UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20222023
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________to _________
001-39732
Commission File Number
Alset EHome International Inc.
(Exact name of registrant as specified in its charter)
| 83-1079861 | ||
State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
4800 Montgomery Lane, Suite 210, Bethesda, Maryland | 20814 | |
| (Address of principal executive offices) | (Zip Code) |
301-971-3940
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 | ||
| Common Stock, $0.001 par value | AEI | The Nasdaq Stock Market LLC |
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. Yes ☒ No ☐
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). Yes ☒ No ☐
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 | ☐ |
| Non-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 13, 2022,15, 2023, there were shares of the registrant’s common stock $0.001 par value per share, issued and outstanding.
Table of Contents
| 2 |
Part I. Financial Information
Item 1. Financial Statements.
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Unaudited)
| March 31, 2023 | December 31, 2022 | |||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 18,675,450 | $ | 17,827,383 | ||||
| Restricted Cash | 603,646 | 694,520 | ||||||
| Account Receivables, Net | 54,976 | 46,522 | ||||||
| Other Receivables | 562,299 | 446,798 | ||||||
| Note Receivables - Related Parties | 2,787,382 | 3,617,176 | ||||||
| Prepaid Expense | 143,712 | 188,070 | ||||||
| Inventory | 34,442 | 35,020 | ||||||
| Investment in Securities at Fair Value | 4,410,499 | 6,288,236 | ||||||
| Investment in Securities at Fair Value - Related Party | 14,489,359 | 13,193,089 | ||||||
| Investment in Securities at Cost | 99,802 | 98,129 | ||||||
| Investment in Securities at Equity Method | 52,871,076 | 52,987,224 | ||||||
| Total Current Assets | 94,732,643 | 95,422,167 | ||||||
| Real Estate | ||||||||
| Rental Properties | 31,641,452 | 31,169,031 | ||||||
| Properties under Development | 25,930,597 | 23,449,698 | ||||||
| Operating Lease Right-Of-Use Asset | 1,565,468 | 1,614,159 | ||||||
| Deposit | 542,079 | 536,947 | ||||||
| Property and Equipment, Net | 1,277,243 | 1,298,334 | ||||||
| Total Assets | $ | 155,689,482 | $ | 153,490,336 | ||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | 5,031,477 | $ | 2,983,470 | ||||
| Deferred Revenue | - | 21,198 | ||||||
| Operating Lease Liability | 130,778 | 45,556 | ||||||
| Notes Payable | 30,545 | 30,287 | ||||||
| Notes Payable - Related Parties | 16,624 | 12,668 | ||||||
| Notes Payable | 16,624 | 12,668 | ||||||
| Total Current Liabilities | 5,209,424 | 3,093,179 | ||||||
| Long-Term Liabilities: | ||||||||
| Notes Payable | 148,274 | 151,559 | ||||||
| Operating Lease Liability | 1,461,987 | 1,582,483 | ||||||
| Total Liabilities | 6,819,685 | 4,827,221 | ||||||
| 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, 2023 and December 31, 2022, respectively | 9,235 | 7,423 | ||||||
| Additional Paid in Capital | 325,967,000 | 322,534,891 | ||||||
| Accumulated Deficit | (192,582,297 | ) | (188,724,411 | ) | ||||
| Accumulated Other Comprehensive Income | 4,772,328 | 3,836,063 | ||||||
| Total Alset Inc. Stockholders’ Equity | 138,166,266 | 137,653,966 | ||||||
| Non-controlling Interests | 10,703,531 | 11,009,149 | ||||||
| Total Stockholders’ Equity | 148,869,797 | 148,663,115 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 155,689,482 | $ | 153,490,336 | ||||
See accompanying notes to condensed consolidated unaudited financial statements.
