making an effort to timely collect outstanding fees and reviews the adequacy of write-offs to minimize the impact of the potential payment defaults. The collection rate was over 80% and approximately HK$0.5 million was written-off for the year ended March 31, 2025.
• We believe that we have sufficient working capital for our requirements for at least the next 12 months from the date of this annual report, absent unforeseen circumstances, taking into account the financial resources presently available to us, including cash and cash equivalents on hand, cash flows from our operations and the estimated net proceeds from our IPO, PFPO and SFPO.
• Our disclosure controls and procedures were ineffective as of March 31, 2025, due to a material weakness related to a lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP and SEC reporting knowledge, and the absence of a comprehensive U.S. GAAP accounting policies and procedures manual.
• We presently do not engage third parties to assist with evaluating the effectiveness of our risk-management and cybersecurity practices.
• None of our directors on the Audit Committee nor our Chief Financial Officer have particular experience in cybersecurity matters.

Industry Context

The company operates in the competitive but fragmented ESG and sustainability consulting market in Hong Kong and Singapore, with intentions to expand globally, particularly to the US. The industry is driven by evolving global ESG-related reporting standards and increasing demand for credible corporate disclosures. The company positions itself as a comprehensive service provider, aiming to differentiate through expertise and client relationships, serving a diverse client base including listed companies and NGOs.

Comparison to Industry Standards

• The company's reported net losses and negative operating cash flows for multiple consecutive years suggest underperformance compared to established, profitable industry players in the financial advisory or consulting sectors.
• The disclosed material weakness in internal controls over financial reporting indicates a significant deviation from best practices and regulatory expectations for publicly traded companies, especially when compared to larger, more mature consulting firms that typically have robust internal control frameworks.
• The reliance on multiple capital raises (IPO and two follow-on offerings) within a short period, despite being a relatively young company, suggests a higher burn rate or insufficient operational cash generation compared to industry peers that might fund growth more organically or with less frequent dilutive financing.
• The company's stated client retention rate of 45.7% for recurring clients in 2025, while presented as a positive, could be assessed against industry benchmarks for professional services, where higher retention rates might be expected for long-term advisory relationships.
• The company's competitive landscape includes large multinational consulting firms with greater brand recognition and resources, as well as local small and medium-sized firms. The company's current financial performance and internal control issues may hinder its ability to effectively compete against these more established or better-resourced competitors.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this Annual Report, the company is not a party to, and is not aware of any threat of, any legal proceeding that is likely to have a material adverse effect on its business, financial condition, or operations.

Related Party Transactions

• Due to director (Claire Luk) balance of HK$1,269,266 as of March 31, 2024, was settled to HK$0 as of March 31, 2025.
• Consulting expenses of approximately HK$0.5 million were paid to Ranger Advisory Co. Limited, a company wholly-owned by Mr. Cheng (a former director), during the year ended March 31, 2024. No such expenses were incurred in 2023 or 2025.

Stakeholder Impact

• Shareholders: Face significant dilution from recent and future capital raises, increased risk due to widening losses, negative operating cash flow, and internal control weaknesses. Share price volatility and potential delisting risks are also present.
• Employees: The company's ability to recruit and retain professionals is key to its success, but ongoing losses and financial instability could impact employee morale and retention.
• Customers: The company aims to provide high-quality services, but risks related to substandard work or data leakage could impact client satisfaction and retention.
• Creditors: The company's financial instability and reliance on capital raises could pose risks to creditors, although the filing mentions promissory notes as receivables, not payables.

Next Steps

• Continue to increase market penetration in Hong Kong and Singapore.
• Expand worldwide footprint, particularly in the US.
• Recruit and retain professionals.
• Pursue strategic acquisitions.
• Implement measures to remedy identified material weaknesses in internal control over financial reporting, including engaging financial consultants, providing U.S. GAAP training, and improving financial oversight.
• Finalize the acquisition of Capital Summit Enterprise Limited, expected in August 2025.

Key Dates

Recommendation

The company's financial performance is in a severe decline, marked by a substantial increase in net losses and operating expenses that far outpace revenue growth. The persistent negative operating cash flow indicates a fundamental inability to generate cash from its core business, necessitating repeated dilutive capital raises. The disclosed material weakness in internal controls over financial reporting is a critical governance failure that undermines investor confidence and suggests significant operational risks. While the company is in a growing industry, its current financial trajectory and internal control deficiencies present an exceptionally high-risk profile, making it an unfavorable investment.

Keywords

ESG, Sustainability, Climate Change Advisory, Corporate Governance, Risk Management, SEC Filing, 20-F, Hong Kong, Singapore, Nasdaq, IPO, Follow-on Offering, Net Loss, Operating Expenses, Internal Controls, Material Weakness, Financial Reporting, Professional Services