UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________to _________
Commission File Number
(Exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 15, 2025, there were shares of the registrant’s common stock $ par value per share, issued and outstanding.
Table of Contents
| 2 |
Part I. Financial Information
Item 1. Financial Statements.
Alset Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| March
31, 2025 (Unaudited) | December
31, 2024 (Audited) | |||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Restricted Cash | ||||||||
| Account Receivables, Net | ||||||||
| Other Receivables, Net | ||||||||
| Note Receivables - Related Parties, Net | ||||||||
| Convertible Loan Receivables at Fair Value - Related Party | ||||||||
| Prepaid Expense | ||||||||
| Inventory | ||||||||
| Investment in Securities at Fair Value | ||||||||
| Investment in Securities at Fair Value - Related Party | ||||||||
| Investment in Securities at Cost | ||||||||
| Investment in Equity Method Securities | ||||||||
| Deposits | ||||||||
| Total Current Assets | ||||||||
| Real Estate - Rental Properties | ||||||||
| Operating Lease Right-Of-Use Assets, Net | ||||||||
| Deposits | ||||||||
| Other Receivables - Long Term, Net | ||||||||
| Property and Equipment, Net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | $ | ||||||
| Deferred Revenue | ||||||||
| Operating Lease Liabilities | ||||||||
| Notes Payable | ||||||||
| Notes Payable - Related Parties | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities: | ||||||||
| Operating Lease Liabilities | ||||||||
| Notes Payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 12) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, $ par value; shares authorized, issued and outstanding | ||||||||
| Common Stock, $ par value; shares authorized; and shares issued and outstanding on March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional Paid in Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Accumulated Other Comprehensive Income (Loss) | ( | ) | ||||||
| Total Alset Inc. Stockholders’ Equity | ||||||||
| Non-controlling Interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| F-1 |
Alset Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Income
For the Three Months Ended March 31, 2025 and 2024 (Unaudited)
| 2025 | 2024 | |||||||
| Revenue | ||||||||
| Rental | $ | $ | ||||||
| Property | ||||||||
| Biohealth | ||||||||
| Other | ||||||||
| Total Revenue | ||||||||
| Operating Expenses | ||||||||
| Cost of Sales | ||||||||
| General and Administrative | ||||||||
| Impairment of Note Receivable, Goodwill and Investment | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest Income | ||||||||
| Interest Income - Related Party | ||||||||
| Interest Expense | ( | ) | ( | ) | ||||
| Foreign Exchange Transaction (Loss) Gain | ( | ) | ||||||
| Unrealized Gain on Securities Investment | ||||||||
| Unrealized Loss on Securities Investment - Related Party | ( | ) | ( | ) | ||||
| Realized Loss on Securities Investment | ( | ) | ( | ) | ||||
| Loss on Equity Method Investment | ( | ) | ( | ) | ||||
| Other Expense | ( | ) | ( | ) | ||||
| Other Income | ||||||||
| Total Other Expense, Net | ( | ) | ( | ) | ||||
| Net Loss Before Income Taxes | ( | ) | ( | ) | ||||
| Income Tax Expense | ( | ) | ||||||
| Net Loss | ( | ) | ( | ) | ||||
| Net Loss Attributable to Non-Controlling Interest | ( | ) | ( | ) | ||||
| Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Other Comprehensive Loss | ||||||||
| Foreign Currency Translation Adjustment | ( | ) | ||||||
| Total Comprehensive Loss | ( | ) | ( | ) | ||||
| Less Comprehensive Loss Attributable to Non-controlling Interests | ( | ) | ( | ) | ||||
| Total Comprehensive Loss Attributable to Common Shareholders | ( | ) | ( | ) | ||||
| Net Loss Per Share - Basic and Diluted | $ | ) | $ | ) | ||||
| Weighted Average Common Shares Outstanding - Basic and Diluted | ||||||||
See accompanying notes to condensed consolidated financial statements.
| F-2 |
Aset Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2025 and 2024 (Unaudited)
| Common Stock | Additional | Accumulated Other | Total Alset | Non- | Total | |||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Paid in Capital | (Loss)
| Accumulated Deficit | Stockholders’ Equity | Controlling Interests | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Issuance of Common Stock and Warrants | ||||||||||||||||||||||||||||||||
| Issuance of HWH Common Stock & Warrants exercise | - | |||||||||||||||||||||||||||||||
| Gain from SHRG Warrants | - | |||||||||||||||||||||||||||||||
| Acquisition of LEH Insurance Group LLC | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign Currency Translations | - | |||||||||||||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Total Alset | Non- | Total | |||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Paid in Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Controlling Interests | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||
| Issuance of HWH Common Stock to EF Hutton for Deferred Underwriting Compensation | - | |||||||||||||||||||||||||||||||
| Gain from SHRG Convertible Note and Warrants | - | |||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest after HWH De SPAC | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign Currency Translations | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| F-3 |
Alset Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2025 and 2024 (Unaudited)
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss from Operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | ||||||||
| Non-Cash Lease Expenses | ||||||||
| Impairment of Note Receivable, Goodwill and Investment | ||||||||
| Foreign Transaction Loss (Gain) | ( | ) | ||||||
| Unrealized Gain on Securities Investment | ( | ) | ( | ) | ||||
| Unrealized Loss on Securities Investment - Related Party | ||||||||
| Realized Loss on Securities Investment | ||||||||
| Loss on Equity Method Investment | ||||||||
| Changes in Operating Assets and Liabilities, net of acquisitions | ||||||||
| Real Estate | ||||||||
| Real Estate Reimbursement Receivable | ( | ) | ||||||
| Account Receivables | ( | ) | ||||||
| Advances to Related Party | ( | ) | ||||||
| Other Receivables - Related Parties | ( | ) | ||||||
| Prepaid Expense | ( | ) | ||||||
| Deposits | ( | ) | ( | ) | ||||
| Trading Securities | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts Payable and Accrued Expenses | ( | ) | ( | ) | ||||
| Deferred Revenue | ||||||||
| Operating Lease Liabilities | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Fixed Assets | ( | ) | ( | ) | ||||
| Purchase of Investment Securities | ( | ) | ||||||
| Issuing Loan Receivable | ( | ) | ||||||
| Issuing Loan Receivable - Related Party | ( | ) | ( | ) | ||||
| Collection of Loan Receivable - Related Party | ||||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Common Stock Issuance | ||||||||
| Borrowing from a Commercial Loan | ||||||||
| Repayment to Notes Payable | ( | ) | ( | ) | ||||
| Net Cash Provided by (Used in) Financing Activities | ( | ) | ||||||
| Net Decrease in Cash and Cash Equivalents and Restricted Cash | ( | ) | ( | ) | ||||
| Effects of Foreign Exchange Rates on Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents and Restricted Cash - Beginning of Period | ||||||||
| Cash and Cash Equivalents and Restricted Cash- End of Period | $ | $ | ||||||
| Cash | $ | $ | ||||||
| Restricted Cash | $ | $ | ||||||
| Total Cash and Restricted Cash | $ | $ | ||||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | $ | ||||||
| Cash Paid for Taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Initial Recognition of ROU / Lease Liability | $ | $ | ||||||
| Promissory Notes Received in Exchange for Sale of HWH Common Stock to Investors | $ | $ | ||||||
| Issuance of HWH Common Stock to EF Hutton for Deferred Underwriting Compensation | $ | $ | ||||||
| Conversion of Ketomei Note Payable to Common Stock | $ | $ | ||||||
| Gain from SHRG Warrants and Convertible Notes | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| F-4 |
Alset Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Alset
Inc. (the “Company” or “AEI”), was incorporated in the State of Delaware on March 7, 2018. AEI is a diversified
holding company principally engaged through its subsidiaries in the development of EHome communities and other real estate, financial
services, digital transformation technologies, biohealth activities and consumer products with operations in the United States, Singapore,
Hong Kong, Australia, South Korea, and the People’s Republic of China. We manage a significant portion of our businesses through
our
The Company has four operating segments based on the products and services we offer, which include three of our principal businesses – real estate, digital transformation technology and biohealth – as well as a fourth category consisting of certain other business activities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or any other interim periods or for any other future years. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2024 filed on March 31, 2025.
The
condensed consolidated financial statements include all accounts of the Company and its majority owned and controlled subsidiaries. The
Company consolidates entities in which it owns more than
| F-5 |
The Company’s condensed consolidated financial statements include the financial position, results of operations and cash flows of the following entities as of March 31, 2025 and December 31, 2024, as follows:
| Name of subsidiary | State or other jurisdiction of | Attributable interest as of, | ||||||||
| consolidated under AEI | incorporation or organization | March 31, 2025 | December 31, 2024 | |||||||
| % | % | |||||||||
| * | ||||||||||
| * | * | |||||||||
| * | ||||||||||
| * |
| F-6 |
During the year ended December 31, 2024, the Company disposed of few subsidiaries which had no or very minimal activities. The disposal of these entities had immaterial effect on the Company’s consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, but are not limited to, allowance for doubtful accounts, valuation of real estate assets, allocation of development costs and capitalized interest to sold lots, fair value of the investments, the valuation allowance of deferred taxes, and contingencies. Actual results could differ from those estimates.
In our property development business, land acquisition costs are allocated to each lot based on the area method, the size of the lot compared to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
If allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable, those costs would be allocated based on area method.
When the Company purchases properties but does not receive the assessment information from the county, the Company allocates the values between land and building based on the data of similar properties. The Company makes appropriate adjustments once the assessment from the county is received. At the same time, any necessary adjustments to depreciation expense are made in the income statement.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents include cash on hand and at the bank and short-term deposits with financial institutions that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in values.
| F-7 |
Restricted Cash
As
a condition to the loan agreement with the Manufacturers and Traders Trust Company (“M&T Bank”), the Company was required
to maintain a minimum of $
The
Company puts money into brokerage accounts specifically for equity investment. As of March 31, 2025 and December 31, 2024, the cash balance
in these brokerage accounts was $
Account Receivables and Allowance for Credit Losses
Account
receivables is recorded at invoiced amounts net of an allowance for credit losses and do not bear interest. The allowance for credit
losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable.
The measurement and recognition of credit losses involves the use of judgment. Management’s assessment of expected credit losses
includes consideration of current and expected economic conditions, market and industry factors affecting the Company’s customers
(including their financial condition), the aging of account balances, historical credit loss experience, customer concentrations, customer
creditworthiness, and the existence of sources of payment. The Company also establishes an allowance for credit losses for specific receivables
when it is probable that the receivable will not be collected and the loss can be reasonably estimated. Account receivables considered
uncollectible are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote. As of March 31, 2025 and December 31, 2024, the allowance for credit losses was an immaterial amount. The Company does not have
any off-balance sheet credit exposure related to its customers. As of March 31, 2025 and December 31, 2024, the balance of account receivables
was $
Other Receivables and Allowance for Credit Losses
Other receivables include developer reimbursements for Lakes at Black Oak project. The Company records an allowance for credit losses based on previous collection experiences, the creditability of the organizations that are supposed to reimburse us, the forecasts from the third-party engineering company and Moody’s credit ratings. The allowance amount for these reimbursements was immaterial at March 31, 2025 and December 31, 2024.