| March 31, 2022 | December 31, 2021 | |||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 51,520,971 | $ | 56,061,309 | ||||
| Restricted Cash | 2,525,182 | 4,740,870 | ||||||
| Account Receivables, Net | 90,407 | 39,622 | ||||||
| Other Receivables | 264,587 | 334,788 | ||||||
| Note Receivables - Related Parties | 13,281,867 | 12,792,671 | ||||||
| Prepaid Expense | 523,382 | 1,202,451 | ||||||
| Inventory | 35,582 | 47,290 | ||||||
| Investment in Securities at Fair Value | 50,791,684 | 36,337,023 | ||||||
| Investment in Securities at Cost | 99,216 | 99,216 | ||||||
| Investment in Securities at Equity Method | 31,766,187 | 30,801,129 | ||||||
| Deposit | 257,452 | 275,204 | ||||||
| Total Current Assets | 151,156,517 | 142,731,573 | ||||||
| Real Estate | ||||||||
| Rental Properties | 25,402,436 | 24,820,253 | ||||||
| Properties under Development | 15,449,370 | 15,695,127 | ||||||
| Operating Lease Right-Of-Use Asset | 502,552 | 659,620 | ||||||
| Deposit | 39,653 | 39,653 | ||||||
| Property and Equipment, Net | 280,059 | 263,917 | ||||||
| Total Assets | $ | 192,830,587 | $ | 184,210,143 | ||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | 2,501,071 | $ | 11,341,789 | ||||
| Deferred Revenue | 220,015 | 728,343 | ||||||
| Builder Deposits | - | 31,553 | ||||||
| Operating Lease Liability | 168,145 | 283,989 | ||||||
| Notes Payable | 151,310 | 317,671 | ||||||
| Notes Payable - Related Parties | 950,459 | 833,658 | ||||||
| Total Current Liabilities | 3,991,000 | 13,537,003 | ||||||
| Long-Term Liabilities: | ||||||||
| Operating Lease Liability | 345,506 | 383,354 | ||||||
| Total Liabilities | 4,336,506 | 13,920,357 | ||||||
| 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, 2022 and December 31, 2021, respectively | 113,188 | 87,368 | ||||||
| Additional Paid in Capital | 320,404,965 | 296,181,977 | ||||||
| Accumulated Deficit | (154,700,759 | ) | (148,233,473 | ) | ||||
| Accumulated Other Comprehensive Income | 293,721 | 341,646 | ||||||
| Total Alset EHome International Stockholders’ Equity | 166,111,115 | 148,377,518 | ||||||
| Non-controlling Interests | 22,382,966 | 21,912,268 | ||||||
| Total Stockholders’ Equity | 188,494,081 | 170,289,786 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 192,830,587 | $ | 184,210,143 | ||||
| F-1 |
Alset Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
For the Three Months Ended March 31, 2023 and 2022
(Unaudited)
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Rental | $ | 633,811 | $ | 232,582 | ||||
| Property | - | 1,041,524 | ||||||
| Biohealth | 12,786 | 617,471 | ||||||
| Other | 280,339 | 60,660 | ||||||
| Total Revenue | 926,936 | 1,952,237 | ||||||
| Operating Expenses | ||||||||
| Cost of Sales | 689,281 | 1,114,550 | ||||||
| General and Administrative | 2,327,385 | 2,491,228 | ||||||
| Total Operating Expenses | 3,016,666 | 3,605,778 | ||||||
| Operating Losses from Operations | (2,089,730 | ) | (1,653,541 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest Income | 39,278 | 172,400 | ||||||
| Foreign Exchange Transaction (Loss) Gain | (788,302 | ) | 408,095 | |||||
| Unrealized Loss on Securities Investment | (2,484,117 | ) | (395,141 | ) | ||||
| Unrealized Gain (Loss) on Securities Investment - Related Party | 1,296,271 | (3,503,874 | ) | |||||
| Realized Loss on Securities Investment | (131,313 | ) | (3,436,783 | ) | ||||
| Loss on Investment Securities at Equity Method | (268,276 | ) | (136,380 | ) | ||||
| Finance Costs | - | (448,008 | ) | |||||
| Other Income | 103,007 | 1,284,893 | ||||||
| Total Other Expense, Net | (2,233,452 | ) | (6,054,798 | ) | ||||
| Net Loss Income Before Income Taxes | (4,323,182 | ) | (7,708,339 | ) | ||||
| Income Tax Expense | - | (222,114 | ) | |||||
| Net Loss | (4,323,182 | ) | (7,930,453 | ) | ||||
| Net Loss Attributable to Non-Controlling Interest | (465,296 | ) | (1,463,167 | ) | ||||
| Net Loss Attributable to Common Stockholders | $ | (3,857,886 | ) | $ | (6,467,286 | ) | ||
| Other Comprehensive Loss, Net | ||||||||
| Unrealized Loss on Securities Investment | - | (9,123 | ) | |||||
| Foreign Currency Translation Adjustment | 1,095,943 | (649,140 | ) | |||||
| Comprehensive Loss | (3,227,239 | ) | (8,588,716 | ) | ||||
| Comprehensive Loss Attributable to Non-controlling Interests | (305,617 | ) | (1,085,395 | ) | ||||
| Comprehensive Loss Attributable to Common Stockholders | $ | (2,921,622 | ) | $ | (7,503,321 | ) | ||
| Net Loss Per Share - Basic and Diluted | $ | (0.46 | ) | $ | (1.30 | ) | ||
| Weighted Average Common Shares Outstanding - Basic and Diluted | 8,451,048 | 4,959,233 | * | |||||
| * | The numbers of weighted average outstanding common stock - basic and diluted were adjusted retrospectively to reflect 20-for-1 reverse stock split on December 28, 2022 |
See accompanying notes to condensed consolidated unaudited financial statements.