On
January 9, 2024, the Company sold shares of HWH International Inc. (“HWH”) to two investors ( shares to
each). The consideration for each of the two purchases of stock was $
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. As of March 31, 2025 and December 31, 2024, inventory consisted of finished goods from subsidiaries of HWH International Inc. and Hapi Metaverse Inc. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventories to net realizable value.
| F-8 |
Investment Securities
Investment Securities at Fair Value
The Company commonly holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and investments at cost. Certain of the Company’s investments in marketable equity securities and other securities are long-term, strategic investments in companies that are in various stages of development.
The
Company accounts for certain of its investments in equity securities in accordance with ASU 2016-01 Financial Instruments—Overall
(Subtopic 825- 10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). In accordance
with ASU 2016-01, the Company records all equity investments with readily determinable fair values at fair value calculated by the publicly
traded stock price at the close of the reporting period. Amarantus BioScience Holdings (“AMBS”) is a publicly traded company.
The Company does not have significant influence over AMBS as the Company holds approximately
The Company has a portfolio of trading securities. The objective is to generate profits on short-term differences in market prices. The Company does not have significant influence over any trading securities in our portfolio and fair value of these trading securities are determined by quoted stock prices.
The Company has elected the fair value option for the equity securities noted below that would otherwise be accounted for under the equity method of accounting. DSS, Inc. (“DSS”), American Premium Water Corporation (“APW”, d.b.a. New Electric CV Corporation, “NECV”), Value Exchange International Inc. (“VEII”), Sharing Services Global Corp. (“SHRG”) and Impact Biomedical Inc. (“Impact”) are publicly traded companies and fair value is determined by quoted stock prices. The Company has significant influence but does not have a controlling interest in these investments, and therefore, the Company’s investment could be accounted for under the equity method of accounting or fair value accounting.
| ● | The
Company has significant influence over DSS. As of March 31, 2025 and December 31, 2024, the Company owned approximately |
| ● | The
Company has significant influence over APW as the Company holds approximately | |
| ● | The
Company has significant influence over Value Exchange International as the Company holds approximately | |
| ● | The
Company has significant influence over SHRG as the Company holds approximately | |
| ● | The
Company has significant influence over Impact as the Company holds approximately |
| F-9 |
Investment Securities at Cost
Investments in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical or similar investments of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the condensed consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair value of the investment.
On
September 8, 2020, the Company acquired shares, approximately
During
2021, the Company invested $
On
March 14, 2024, the Company entered into shares subscription agreement to subscription of shares in Ideal Food & Beverage Pte. Ltd.
(“IFBPL”) with the subscription of shares, constituting % of the shares of IFBPL. The subscription fee of $
On
April 25, 2024, the Company entered into a binding term sheet (the “Term Sheet”) through its subsidiary Health Wealth Happiness
Pte Ltd. (“HWHPL”) outlining a joint venture with Chen Ziping, an experienced entrepreneur in the travel industry, and Chan
Heng Fai, the Company’s Executive Chairman, as a part of the Company’s strategy of building its travel business in Asia.
The joint venture company (referred to here as the “JVC”) is known as HapiTravel Holding Pte. Ltd. The JVC was incorporated
in July 2024 and is owned by:
There has been no indication of impairment or changes in observable prices via transactions of similar securities in the remaining investments and these remaining investments are still carried at cost.
Equity Method Investment
The Company accounts for equity investment in entities with significant influence under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the condensed consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. When the Company’s share of loss in an equity-method investee equals or exceeds its carrying value of the investment in that entity, the equity method investment can be reduced below zero based on losses, if the Company either is liable for the obligations of the investee or provides for losses in excess of the investment when imminent return to profitable operations by the investee appears to be assured. Otherwise, the Company does not recognize its share of equity method losses exceeding its carrying amount of the investment. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Company to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than-temporary.
| F-10 |
American Medical REIT Inc.
LiquidValue
Asset Management Pte. Ltd. (“LiquidValue”), a subsidiary of the Company, owns
American Pacific Financial, Inc.
The
Company owns
Sentinel Brokers Company Inc.
The
Company’s indirect subsidiary, SeD Capital Pte Ltd (“SeD Capital”), owns shares (
Investment in Debt Securities
Debt securities are reported at fair value, with unrealized gains and losses (other than impairment losses) recognized in accumulated other comprehensive income or loss. Realized gains and losses on debt securities are recognized in the net income in the condensed consolidated statements of comprehensive income. The Company monitors its investments for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other company-specific information.
On
February 26, 2021, the Company invested approximately $
Variable Interest Entity
Under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810, Consolidation, when a reporting entity is the primary beneficiary of an entity that is a variable interest entity (“VIE”), as defined in ASC 810, the VIE must be consolidated into the financial statements of the reporting entity. The determination of which owner is the primary beneficiary of a VIE requires management to make significant estimates and judgments about the rights, obligations, and economic interests of each interest holder in the VIE.
| F-11 |
The Company evaluates its interests in VIEs on an ongoing basis and consolidates any VIE in which it has a controlling financial interest and is deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation to absorb losses of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could be significant to the VIE.
Real Estate Assets
Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with FASB ASC 805 - “Business Combinations”, which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold.
The
Company capitalized construction costs of approximately $
The Company’s policy is to obtain an independent third-party valuation for each major project in the United States as part of our assessment of identifying potential triggering events for impairment. Management may use the market comparison method to value other relatively small projects. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant and Equipment (“ASC 360”), the Company applies a fair value-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
The
Company did
Properties under development
Properties under development are properties being constructed for sale in the ordinary course of business, rather than to be held for the Company’s own use, rental or capital appreciation.
Rental Properties
Rental
properties are acquired with the intent to be rented to tenants. As of March 31, 2025 and December 31, 2024, the Company owned 132 homes.
The aggregate purchase cost of all the homes is $
Investments in Single-Family Residential Properties
The Company accounts for its investments in single-family residential properties as asset acquisitions and records these acquisitions at their purchase price. The purchase price is allocated between land, building and improvements based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, title fees, property inspection and valuation fees, as well as other closing costs.
Building
improvements and buildings are depreciated over estimated useful lives of approximately
The Company assesses its investments in single-family residential properties for impairment whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value. Should impairment exist, the asset is written down to its estimated fair value. The Company did not recognize any impairment losses during three ended March 31, 2025 and 2024.
| F-12 |
Rental of Model Houses
In May 2023, the Company entered into a lease agreement for one of its model houses located in Montgomery County, Texas. The lease was terminated in February 2025. Management intends to procure a new, tenant to occupy the premises after the office used for real estate sales is converted back to a garage.
On
July 14, 2023, 150 CCM Black Oak Ltd entered into a model home lease agreement with Davidson Homes, LLC (“Davidson”). On
August 3, 2023, 150 CCM Black Oak Ltd entered into a development and construction agreement with Davidson Homes, LLC to build a model
house located in Montgomery County, Texas. On January 4, 2024, 150 CCM Black Oak Ltd sent $
Revenue Recognition and Cost of Revenue
ASC 606 - Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which the determination of revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services. ASC 606 requires the Company to apply the following steps:
(1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied.
The following represents the Company’s revenue recognition policies by Segments:
Real Estate
Property Sales
Part
of the Company’s real estate business is land development. The Company purchases land and develops it for building into residential
communities. The developed lots are sold to builders (customers) for the construction of new homes. Builders enter a sales contract with
the Company before they take the lots. The prices and timeline are determined and agreed upon in the contract. Builders do the inspections
to make sure all conditions and requirements in contracts are met before purchasing the lots. A detailed breakdown of the five-step process
for the revenue recognition of the Lakes at Black Oak project, which represented approximately
| ● | Identify the contract with a customer. |
The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided.
| ● | Identify the performance obligations in the contract. |
| F-13 |
Performance obligations of the Company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met.
| ● | Determine the transaction price. |
The transaction price per lot is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.
| ● | Allocate the transaction price to performance obligations in the contract. |
Each lot or a group of lots is considered to be a separate performance obligation, for which the specified price in the contract is allocated to.
| ● | Recognize revenue when (or as) the entity satisfies a performance obligation. |
The builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue at a point in time when title is transferred. The Company does not have further performance obligations or continuing involvement once title is transferred. Revenue is recognized at a point in time.
Rental Revenue
The Company leases real estate properties to its tenants under leases that are predominately classified as operating leases, in accordance with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and revenue from the collection of lease termination fees.
Rent from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease. Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally, at the end of the lease term, the Company provides the tenant with a one-year renewal option, including mostly the same terms and conditions provided under the initial lease term, subject to rent increases.
The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within deferred revenues and other payables on the Company’s condensed consolidated balance sheets.
Rental revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the three months ended March 31, 2025 and the year ended December 31, 2024, the Company did not recognize any deferred revenue and collected all rents due.
Cost of Revenues
Real Estate
| ● | Cost of Real Estate Sale |
All of the costs of real estate sales are from our land development business. Land acquisition costs are allocated to each lot based on the area method, the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
| F-14 |
If allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot comparing to the total size of all lots in the project.
| ● | Cost of Rental Revenue |
Cost of rental revenue consists primarily of the costs associated with management and leasing fees to our management company, repairs and maintenance, depreciation and other related administrative costs. Utility expenses are paid directly by tenants.
Other Businesses
| ● | Food and Beverage |
The Company, through Alset F&B One and Alset F&B PLQ each acquired a restaurant franchise licenses at the end of 2021 and 2022 respectively, both of which have since commenced operations. These licenses allow Alset F&B One and Alset F&B PLQ each to operate a Killiney Kopitiam restaurant in Singapore. Killiney Kopitiam, founded in 1919, is a Singapore-based chain of mass-market, traditional kopitiam style service cafes selling traditional coffee and tea, along with a range of local delicacies such as Curry Chicken, Laksa, Mee Siam, and Mee Rebus.
The Company, through Hapi Café Inc. (“HCI-T”), commenced operation of two cafés during 2022 and 2021, which are located in Singapore and South Korea.
The cafes are operated by subsidiaries of HCI-T, namely Hapi Café SG Pte. Ltd. in Singapore and Hapi Café Korea Inc. in Seoul, South Korea. Hapi Cafes are distinctive lifestyle café outlets that strive to revolutionize the way individuals dine, work, and live, by providing a conducive environment for everyone to relish the four facets – health and wellness, fitness, productivity, and recreation all under one roof.
In February of 2024, HCI-T acquired an additional café in South Korea.
In 2023, the Company incorporated new subsidiaries Guangdong LeFu Wealth Investment Consulting Co., Ltd. (f.k.a. Shenzhen Leyouyou Catering Management Co. Ltd.) and Dongguan Leyouyou Catering Management Co., Ltd. in the People’s Republic of China. These companies will be principally engaged in the food and beverage business in Mainland China.
Additionally,
through its subsidiary MOC HK Limited, the Company is focusing on operating café business in Hong Kong. This business was acquired
on October 5, 2022. During the acquisition, a goodwill of $
| F-15 |
In
the second quarter of 2024, the Company ceased operations of its subsidiary Alset F&B (PLQ) Pte. Ltd. Due to the closure of this
subsidiary the Company wrote off $
| ● | Remaining performance obligations |
As of March 31, 2025 and December 31, 2024, there were no remaining performance obligations or continuing involvement, as all service obligations within the other business activities segment have been completed.
Deferred Revenue
The
Company recognizes deferred revenue when payments are received in advance of fulfilling its performance obligations. Deferred
revenue at March 31, 2025, December 31, 2024 and 2023 was $
Stock-Based Compensation
The Company accounts for stock-based compensation to employees in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination. During the three months ended on March 31, 2025 and 2024, the Company recorded $ as stock-based compensation expense.
Foreign currency
Functional and reporting currency
Items included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements of the Company are presented in U.S. dollars (the “reporting currency”).
The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiaries located in Singapore, Hong Kong, Australia, South Korea, and the People’s Republic of China are maintained in their local currencies, the Singapore Dollar (S$), Hong Kong Dollar (HK$), Australian Dollar (“AUD”), South Korean Won (“KRW”), Chinese Yuan (CN¥) and Taiwan Dollar (“NT$”), which are also the functional currencies of these entities.
Transactions in foreign currencies
Transactions in currencies other than the functional currency during the periods are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statement of operations.
The
majority of the Company’s foreign currency transaction gains or losses come from the effects of foreign exchange rate changes on
the intercompany loans between Singapore entities and U.S. entities. The Company recorded foreign exchange loss of $
| F-16 |
Translation of consolidated entities’ financial statements
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. The Company’s entities with functional currency of S$, HK$, AUD, KRW, CN¥ and NT$, translate their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenue, expense, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income (loss).
The
Company recorded other comprehensive gain of $
The Company presents basic and diluted earnings (loss) per share data for its common shares. Basic earnings (loss) per share is calculated by dividing the profit or loss attributable to common stock shareholders of the Company by the weighted-average number of common shares outstanding during the year, adjusted for treasury shares held by the Company.
Diluted earnings (loss) per share is determined by adjusting the profit or loss attributable to common stock shareholders and the weighted-average number of common shares outstanding, adjusted for treasury shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible securities, such as stock options, convertible bonds and warrants. At March 31, 2025, there were potentially dilutive warrants outstanding. At December 31, 2024 there were potentially dilutive warrants outstanding.
Basic and diluted net loss per share are the same for both periods presented, as all potentially dilutive securities were antidilutive due to the Company’s net loss in both years.
Fair Value Measurements
ASC 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1: Observable inputs such as quoted prices (unadjusted) in an active market for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that are supported by little or no market activity; therefore, the inputs are developed by the Company using estimates and assumptions that the Company expects a market participant would use, including pricing models, discounted cash flow methodologies, or similar techniques.
The carrying value of the Company’s financial instruments, including cash and restricted cash, accounts receivable and accounts payable and accrued expenses approximate fair value because of the short-term maturity of these financial instruments. The liabilities in connection with the conversion and make-whole features included within certain of the Company’s notes payable and warrants are each classified as a level 3 liability.
Non-controlling interests
Non-controlling interests represent the equity in subsidiary not attributable, directly or indirectly, to owners of the Company, and are presented separately in the condensed consolidated statements of operation and comprehensive income, and within equity in the Condensed Consolidated Balance Sheets, separately from equity attributable to owners of the Company.
| F-17 |
On
March 31, 2025 and December 31, 2024, the aggregate non-controlling interests in the Company were $
Impairment of Long-lived Assets
Real Estate
Our policy is to annually obtain an independent third-party valuation for each major project in the United States to identify triggering events for impairment. Our management may use a market comparison method to value other relatively small projects. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant and Equipment (“ASC 360”), we apply a fair value-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
Goodwill
The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently, if the management believes indicators of impairment exist. Such indicators could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a quantitative goodwill impairment test. The impairment test involves comparing the fair value of the applicable reporting unit with its carrying value. The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Loans and Investments
The Company evaluates loans and investments for impairment at each reporting date. For loans, impairment is recognized when it is probable that the Company will be unable to collect all amounts due according to the contractual terms. For investments, an impairment loss is recorded if the decline in fair value is considered other-than-temporary. Impairment losses are measured based on the difference between the carrying amount and estimated fair value, with changes recognized in the consolidated statements of operations.
Capitalized Financing Costs
Financing costs, such as loan origination fee, administration fee, interests, and other related financing costs should be capitalized and recorded on the balance sheet, if these financing activities are directly associated with the development of real estate.
Capitalized financing costs are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project. If the allocation of capitalized financing costs based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on an area method, which uses the size of the lots compared to the total project area and allocates costs based on their size.
As of December 31, 2024, the Company sold all of its lots and therefore did not capitalize any financing costs.
| F-18 |
Related Party Transactions
The Company accounts for related party transactions in accordance with ASC 850 (“Related Party Disclosures”). A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The ASU’s amendments are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that adoption of ASU 2023-09 will have on its financial statements.
In November 2024, the FASB issued ASU No. 2024-03 (“ASU 2024-03”), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve disclosures about a public business entity’s expenses, primarily through additional disaggregation of income statement expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The amendments in ASU 2024-03 should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.
3. CONCENTRATIONS
The Company maintains cash balances at various financial institutions in different countries. These balances are usually secured by the central banks’ insurance companies. At times, these balances may exceed the insurance limits.
For
the three months ended March 31, 2024, one customer accounted for approximately
4. SEGMENTS
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers (the “CODMs”), or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers are the two Co-CEOs, who review and assess the performance of the Company as a whole. The Company reports its segment information to reflect the manner in which the CODMs review and assess performance. The Company has four operating segments based on the products and services we offer, which include three of our principal businesses – real estate, digital transformation technology and biohealth – as well as a fourth category consisting of certain other business activities. In determination of segments, the Company, together with its CODMs, considers factors that include the nature of business activities, allocation of resources and management structure.
| F-19 |
The primary financial measures used by the CODMs to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODMs use net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Information on net income (loss) and operating income (loss) is disclosed in the Consolidated Statements of Income. Segment expenses and other segment items are provided to the CODMs on the same basis as disclosed in the Consolidated Statements of Income. Costs excluded from segment income (loss) before taxes and reported as “Other” consist of corporate general and administrative activities which are not allocable to the four reportable segments.
The CODMs do not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the Notes to the Financial Statements.
The following table summarizes the Company’s segment information for the following balance sheet dates presented, and for the three months ended March 31, 2025 and 2024:
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Three Months Ended on March 31, 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of Sales | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Operating Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net Loss Before Income Tax | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Three Months Ended on March 31, 2024 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of Sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Gross Profit (Loss) | ( | ) | ||||||||||||||||||
| Operating Expenses | ( | ) | ( | ) | ( | ) | ( | ) | $ | ( | ) | |||||||||
| Operating Income (Loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other Income (Expense) | ( | ) | ( | ) | ( | ) | $ | ( | ) | |||||||||||
| Net Income (Loss) Before Income Tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| March 31, 2025 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | $ | $ | $ | $ | |||||||||||||||
| Total Assets | ||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | $ | $ | $ | $ | |||||||||||||||
| Total Assets | $ | |||||||||||||||||||
| F-20 |
5. REAL ESTATE ASSETS
As of March 31, 2025 and December 31, 2024, real estate assets consisted of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Rental Properties, net | ||||||||
| Total Real Estate Assets | $ | $ | ||||||
Single family residential properties
As
of March 31, 2025 and December 31, 2024, the Company owned
The following table presents the summary of our SFRs as of March 31, 2025:
Number of Homes |
Aggregate Investment |
Average Investment per Home |
||||||||||
| SFRs | $ | $ | ||||||||||
6. NOTES PAYABLE
As of March 31, 2025 and December 31, 2024, notes payable consisted of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Motor Vehicle Loans | $ | $ | ||||||
| Loans for Operations | ||||||||
| Promissory Note to EF Hutton LLC | ||||||||
| Total notes payable | $ | $ | ||||||
M&T Bank Loan
On
April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T
Bank”) in the principal amount not to exceed at any one time outstanding the sum of $
Motor Vehicle Loans
On
May 17, 2021, Alset International entered into an agreement with Hong Leong Finance Limited to purchase a car for business purposes.
The total purchase price of the car, including associated charges, was approximately $
| F-21 |
On
September 22, 2022 Alset International entered into an agreement with United Overseas Bank Limited to purchase an additional car for
business purposes. The total purchase price of the car, including associated charges, was approximately $
Future minimum principal payments under existing motor vehicle loans at March 31, 2025 in each calendar year through the end of their terms are as follows:
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total Future Payments | $ |
Loans for Operations
The
Company’s subsidiary, Ketomei Pte Ltd (“Ketomei”) has a loan from DBS Bank Limited, which was used to fund Ketomei’s
current operations. Ketomei owed DBS Bank Limited $
Ketomei
also borrowed $
Promissory Note to EF Hutton LLC
On
December 18, 2023, the Company’s subsidiary, HWH International Inc. entered into a Satisfaction and Discharge of Indebtedness
Agreement in connection with an underwriting agreement previously entered into by HWH and EF Hutton LLC (“EF Hutton”) (now known as D. Boral Capital LLC),
a division of Benchmark Investments, LLC, under which in lieu of HWH tendering the full amount due of $
| F-22 |
7. RELATED PARTY TRANSACTIONS
Purchase of Shares and Warrants from NECV
On
July 17, 2020, the Company purchased shares, approximately
Stock Purchase Agreement with HWH
On November 25, 2024, the Company entered into a stock purchase agreement with HWH pursuant to which the Company agreed to purchase newly issued shares of the HWH’s common stock for a purchase price of $per share.
On December 24, 2024, the Company entered into a stock purchase agreement with HWH pursuant to which the Company agreed to purchase newly issued shares of the HWH’s common stock for a purchase price of $ per share.
Stock Purchase Agreement with DSS
On
December 10, 2024, the Company entered into a stock purchase agreement with DSS, pursuant to which the Company agreed to purchase
newly issued shares of DSS’s common stock for a total purchase price of $
The Company and its various subsidiaries are collectively the largest shareholder of DSS. The Company’s Chairman, Chief Executive Officer and majority stockholder, Chan Heng Fai, is also the Executive Chairman of DSS and a significant stockholder of DSS.
Business Combination of Alset Capital Acquisition Corp. and HWH International Inc.
On
January 9, 2024, two entities affiliated with Alset Inc. completed a previously announced transaction. On September 9, 2022, Alset Capital
entered into an agreement and plan of merger (the “Merger Agreement”) with our indirect subsidiary HWH International Inc.,
a Nevada corporation and HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of Alset Capital (“Merger Sub”).
The Company and its
Pursuant to the Merger Agreement, on January 9, 2024, a Business Combination between Alset Capital and HWH was effected through the merger of Merger Sub with and into HWH, with HWH surviving the merger as a wholly owned subsidiary of Alset Capital (the “Merger”), and Alset Capital changing its name to HWH International Inc. (“New HWH”).
The total consideration paid at the closing of the Merger by New HWH to the HWH shareholders was shares of New HWH common stock. Alset International owned the majority of the outstanding shares of HWH at the time of the Business Combination, and received shares of New HWH as consideration for its shares of HWH.
New
HWH currently has shares of common stock issued and outstanding following a
The transaction described above was a transaction between entities under common control. In the transactions under common control, financial statements and financial information were presented as of the beginning of the period as though the assets and liabilities had been transferred at that date. The Company controlled both entities before and after the transaction and accordingly, the transaction had no effect on the Company’s financial statements as the equity was eliminated in consolidation.
| F-23 |
Convertible Notes to Value Exchange
On
January 27, 2023, Hapi Metaverse and New Electric CV Corporation (together with Hapi Metaverse, the “Lenders”) entered into
a Convertible Credit Agreement (the “1st VEII Credit Agreement”) with VEII. The 1st VEII Credit Agreement
provides VEII with a maximum credit line of $
On
September 6, 2023, Hapi Metaverse converted $
On
December 14, 2023, Hapi Metaverse entered into a Convertible Credit Agreement (“2nd VEII Credit Agreement”) with
VEII. On December 15, 2023, Hapi Metaverse loaned VEII $
On
July 15, 2024, the Company entered into a Convertible Credit Agreement (“3rd VEII Credit Agreement”) with VEII
for an unsecured credit line in the maximum amount of $
| F-24 |
VEII
issued a Convertible Promissory Note (the “VEII Convertible Promissory Note”) for $
Convertible Notes to Sharing Services
On
January 17, 2024, the Company received a Convertible Promissory Note (the “1st SHRG Convertible Note”) from Sharing
Services Global Corp., an affiliate of the Company, in exchange for a $
On
March 20, 2024, HWH International Inc., a subsidiary of the Company, entered into a securities purchase agreement with SHRG, pursuant
to which HWH purchased from SHRG a (i) Convertible Promissory Note (the “2nd SHRG Convertible Note) in the amount of
$
On
May 9, 2024, HWH entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a Convertible Promissory
Note (the “3rd SHRG Convertible Note”) in the amount of $
| F-25 |
On
June 6, 2024, HWH entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a Convertible Promissory
Note (the “4th SHRG Convertible Note”) in the amount of $
On
August 13, 2024, HWH entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a Convertible
Promissory Note (the “5th SHRG Convertible Note”) in the amount of $
On
January 15, 2025, HWH entered into a Loan Agreement (the “Loan Agreement”) with SHRG, under which HWH provided a loan to
SHRG in the amount of $
On
March 31, 2025, HWH entered into a securities purchase agreement with SHRG, pursuant to which SHRG issued a convertible promissory note
to HWH in the amount of $
Advance to Related Party
On
February 20, 2024, the Company sent $
Acquisition of L.E.H. Insurance Group, LLC
On
November 19, 2024, HWH entered definitive agreements to acquire a controlling
As
of March 31, 2025, the Company impaired goodwill of $
Apartment Rental for the CEO
The
Company was renting an apartment in Singapore for its CEO and Chairman, Chan Heng Fai, as part of the compensation for his services.
The Company paid $
Notes Payable
Chan
Heng Fai provided an interest-free, due on demand advance to SeD Perth Pty. Ltd. for its general operations. As of March 31, 2025 and
December 31, 2024, the outstanding balance was $
Chan
Heng Fai provided an interest-free, due on demand advance to Hapi Metaverse Inc. for its general operations. As of March 31, 2025 and
December 31, 2024, the outstanding balance was $
| F-26 |
Management Fees
MacKenzie
Equity Partners, LLC, an entity owned by Charles MacKenzie, Chief Development Officer of the Company, has a consulting agreement with
a majority-owned subsidiary of the Company. Pursuant to an agreement entered into in June of 2022, as supplemented in August, 2023, the
Company’s subsidiary has paid $
The
Company incurred expenses of $
CA
Global Consulting Inc., an entity owned by Anthony Chan, the former Chief Operating Officer of the Company, had a consulting agreement
with the Company dated April 8, 2021, as amended on May 6, 2022. As of June 13, 2024, the Company terminated the consulting agreement
with CA Global Consulting Inc., and the Company ceased paying consulting fees in the amount of $
Notes Receivable from Related Party
On
August 31, 2023, Hapi Café Inc. and Ketomei Pte. Ltd. entered into a binding term sheet pursuant to which HCI agreed to lend Ketomei
up to $
On
October 26, 2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $
The
amount due from Ketomei at December 31, 2024 was $
On
February 20, 2024, HCI-T invested $
On
October 13, 2021 BMI Capital Partners International Limited (“BMI”) entered into a loan agreement with Liquid Value Asset
Management Limited (“LVAML”), a subsidiary of DSS, pursuant to which BMI agreed to lend $
On
September 28, 2023 Alset International Limited (“Alset International”) entered into loan agreement with Value Exchange International
Inc., pursuant to which Alset International agreed to lend $
On
November 6, 2024, the Company signed a loan agreement with HapiTravel Holding Pte. Ltd. (“HTHPL”) in the amount of $
| F-27 |
On
December 18, 2024, the Company sold Hapi Travel Pte. Ltd. (“HTPL”) to HTHPL for a consideration of $
On December 17, 2024, the Company entered into a shares purchase agreement with HTHPL, pursuant to which the Company sold ordinary shares of Hapi Travel Limited (“HTL”), representing of the issued and outstanding share capital of HTL, in exchange for a promissory note in the amount of $, which bears an interest rate and has a scheduled maturity two years from the date of the promissory note. As of March 31, 2025 and December 31, 2024 the Company accrued $ and $ interest, respectively, and HTHPL owed $ and $, respectively, to the Company.
On
January 23, 2025 the Company entered into loan agreement with New Energy Asia Pacific Company Limited (“New Energy Asia”),
pursuant to which the Company agreed to lend $
8. EQUITY
The Company has authorized share capital of common shares and preferred shares.
The Company has designated preferred shares as Series A Preferred Stock and as Series B Preferred Stock.
Holders of the Series A Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of the Company’s common stock, par value $ per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series A Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series A Preferred Stock is convertible. Holders of Series A Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series A Preferred Stock would receive if the Series A Preferred Stock were fully converted into Common Stock.
Holders of the Series B Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of the Company’s common stock par value $per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series B Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series B Preferred Stock is convertible. Holders of Series B Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series B Preferred Stock would receive if the Series B Preferred Stock were fully converted into Common Stock.
The Company analyzed the Preferred Stock and the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.
On January 2, 2025, the Company entered into a securities purchase agreement with certain accredited investors (the “Purchasers”), pursuant to which the Company agreed to sell and issue to the Purchasers an aggregate of shares of common stock, par value $ per share, at a purchase price of $ per share, in a registered direct offering (the “Offering”).
The Offering was made pursuant to the Company’s existing shelf registration statement filed with the Securities and Exchange Commission (“Commission”) on April 11, 2022, and declared effective by the Commission on May 5, 2022. A prospectus supplement to the Registration Statement was filed with the Commission on January 3, 2025.
| F-28 |
The
closing of the Offering occurred on January 3, 2025. The Company received net proceeds from the Offering of approximately $
In
connection with the Offering, the Company entered into a Placement Agency Agreement with Aegis Capital Corp. (the “Placement Agent”),
as the exclusive placement agent in connection with the Offering. As compensation to the Placement Agent, the Company paid the Placement
Agent a cash fee of
On March 31, 2025, there were common shares issued and outstanding.
The following table summarizes the warrant activity for the three months ended March 31, 2025.
Warrant for Common Shares | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Warrants Outstanding as of December 31, 2024 | $ | $ | ||||||||||||||
| Warrants Vested and exercisable at December 31, 2024 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited, cancelled, expired | ||||||||||||||||
| Warrants Outstanding as of March 31, 2025 | $ | $ | ||||||||||||||
| Warrants Vested and exercisable at March 31, 2025 | $ | $ | ||||||||||||||
Issuance of HWH Shares to EF Hutton
On
December 18, 2023, the Company’s subsidiary, HWH International Inc. entered into a Satisfaction and Discharge of Indebtedness
Agreement in connection with an underwriting agreement previously entered into by HWH and EF Hutton (now known as D. Boral Capital LLC), a division of Benchmark
Investments, LLC, under which in lieu of HWH tendering the full amount due of $
9. LEASE INCOME
The Company generally rents its SFRs under lease agreements with a term of one or two years. Future minimum rental revenue under existing leases on our properties at March 31, 2025 in each calendar year through the end of their terms are as follows:
| 2025 | $ | |||
| 2026 | $ | |||
| Total Future Receipts | $ |
| F-29 |
Property Management Agreements
The
Company has entered into property management agreement with the property managers under which the property managers generally oversee
and direct the leasing, management and advertising of the properties in our portfolio, including collecting rents and acting as liaison
with the tenants. The Company pays its property managers a monthly property management fee for each property unit and a leasing fee.
For the three months ended March 31, 2025 and 2024, property management fees incurred by the property managers were $
10. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Following is a summary of the changes in the balances of accumulated other comprehensive (loss) income, net of tax:
| Unrealized
Gains and Losses on Security Investment | Foreign Currency Translations | Change
in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Other Comprehensive Income (Loss) | ( | ) | ||||||||||||||
| Balance at March 31, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Unrealized
Gains and Losses on Security Investment | Foreign Currency Translations | Change
in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Other Comprehensive Loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance at March 31, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
11. ASSETS MEASURED AT FAIR VALUE
Financial assets measured at fair value on a recurring basis are summarized below and disclosed on the condensed consolidated balance sheet as of March 31, 2025 and December 31, 2024:
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| March 31, 2025 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment Securities- Fair Value Option | $ | $ | $ | $ | ||||||||||||
| Investment Securities- Trading | ||||||||||||||||
| Warrants – NECV | ||||||||||||||||
| Warrants - VEII | ||||||||||||||||
| Warrants - SHRG | ||||||||||||||||
| Convertible Loan Receivable - VEII | ||||||||||||||||
| Convertible Loan Receivable - SHRG | ||||||||||||||||
| Total Assets at Fair Value | $ | $ | $ | $ | ||||||||||||
| F-30 |
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2024 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment Securities- Fair Value Option | $ | $ | $ | $ | ||||||||||||
| Investment Securities- Trading | ||||||||||||||||
| Warrants - APW | ||||||||||||||||
| Warrants - VEII | ||||||||||||||||
| Warrants- SHRG | ||||||||||||||||
| Convertible Loan Receivable - VEII | ||||||||||||||||
| Convertible Loan Receivable - SHRG | ||||||||||||||||
| Total Investment in Securities at Fair Value | $ | $ | $ | $ | ||||||||||||
Realized
loss on investment securities for the three months ended March 31, 2025 was $
For U.S. trading stocks, we use Bloomberg Market stock prices as the share prices to calculate fair value. For overseas stock, we use the stock price from the local stock exchange to calculate fair value. The following chart shows details of the fair value of equity security investment at March 31, 2025 and December 31, 2024, respectively.
| Share price | Market Value | |||||||||||||
| 3/31/2025 | Shares | 3/31/2025 | Valuation | |||||||||||
| DSS (Related Party) | $ | $ | ||||||||||||
| Impact Biomedical (Related Party) | $ | $ | ||||||||||||
| Trading Stocks | $ | |||||||||||||
|
Total Level 1 Equity Securities | $ | |||||||||||||
| AMBS | $ | $ | ||||||||||||
| Holista | $ | $ | ||||||||||||
| Value Exchange (Related Party) | $ | $ | ||||||||||||
| New Electric CV (Related Party) | $ | $ | ||||||||||||
| Sharing Services (Related Party) | $ | $ | ||||||||||||
| Trading Stocks | $ | |||||||||||||
| Total Level 2 Equity Securities | $ | |||||||||||||
| Nervotec | N/A | $ | ||||||||||||
| UBeauty | N/A | $ | ||||||||||||
| Ideal Food and Beverages | N/A | $ | ||||||||||||
| HapiTravel Holding | N/A | $ | ||||||||||||
| Total Equity Securities | $ | |||||||||||||
| F-31 |
| Share price | Market Value | |||||||||||||
| 12/31/2024 | Shares | 12/31/2024 | Valuation | |||||||||||
| DSS (Related Party) | $ | $ | ||||||||||||
| Trading Stocks | $ | |||||||||||||
| Total Level 1 Equity Securities | $ | |||||||||||||
| AMBS | $ | $ | ||||||||||||
| Holista | $ | $ | ||||||||||||
| Value Exchange (Related Party) | $ | $ | ||||||||||||
| Sharing Services (Related Party) | $ | $ | ||||||||||||
| New Electric CV (Related Party) | $ | $ | ||||||||||||
| Impact BioMedical (Related Party) | $ | $ | ||||||||||||
| Trading Stocks | $ | |||||||||||||
| Total Level 2 Equity Securities | $ | |||||||||||||
| Nervotec | N/A | $ | ||||||||||||
| UBeauty | N/A | $ | ||||||||||||
| Ideal Food and Beverages | N/A | $ | ||||||||||||
| HapiTravel Holding | N/A | $ | ||||||||||||
| Total Equity Securities | $ | |||||||||||||
| F-32 |
Changes in the observable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.
The table below provides a summary of the changes in fair value which are recorded as other comprehensive income (loss), including net transfers in and/or out of all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2025 and 2024:
| Total | ||||
| Balance at January 1, 2025 | $ | |||
| Total Gains | ||||
| Balance at March 31, 2025 | $ | |||
| Total | ||||
| Balance at January 1, 2024 | $ | |||
| Impairment | ( | ) | ||
| Total Gains | ||||
| Balance at March 31, 2024 | $ | |||
Vector Com Convertible Bond
On
February 26, 2021, the Company invested approximately $
Warrants
NECV
On
July 17, 2020, the Company purchased shares, approximately
The fair value of the NECV warrants under level 3 category as of March 31, 2025 and December 31, 2024 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
| March 31, 2025 | December 31, 2024 | |||||||
| Stock Price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Annualized volatility | % | % | ||||||
| Dividend Yield | $ | $ | ||||||
| Year to maturity | ||||||||
VEII
On
September 6, 2023, the Company received warrants to purchase shares of VEII, a related party listed company. For further details on this
transaction, refer to Note 7 - Related Party Transactions, Note Receivable from a Related Party Company. As of March 31, 2025
and December 31, 2024, the fair value of the warrants was $
The fair value of the VEII warrants under level 2 category as of March 31, 2025, and December 31, 2024 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
| March 31, 2025 | December 31, 2024 | |||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Annualized volatility | % | % | ||||||
| Dividend Yield | $ | $ | ||||||
| Year to maturity | ||||||||
| F-33 |
SHRG
On
March 20, 2024, HWH International Inc., entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from
SHRG a (i) Convertible Promissory Note in the amount of $
The
fair value of the
| March 31, 2025 | December 31, 2024 | |||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Annualized volatility | % | % | ||||||
| Dividend Yield | $ | $ | ||||||
| Year to maturity | ||||||||
On
March 31, 2025, HWH entered into a securities purchase agreement with the SHRG, pursuant to which SHRG issued a convertible promissory
note to HWH in the amount of $
The
fair value of the
| March 31, 2025 | ||||
| Stock price | $ | |||
| Exercise price | $ | |||
| Risk free interest rate | % | |||
| Annualized volatility | % | |||
| Dividend Yield | $ | |||
| Year to maturity | ||||
Convertible Loan Receivables
The Company has elected to recognize the convertible loan receivables at fair value and therefore there was no further evaluation of embedded features for bifurcation. The Company engaged third party valuation firm to perform the valuation of convertible loans. The fair value of the convertible loans is calculated using the binomial tree model based on probability of remaining as straight debt using discounted cash flow.
| F-34 |
12. COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases offices in Maryland, Singapore, Hong Kong, South Korea and China through leased spaces aggregating approximately
| Office Location | Lease Term as of March 31, 2025 | |
| Singapore - AI | ||
| Singapore – F&B | ||
| Singapore – Hapi Cafe | ||
| South Korea – Hapi Cafe | ||
| South Korea – HWH World | ||
| Bethesda, Maryland, USA | ||
| China - Office | ||
| China - Shop | ||
| Taiwan - Cafe | ||
| Taiwan - Office | ||
| Hong Kong - Office |
The
Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) to recognize a right-of-use asset and a lease liability
for all the leases with terms greater than twelve months. We elected the practical expedient to not recognize operating lease right-of-use
assets and operating lease liabilities for lease agreements with terms less than 12 months. Operating lease right-of-use assets and operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date.
The table below summarizes future payments due under these leases as of March 31, 2025.
For the Twelve Months Ending March 31:
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total Minimum Lease Payments | $ | |||
| Less: Effect of Discounting | ( | ) | ||
| Present Value of Future Minimum Lease Payments | ||||
| Less: Current Obligations under Leases | ( | ) | ||
| Long-term Lease Obligations | $ |
Security Deposits
Our
rental-home lease agreements require tenants to provide a one-month security deposits. The property management company collects all security
deposits and maintains them in a trust account. The Company also has obligation to refund these deposits to the renters at the time of
lease termination. As of March 31, 2025 and December 31, 2024, the security deposits held in the trust account were $
| F-35 |
13. SUBSEQUENT EVENTS
Credit Facility Agreement with HWH
On
April 14, 2025, the Company entered into an amendment (the “Amendment”) to the Credit Facility Agreement with HWH International
Inc. dated April 24, 2024, pursuant to which the Company provided HWH a line of credit facility (the “Credit Facility”) which
provides a maximum, aggregate credit line of up to $
Stock Compensation
On
April 15, 2025, the Board of Directors (the “Board”) of the Company awarded Chairman and Chief Executive Officer Chan Heng
Fai restricted shares of the Company’s common stock (the “Shares”). The Shares were granted to Mr. Chan as
compensation for services rendered to the Company pursuant to the Company’s 2025 Incentive Compensation Plan, as adopted on March
17, 2025. Under the terms and conditions of the award, the Shares may not be sold, assigned, transferred, pledged, encumbered or otherwise
disposed of until April 15, 2026. The Shares are not part of Mr. Chan’s regular annual compensation and will not be awarded on
a regularly recurring basis. As of the date of the issuance of the Shares, the fair value thereof was $
Loan to SHRG
On
April 17, 2025, HWH International Inc. (“HWH”) entered into a Loan Agreement (the “Loan Agreement”) with Sharing
Services Global Corp., an affiliate of the Company (“SHRG”), under which HWH provided a loan to SHRG in the amount of $
Sale of IBO Shares
Between April 1, 2025 and April 4, 2025, the Company and its subsidiaries Alset International Limited and Global Biomedical Pte. Ltd. collectively sold the Company’s entire equity interest in Impact Biomedical Inc. (NYSE: IBO) (“Impact”) consisting of shares of Impact’s common stock. The disposition of the Impact stock was made through several sales on the market through a broker. Chan Heng Fai, our Chairman and Chief Executive Officer, is a director of Impact.
Planned Acquisition of New Energy Asia Pacific Inc.
On December 13, 2023, the Company entered into a term sheet with Chan Heng
Fai (the “Seller”), the Chairman of the Board of Directors, Chief Executive Officer and largest stockholder of the Company.
The Company had agreed to purchase from the Seller all of the issued and outstanding shares of New Energy Asia Pacific Inc. (“NEAPI”),
a corporation incorporated in the State of Nevada, for the consideration of $
The
parties have now mutually agreed to revise this agreement, and on May 8, 2025, the Company and the Seller entered into an Amended
Term Sheet (the “Amended Term Sheet”). Under the terms of the Amended Term Sheet, the Company agreed to purchase from
the Seller all of the outstanding shares of NEAPI through a stock purchase agreement for a purchase price of $
The Company anticipates entering into definitive agreements in the immediate future reflecting the terms set forth in the Amended Term Sheet. The closing of the transaction contemplated by the Amended Term Sheet will be subject to certain closing conditions, including receiving consent of the stockholders holding a majority of the Company’s issued and outstanding shares.
Notice from NASDAQ
On May 13, 2025, the Company received a letter from The Nasdaq Stock Market LLC indicating that the Company’s common stock had closed below the minimum $ per share bid price requirement for 30 consecutive business days, and that the Company is therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The notification has no immediate effect on the listing of the Company’s common stock, and the Company has 180 calendar days to regain compliance with the minimum bid price requirement.
| F-36 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate, competition within our chosen industry, including competition from much larger competitors, technological advances and failure to successfully develop business relationships.
Business Overview
We are a diversified holding company principally engaged through our subsidiaries in the development of EHome communities and other real estate, financial services, digital transformation technologies, biohealth activities and consumer products with operations in the United States, Singapore, Hong Kong, Australia, South Korea and the People’s Republic of China. We manage a significant portion of our three principal businesses through our 85.8% owned subsidiary, Alset International, a public company traded on the Singapore Stock Exchange. Through this subsidiary (and indirectly, through other public and private U.S. and Asian subsidiaries), we are actively developing real estate projects near Houston, Texas in our real estate segment. In our digital transformation technology segment, we focus on serving business-to-business (B2B) needs in e-commerce, collaboration and social networking functions. Our biohealth segment includes the sale of consumer products. Alset Inc. and Alset International Limited collectively own 73.3% of HWH International Inc. (described in further detail below). We also have certain wholly owned subsidiaries that collectively own 132 single family residential rental properties in Montgomery and Harris Counties, Texas.
We also have minority ownership interests, including a 36.9% equity interest in American Pacific Financial, Inc., formerly known as American Pacific Bancorp Inc. (“APF”), a 43.6% equity interest in DSS Inc. (“DSS”), an indirect 48.7% equity interest in Value Exchange International Inc. (“VEII”), a 0.5% equity interest in American Premium Water Corporation (“APW”, d.b.a. New Electric CV Corporation, “NECV”), a 29% equity interest in Sharing Services Global Corporation (“SHRG”) and a 35.3% equity interest in Impact BioMedical Inc. (“IBO”). APF is a financial network holding company. DSS is a multinational company operating businesses with five divisions: product packaging, biotechnology, direct marketing, commercial lending, and securities and investment management. DSS Inc. is listed on the NYSE American (NYSE: DSS). Value Exchange International, Inc. is a provider of information technology services for businesses, and is traded on the OTCQB (OTCQB: VEII). Sharing Services Global Corporation (OTC Pink: SHRG), is a publicly traded company dedicated to building shareholder value by developing or acquiring businesses, products and technologies in the direct selling industry and other industries that augment the Company’s product and services portfolio, business competencies, and geographic reach. Impact BioMedical Inc. is focused on discovery, development, and commercialization of products and technologies to address unmet needs in human healthcare and wellness for specialty biopharmaceuticals, antivirals, antimicrobials, consumer healthcare, and wellness products in the United States. Impact BioMedical Inc. is listed on NYSE American (NYSE: IBO).
| 3 |
We generally acquire majority and/or control stakes in innovative and promising businesses that are expected to appreciate in value over time. Our emphasis is on building businesses in industries where our management team has in-depth knowledge and experience, or where our management can provide value by advising on new markets and expansion. We have at times provided a range of global capital and management services to these companies in order to gain access to Asian markets. We have historically favored businesses that improve an individual’s quality of life or that improve the efficiency of businesses through technology in various industries. We believe our capital and management services provide us with a competitive advantage in the selection of strategic acquisitions, which creates and adds value for our Company and our stockholders.
Additionally, the Company operates a portfolio of trading securities with the objective of generating profits from short-term fluctuations in market prices. The portfolio is actively managed, and securities are bought and sold with the intent to realize gains from price movements within a short-term horizon.
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers (the “CODMs”), or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers are the two Co-CEOs, who review and assess the performance of the Company as a whole. The Company reports its segment information to reflect the manner in which the CODMs review and assess performance. The Company has four operating segments based on the products and services we offer, which include three of our principal businesses – real estate, digital transformation technology and biohealth – as well as a fourth category consisting of certain other business activities. In determination of segments, the Company, together with its CODMs, considers factors that include the nature of business activities, allocation of resources and management structure.
The primary financial measures used by the CODMs to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODMs use net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Information on net income (loss) and operating income (loss) is disclosed in the Consolidated Statements of Income. Segment expenses and other segment items are provided to the CODMs on the same basis as disclosed in the Consolidated Statements of Income.
The CODMs do not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the Notes to the Financial Statements.
Recent Developments
Stock Compensation
On April 15, 2025, the Board of Directors (the “Board”) of the Company awarded Chairman and Chief Executive Officer Chan Heng Fai 1,000,000 restricted shares of the Company’s common stock (the “Shares”). The Shares were granted to Mr. Chan as compensation for services rendered to the Company pursuant to the Company’s 2025 Incentive Compensation Plan, as adopted on March 17, 2025. Under the terms and conditions of the award, the Shares may not be sold, assigned, transferred, pledged, encumbered or otherwise disposed of until April 15, 2026. The Shares are not part of Mr. Chan’s regular annual compensation and will not be awarded on a regularly recurring basis. As of the date of the issuance of the Shares, the fair value thereof was $840,000.
Notice from NASDAQ
On May 13, 2025, the Company received a letter from The Nasdaq Stock Market LLC indicating that the Company’s common stock had closed below the minimum $1.00 per share bid price requirement for 30 consecutive business days, and that the Company is therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The notification has no immediate effect on the listing of the Company’s common stock, and the Company has 180 calendar days to regain compliance with the minimum bid price requirement.
Consummation of the Merger of Alset Capital Acquisition Corp. and HWH International Inc.
On January 9, 2024, two entities affiliated with Alset Inc. completed a previously announced transaction. On September 9, 2022, Alset Capital Acquisition Corp., a Delaware corporation (“Alset Capital”) entered into an agreement and plan of merger (the “Merger Agreement”) with our indirect subsidiary HWH International Inc., a Nevada corporation (“HWH Nevada”) and HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of Alset Capital (“Merger Sub”). The Company and its 85.8% owned subsidiary Alset International own Alset Acquisition Sponsor, LLC, the sponsor (the “Sponsor”) of Alset Capital.
Pursuant to the Merger Agreement, on January 9, 2024, a Business Combination between Alset Capital and HWH Nevada was effected through the merger of Merger Sub with and into HWH Nevada, with HWH Nevada surviving the merger as a wholly owned subsidiary of Alset Capital (the “Merger”), and Alset Capital changing its name to HWH International Inc. (“New HWH”).
The total consideration paid at the closing of the Merger by New HWH to the shareholders of HWH Nevada was 12,500,000 shares of New HWH common stock. Alset International owned the majority of the outstanding shares of HWH Nevada at the time of the business combination, and received 10,900,000 shares of New HWH as consideration for its shares of HWH Nevada.
| 4 |
Following these transactions, HWH International Inc. is now a purpose-driven lifestyle company encompassing differentiated offerings from four core pillars: Hapi Marketplace, Hapi Cafe, Hapi Travel and Hapi Wealth Builder. HWH International Inc. seeks to develops new pathways to help people in their pursuit of Health, Wealth and Happiness. HWH International Inc. is listed on the Nasdaq under the symbol HWH.
Stock Purchase Agreement and Debt Conversion Agreements
On September 24, 2024, HWH entered into two (2) debt conversion agreements with creditors (each an “Agreement,” or collectively, the “Agreements”): (i) Alset International Limited (which is HWH’s majority stockholder); and (ii) Alset Inc. (which in turn is Alset International Limited’s majority stockholder). Each Agreement converts debt owed by HWH to the respective creditor into shares of HWH’s common stock.
Under the terms of their respective Agreements, Alset Inc. converted $300,000 of HWH’s debt into 476,190 shares of HWH’s common stock, and Alset International Limited converted $3,501,759 of HWH’s debt into 5,558,347 shares of HWH’s common stock. Under the Agreements, the debt conversions resulted in the issuance of newly issued shares of HWH’s common stock. The price at which the debt conversion was fixed was set at $0.63 per share of HWH common stock. Cumulatively, the newly issued shares contemplated by the Agreements represented 6,034,537 new shares of HWH’s common stock.
On September 26, 2024, Alset Inc. entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the Company’s majority owned subsidiary, Alset International Limited. Pursuant to the Stock Purchase Agreement, the Company will purchase 6,500,000 shares (the “Shares”) of HWH International Inc. (the Nasdaq-listed company). As consideration for the Shares, the Company will issue a secured promissory note to Alset International Limited in the original principal amount of $4,095,000 (the “Promissory Note”). The Promissory Note bears an interest rate of 5% per annum and a maturity date of September 26, 2026, and will be secured by collateral specified in a security agreement (the “Security Agreement”), between the Company and Alset International Limited.
Our Chairman, Chief Executive Officer and majority stockholder, Chan Heng Fai, is also the Chairman and Chief Executive Officer of Alset International Limited and the Chairman of HWH. In addition, certain other members of our board are also officers and/or directors of Alset International Limited and HWH.
The closing of the transactions described herein was contingent upon the approval of the stockholders of Alset International Limited (which was approved on November 18, 2024) and the satisfaction of other closing conditions. The transactions closed on November 20, 2024.
Sale of Certain Lots
Agreement to Sell 142 Lots and 63 Lots
On November 13, 2023, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership, entered into two Contracts for Purchase and Sale and Escrow Instructions (each an “Agreement,” collectively, the “Agreements”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of one of the aforementioned Agreements, the Seller agreed to sell approximately 142 single-family detached residential lots comprising a section of a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” On July 1, 2024, the Seller closed the sale of 70 of the lots contemplated by the Agreement, generating approximately $3.8 million. Pursuant to the other Agreement, the Seller agreed to sell 63 single-family detached residential lots in the city of Magnolia, Texas. In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of partially developed land near Houston, Texas which was used to develop a community named Alset Villas (“Alset Villas”). Alset EHome was in the process of developing the 63 lots at Alset Villas in 2023. The selling price of these lots was anticipated to equal approximately $3.3 million. The sale of the first 70 lots closed on July 1, 2024 generating approximately $3.8 million. The sale of the additional 72 lots closed on October 10, 2024 generating approximately $3.9 million. The sale of 63 lots at Alset Villas closed on December 16, 2024 generating approximately $3.8 million.
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The Company has retained four model lots within Section 1 of the property. The Company intends to enter into contract-build agreements with local, regional or national builders to construct single-family, for rent homes. These elevations and floor plans will be carefully selected to suit the for-rent tenants and/or for-sale customers. The Company will also reserve the right to sell these homes in the event this is deemed to be the highest and best use in the marketplace. The Company expects to complete these homes within the next twelve months.
Issuance of Convertible Loans to Value Exchange International, Inc.
On July 15, 2024, the Company entered into a Convertible Credit Agreement (“3rd VEII Credit Agreement”) with VEII for an unsecured credit line in the maximum amount of $110,000 (“2024 Credit Line”). Advances of the principal under the 3rd VEII Credit Agreement accrue simple interest at 8% per annum. Each Advance under the 3rd VEII Credit Agreement and all accrued interest thereon may, at the election of VEII, or the Company, be: (1) repaid in cash; (2) converted into shares of VEII Common Stock; or (3) be repaid in a combination of cash and shares of VEII Common Stock. The principal amount of each Advance under the 3rd VEII Credit Agreement is due and payable on the third (3rd) annual anniversary of the date that the Advance is received by VEII along with any unpaid interest accrued on the principal (the “Advance Maturity Date”). Prior to the Advance Maturity Date, unpaid interest accrued on any Advance shall be paid on the last business day of June and on the last business day of December of each year in which the Advance is outstanding and not converted into shares of VEII Common Stock. Company may prepay any Advance under the 3rd VEII Credit Agreement and interests accrued thereon prior to Advance Maturity Date without penalty or charge. At the time of this filing, the Company has not converted the Loan Amount.
VEII issued a Convertible Promissory Note (the “VEII Convertible Promissory Note”) for $30,000, dated as of March 28, 2025 to Alset Inc. as consideration for a loan in the same amount. This amount can be converted into shares of VEII pursuant to the terms of the VEII Convertible Promissory Note for a period of two years. In the event that Alset Inc. converts all or a portion of the indebtedness into shares of VEII Common Stock, the conversion price shall be $0.0166 per share. The fair value of this convertible note on March 31, 2025 was $28,543. (For further details on fair value valuation refer to Note 11. – Investments Measured at Fair Value, Convertible Note Receivables). At the time of this filing, the Company has not converted the Loan Amount.
The Company currently owns a total of 21,179,275 shares (representing approximately 48.7%) of VEII.
Our founder, Chairman and Chief Executive Officer, Chan Heng Fai, and another member of the Board of Directors of Hapi Metaverse, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of the Board of Directors of Alset Inc. are also members of the Board of Directors of VEII (Wong Shui Yeung and Wong Tat Keung).
Issuance of Convertible Loans to Sharing Services Global Corp.
On January 17, 2024, the Company received a Convertible Promissory Note (the “1st SHRG Convertible Note”) from Sharing Services Global Corp., an affiliate of the Company, in exchange for a $250,000 loan made by the Company to SHRG. The Company may convert a portion or all of the outstanding balance due under the 1st SHRG Convertible Note into shares of SHRG’s common stock at the average closing market price of SHRG stock within the last three (3) days from the date of conversion notice. The 1st SHRG Convertible Note bears a 10% interest rate and has a scheduled maturity six (6) months from the date of the 1st SHRG Convertible Note, or July 17, 2024. The terms of the note and maturity date were subsequently extended.
On March 20, 2024, the Company’s subsidiary HWH International Inc. entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a (i) Convertible Promissory Note (the “2nd SHRG Convertible Note) in the amount of $250,000, convertible into 148,810 shares of SHRG’s common stock at the option of HWH, and (ii) certain warrants exercisable into 148,810 shares of SHRG’s common stock at an exercise price of $1.68 per share, the exercise period of the warrant being five (5) years from the date of the securities purchase agreement, for an aggregate purchase price of $250,000. At the time of this filing, HWH has not converted any of the debt contemplated by the 2nd SHRG Convertible Note nor exercised any of the warrants.
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On May 9, 2024, HWH entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a Convertible Promissory Note (the “3rd SHRG Convertible Note”) in the amount of $250,000, convertible into 89,286 shares of SHRG’s common stock at the option of HWH for an aggregate purchase price of $250,000. The 3rd SHRG Convertible Note bears an 8% interest rate and has a scheduled maturity three years from the date of the 3rd SHRG Convertible Note. Additionally, upon signing the 3rd SHRG Convertible Note, SHRG owns the Company commitment fee of 8% of the principal amount, which will be paid either in cash or in common stock of SHRG, at the discretion of the Company. At the time of this filing, HWH has not converted any of the debt contemplated by the 3rd SHRG Convertible Note.
On June 6, 2024, HWH entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a Convertible Promissory Note (the “4th SHRG Convertible Note”) in the amount of $250,000, convertible into 89,286 shares of SHRG’s common stock at the option of HWH for an aggregate purchase price of $250,000. The Convertible Note bears an 8% interest rate and has a scheduled maturity three years from the date of the 4th SHRG Convertible Note. Additionally, upon signing the 4th SHRG Convertible Note, SHRG owns the Company commitment fee of 8% of the principal amount $20,000 in total, which will be paid either in cash or in common stock of SHRG, at the discretion of the Company. At the time of this filing, HWH has not converted any of the debt contemplated by the 4th SHRG Convertible Note.
On August 13, 2024, HWH entered into a securities purchase agreement with SHRG, pursuant to which HWH purchased from SHRG a Convertible Promissory Note (the “5th SHRG Convertible Note”) in the amount of $100,000, convertible into 35,714 shares of SHRG’s common stock at the option of the Company for an aggregate purchase price of $100,000. The 5th SHRG Convertible Note bears an 8% interest rate and has a scheduled maturity three years from the date of the 5th SHRG Convertible Note. Additionally, upon signing the 5th SHRG Convertible Note, SHRG owed the Company a commitment fee of 8% of the principal amount, $8,000 in total, to be paid either in cash or in common stock of SHRG, at the discretion of the Company. At the time of this filing, HWH has not converted any of the debt contemplated by the 5th SHRG Convertible Note.
On January 15, 2025, HWH International Inc. (“HWH”) entered into a Loan Agreement (the “Loan Agreement”) with Sharing Services Global Corp., an affiliate of the Company (“SHRG”), under which HWH provided a loan to SHRG in the amount of $150,000. HWH may convert a portion or all of the outstanding balance due under the loan into shares of SHRG’s common stock at the average closing market price of SHRG stock within the last three (3) days from the date of maturity of the Loan Agreement, January 15, 2026. The Loan Agreement bears an 8% interest rate.
On March 31, 2025, HWH entered into a securities purchase agreement with the Issuer, pursuant to which the Issuer issued a convertible promissory note to HWH in the amount of $150,000 (the “6th SHRG Convertible Note”). The 6th SHRG Convertible Note is convertible into the Issuer’s common stock at $0.80 per share at HWH’s option until maturity three (3) years from the date of the securities purchase agreement. In addition, the Issuer granted HWH warrants exercisable into 937,500 shares of the Issuer’s common stock. The warrants may be exercised for three (3) years from the date of the securities purchase agreement at an exercise price of $0.85 per share.
Planned Acquisition of New Energy Asia Pacific Inc.
On December 13, 2023 the Company entered into a term sheet with Chan Heng Fai (the “Seller”), the Chairman of the Board of Directors, Chief Executive Officer and largest stockholder of the Company. The Company had agreed to purchase from the Seller all of the issued and outstanding shares of New Energy Asia Pacific Inc. (“NEAPI”), a corporation incorporated in the State of Nevada, for the consideration of $103,750,000, to be paid in the form of a convertible promissory note to be issued to the Seller. NEAPI owns 41.5% of the issued and outstanding shares of New Energy Asia Pacific Limited (“New Energy”), a Hong Kong corporation.
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The parties have now mutually agreed to revise this agreement, and on May 8, 2025, the Company and the Seller entered into an Amended Term Sheet (the “Amended Term Sheet”). Under the terms of the Amended Term Sheet, the Company agreed to purchase from the Seller all of the outstanding shares of NEAPI through a stock purchase agreement for a purchase price of $83,000,000 in the form of a promissory note convertible into newly issued shares of the Company’s common stock (the “Convertible Note”). The Convertible Note shall have an interest rate of 1% per annum. Under the terms of the Convertible Note, the Seller may convert any outstanding principal and interest into shares of the Company’s common stock at $3.00 per share upon ten (10) days’ notice prior to maturity of the Convertible Note five (5) years from the date of the Term Sheet, and upon maturity of the Convertible Note any outstanding principal and accrued interest accrued thereunder will automatically be converted into shares of the Company’s common stock at the conversion rate.
The Company anticipates entering into definitive agreements in the immediate future reflecting the terms set forth in the Amended Term Sheet. The closing of the transaction contemplated by the Amended Term Sheet will be subject to certain closing conditions, including receiving consent of the stockholders holding a majority of the Company’s issued and outstanding shares.
New Energy focuses on distributing all-electric versions of special-purpose and transportation vehicles, charging stations and batteries. The Company intends for this to be a strategic move, in line with the Company’s commitment to advancing sustainable and eco-friendly solutions for the future. The Seller is a member of the Board of Directors of New Energy and is a stockholder of New Energy.
Purchase of DSS Shares
On May 21, 2024, the Company entered into a Securities Purchase Agreement (the “DSS Securities Purchase Agreement”) with the Company’s Chairman and Chief Executive Officer, Chan Heng Fai, and Heng Fai Holdings Limited, a company wholly owned by Mr. Chan. Pursuant to the DSS Securities Purchase Agreement, the Company will purchase 982,303 shares of DSS Inc., a NYSE-listed company. These shares include 979,325 shares of DSS common stock to be acquired from Mr. Chan and 2,978 shares to be acquired from Heng Fai Holdings Limited (collectively, the “Shares”). The Shares represent approximately 13.9% of the total issued and outstanding shares of DSS as of the date hereof. As consideration for the Shares, the Company will issue a total of 3,316,488 shares of its common stock to Mr. Chan and Heng Fai Holdings Limited. The consideration to be paid for the Shares is based on the relevant market closing price of DSS common stock and the Company’s common stock as of May 3, 2024.
Approval of the transactions described herein was granted by the Board of Directors of the Company (“the Board”) during a meeting of the Board held on May 6, 2024. Mr. Chan and Chan Tung Moe, another member of the Board and the son of Mr. Chan, recused themselves from discussion and voting on the approval of such transaction and the acquisition of the DSS Shares.
The closing of the transactions contemplated by the DSS Securities Purchase Agreement remains subject to the approval of the Company’s stockholders and no objection from the Nasdaq.
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Matters that May or Are Currently Affecting Our Business
In addition to the matters described above, the primary challenges and trends that could affect or are affecting our financial results include:
● Our ability to improve our revenue through cross-selling and revenue-sharing arrangements among our diverse group of companies;
● Our ability to identify complementary businesses for acquisition, obtain additional financing for these acquisitions, if and when needed, and profitably integrate them into our existing operations;
● Our ability to attract competent and skilled technical and sales personnel for each of our businesses at acceptable compensation levels to manage our overhead;
● Our ability to control our operating expenses as we expand each of our businesses and product and service offerings; and
● The effects of public health issues such as a major epidemic or pandemic, including the impact of COVID-19 on the economy and our business.
Results of Operations
Summary of Statements of Operations for the Three Months Ended March 31, 2025 and 2024
| Three- Months Ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Revenue | $ | 1,068,303 | $ | 6,086,207 | ||||
| Operating Expenses | $ | (5,000,421 | ) | $ | (8,352,720 | ) | ||
| Other Expenses | $ | (5,529,826 | ) | $ | (5,047,279 | ) | ||
| Income Tax Expense | $ | (42,948 | ) | $ | - | |||
| Net Loss | $ | (9,504,892 | ) | $ | (7,313,792 | ) | ||
Revenue
The following tables set forth period-over-period changes in revenue for each of our reporting segments:
| Three-months Ended | Change | |||||||||||||||
| March 31, 2025 | March 31, 2024 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 717,805 | $ | 5,752,994 | $ | (5,035,189 | ) | -88 | % | |||||||
| Biohealth | - | 535 | (535 | ) | -100 | % | ||||||||||
| Other | 350,498 | 332,678 | 17,820 | 5 | % | |||||||||||
| Total Revenue | $ | 1,068,303 | $ | 6,086,207 | $ | (5,017,904 | ) | -82 | % | |||||||
Revenue was $1,068,303 and $6,086,207 for the three months ended March 31, 2025 and 2024, respectively. The decrease in revenue is mainly caused by the fact that the remaining properties in the Lakes at Black Oak and Alset Villas projects were sold in 2024.
In late 2022 and early 2023, the Company entered into three contracts with builders to sell multiple lots from its Lakes at Black Oak project. The sales contemplated by these contracts were contingent on certain conditions which the parties to such contracts had to meet and were expected to generate approximately $23 million of funds from operations, not including certain expenses that the Company was required to pay. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.1 million revenue. The sale of remaining lots closed on January 4, 2024 generating approximately $5.0 million revenue.
Revenue from rental business was $717,805 and $707,592 in the three months ended March 31, 2025 and 2024, respectively. The Company expects that the revenue from this business will continue to increase as we acquire more rental houses and successfully rent them.
The Company operates its biohealth segment in the South Korean market through one of the subsidiaries of HWH International Inc., HWH World Inc (“HWH World”). HWH World operates based on a direct sale model of health supplements. HWH World recognized $0 and $535 in revenue in the three months ended March 31, 2025 and 2024, respectively.
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The category described as “Other” includes corporate and financial services, food and beverage business, digital transformation technology, and new venture businesses. “Other” includes certain costs that are not allocated to the reportable segments, primarily consisting of unallocated corporate overhead costs, including administrative functions not allocated to the reportable segments from global functional expenses.
The financial services, food and beverage businesses and new venture businesses are small and diversified, and accordingly they are not separately addressed as one independent category. In the three months ended March 31, 2025 and 2024, the revenue from other businesses was $350,498 and $332,678, respectively, generated by Korean, Singaporean and Chinese café shops and restaurants.
Cost of Revenues and Operating Expenses
The following tables sets forth period-over-period changes in cost of revenues for each of our reporting segments:
| Three-months Ended | Change | |||||||||||||||
| March 31, 2025 | March 31, 2024 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 602,785 | $ | 4,533,660 | $ | (3,930,875 | ) | -87 | % | |||||||
| Biohealth | - | 2,041 | (2,041 | ) | -100 | % | ||||||||||
| Other | 174,744 | 122,666 | 52,078 | 42 | % | |||||||||||
| Total Cost of Revenues | $ | 777,529 | $ | 4,658,367 | $ | (3,880,838 | ) | -83 | % | |||||||
Cost of revenues decreased from $4,658,367 in the three months ended March 31, 2024 to $777,529 in the three months ended March 31, 2025. The decrease in cost of revenue is caused by the decrease in property sales from the Lakes at Black Oak project in 2025. The last lots in Lakes at Black Oak project were sold during 2024.
The gross margin decreased to $290,774 from $1,427,840 in the three months ended March 31, 2025 and 2024, respectively. The decrease of gross margin was caused by the decrease in sales in the Lakes at Black Oak Project.
The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments.
| Three-months Ended | Change | |||||||||||||||
| March 31, 2025 | March 31, 2024 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 1,144,805 | $ | 361,696 | $ | 783,109 | 217 | % | ||||||||
| Biohealth | 512,932 | 826,961 | (314,029 | ) | -38 | % | ||||||||||
| Digital Transformation Technology | 163,554 | 163,707 | (153 | ) | 0 | % | ||||||||||
| Other | 2,401,601 | 2,341,990 | 59,611 | 3 | % | |||||||||||
| Total Operating Expenses | $ | 4,222,892 | $ | 3,694,354 | $ | 528,538 | 14 | % | ||||||||
The increase of operating expenses in the first three months of 2025 compared to the same period of 2024 was mostly caused by recording impairment of goodwill and note receivable. Additionally, the Company has been notified by a purchaser of certain lots that they mistakenly overpaid by $450,000 in December 2024. The repayment of $450,000 was recorded in the Company’s books in the first quarter of 2025 as an expense.
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Other Income (Expense)
In the three months ended March 31, 2025, the Company had other expense of $5,529,826 compared to other expense of $ 5,047,279 in the three months ended March 31, 2024. The loss/gain on foreign exchange transaction is the primary reason for the volatility in these two periods. Foreign exchange transaction loss was $1,409,102 in the three months ended March 31, 2025, compared to $1,193,636 gain in the three months ended March 31, 2024.
Net Loss
In the three months ended March 31, 2025 the Company had net loss of $9,504,892 compared to net loss of $7,313,792 in the three months ended March 31, 2024.
Liquidity and Capital Resources
Our real estate assets have decreased to $30,426,990 as of March 31, 2025 from $30,695,669 as of December 31, 2024. This decrease reflects depreciation expenses on the rental properties.
Our cash has decreased from $27,243,787 as of December 31, 2024 to $25,194,810 as of March 31, 2025. Our liabilities decreased from $6,563,126 at December 31, 2024 to $5,654,372 at March 31, 2025. Our total assets have decreased to $90,464,745 as of March 31, 2025 from $96,761,977 as of December 31, 2024 mainly due to decrease in cash and value of investment securities.
On April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”) in the principal amount not to exceed at any one time outstanding the sum of $8,000,000, with a cumulative loan advance amount of $18,500,000. The line of credit bore interest rate on LIBOR plus 375 basis points. SeD Maryland Development LLC was also provided with a Letter of Credit (“L/C”) Facility in an aggregate amount of up to $900,000. The L/C commission is 1.5% per annum on the face amount of the L/C. Other standard lender fees apply in the event the L/C is drawn down. The loan is a revolving line of credit. The L/C Facility is not a revolving loan, and amounts advanced and repaid may not be re-borrowed. Repayment of the Loan Agreement is secured by a $2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. On March 15, 2022, approximately $2,300,000 was released from collateral, leaving approximately $300,000 as collateral for outstanding letters of credit. On December 14, 2023 approximately $201,751 was released from collateral, leaving approximately $100,000 as collateral for outstanding letters of credit.
On November 13, 2023, the Company entered into two Contracts for Purchase and Sale and Escrow Instructions (each an “Agreement,” collectively, the “Agreements”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of one of the aforementioned Agreements, the Seller agreed to sell approximately 142 single-family detached residential lots comprising a section of a residential community in the Lakes at Black Oak. The selling price of these lots was anticipated to equal approximately $7.4 million. Pursuant to the other Agreement, the Seller agreed to sell 63 single-family detached residential lots in the city of Magnolia, Texas. In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of partially developed land near Houston, Texas which was used to develop a community named Alset Villas. Alset EHome was in the process of developing the 63 lots at Alset Villas in 2023. The closing of the transactions described above depended on the satisfaction of certain conditions. On July 1, 2024, the Seller closed the sale of 70 of the lots contemplated by that certain Agreement, generating approximately $3.8 million. The sale of the remaining 72 lots at Lakes at Black Oak closed on October 10, 2024 generating approximately $3.9 million. The sale of 63 lots at Alset Villas closed on December 16, 2024 generating approximately $3.8 million.
The Company is entitled to receive certain developer reimbursements for the Lakes at Black Oak and Alset Villas projects. The Company expects that approximately $8 million of the receivable will be collected within the next twelve months.
The management believes that the available cash in bank accounts and favorable cash revenue from real estate projects are sufficient to fund our operations for at least the next 12 months.
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Summary of Cash Flows for the Three Months Ended March 31, 2025 and 2024
| Three-months Ended | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (3,756,154 | ) | $ | (1,509,247 | ) | ||
| Net cash used in investing activities | $ | (461,505 | ) | $ | (1,758,503 | ) | ||
| Net cash provided by (used in) financing activities | $ | 2,333,452 | $ | (240,182 | ) | |||
Cash Flows from Operating Activities
Net cash used in operating activities was $1,509,247 in the first three months of 2024, as compared to net cash used in operating activities of $3,756,154 in the same period of 2025. Purchase of trading securities and paying off payables in 2025 were the main reason for the cash used in operating activities in that period.
Cash Flows from Investing Activities
Net cash used in investing activities was $1,758,503 in the first three months of 2024, as compared to net cash used in investing activities of $461,505 in the same period of 2025. In the three months ended March 31, 2025, the Company issued $479,297 in loans to related parties and spent $61,244 to purchase fixed assets. At the same time, we received $79,036 from repayment of related party loan. In the three months ended March 31, 2024 we invested $646,785 in marketable securities, issued $1,144,317 in loans to related parties and received $34,671 from repayment of related party notes receivable.
Cash Flows from Financing Activities
Net cash provided by financing activities was $2,333,452 in the three months ended March 31, 2025, compared to net cash used of $240,182 in the three months ended March 31, 2024. The cash provided by financing activities in the first three months of 2025 was from proceeds from issuing common stock of $2,613,526. In that same period, the Company repaid $280,074 of note payable. In the first three months of 2024 the Company borrowed $119,621 from a third party loan and repaid $359,803 of note payable.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2025 or the year ended December 31, 2024. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
Impact of Foreign Exchange Rates
The effect of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from Singapore to the United States and which were approximately $30 million and $30 million on March 31, 2025 and December 31, 2024, respectively, are the reason for the significant fluctuation of foreign currency transaction Gain or Loss on the Condensed Consolidated Statements of Operations and Other Comprehensive Loss. Because the intercompany loan balances between Singapore and United States will remain at approximately $30 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2025, especially given that the foreign exchange rate may and is expected to be volatile. If the amount of intercompany loan is lowered in the future, the effect will be reduced. However, at this moment, we do not expect to repay the intercompany loans in the short term.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption.
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Seasonality
The real estate business is subject to seasonal shifts in costs as certain work is more likely to be performed at certain times of the year. This may impact the expenses of our subsidiary Alset EHome Inc. from time to time. In addition, should we commence building homes, we are likely to experience periodic spikes in sales as we commence the sales process at a particular location.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officers and Chief Financial Officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including our Chief Executive Officers and Chief Financial Officers, concluded that our disclosure controls and procedures are not effective as of March 31, 2025 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officers and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in the Company’s Internal Controls Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarterly period ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceeding
Not applicable.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits
The following documents are filed as a part of this report:
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ALSET INC. | ||
| May 15, 2025 | By: | /s/ Chan Heng Fai |
Chan Heng Fai | ||
| Chairman of the Board and | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May 15, 2025 | By: | /s/ Chan Tung Moe |
| Chan Tung Moe | ||
| Co-Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May 15, 2025 | By: | /s/ Rongguo Wei |
Rongguo Wei | ||
| Co-Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| May 15, 2025 | By: | /s/ Lui Wai Leung Alan |
Lui Wai Leung Alan | ||
| Co-Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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