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Statements of OperationsStockholders’ Equity
For the Three Months Ended March 31, 2023
(Unaudited)
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Other Comprehensive Income | Accumulated Deficit | Total Alset Stockholders’ Equity | Non-Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Other Comprehensive Income | Accumulated Deficit | Total Alset Stockholders’ Equity | Non-Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | - | $ | - | - | $ | - | 7,422,846 | $ | 7,423 | $ | 322,534,891 | $ | 3,836,063 | $ | (188,724,411 | ) | $ | 137,653,966 | $ | 11,009,149 | $ | 148,663,115 | ||||||||||||||||||||||||||
| Issuance of Common Stock | - | - | 1,812,273 | 1,812 | 3,432,109 | - | - | 3,433,921 | - | 3,433,921 | ||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | 936,265 | - | 936,265 | 159,678 | 1,095,943 | ||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | (3,857,886 | ) | (3,857,886 | ) | (465,296 | ) | (4,323,182 | ) | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | - | $ | - | - | $ | - | 9,235,119 | $ | 9,235 | $ | 325,967,000 | $ | 4,772,328 | $ | (192,582,297 | ) | $ | 138,166,266 | $ | 10,703,531 | $ | 148,869,797 | ||||||||||||||||||||||||||
Alset Inc. and Other Comprehensive LossSubsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Other Comprehensive Income | Accumulated Deficit | Total Alset Stockholders’ Equity | Non-Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | - | $ | - | - | $ | - | 87,368,446 | $ | 87,368 | $ | 296,181,977 | $ | 341,646 | $ | (148,233,473 | ) | $ | 148,377,518 | $ | 21,912,268 | $ | 170,289,786 | ||||||||||||||||||||||||||
| Balance | - | $ | - | - | $ | - | 87,368,446 | $ | 87,368 | $ | 296,181,977 | $ | 341,646 | $ | (148,233,473 | ) | $ | 148,377,518 | $ | 21,912,268 | $ | 170,289,786 | ||||||||||||||||||||||||||
| Issuance of Stock by Exercising Warrants | - | - | 15,819,452 | 15,820 | (11,925 | ) | - | - | 3,895 | - | 3,895 | |||||||||||||||||||||||||||||||||||||
| Convert Related Party Note to Common Stock | 10,000,000 | 10,000 | 6,203,000 | - | - | 6,213,000 | - | 6,213,000 | ||||||||||||||||||||||||||||||||||||||||
| Deconsolidate Alset Capital Acquisition | - | - | 17,160,800 | - | - | 17,160,800 | 2,227,744 | 19,388,544 | ||||||||||||||||||||||||||||||||||||||||
| Gain from Purchase Stock DSS | - | - | 737,572 | - | - | 737,572 | - | 737,572 | ||||||||||||||||||||||||||||||||||||||||
| Beneficial Conversion Feature Intrinsic Value, Net | - | - | 450,000 | - | - | 450,000 | - | 450,000 | ||||||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | - | (316,459 | ) | 459,069 | - | 142,610 | (142,610 | ) | - | ||||||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | (7,027 | ) | - | (7,027 | ) | (2,096 | ) | (9,123 | ) | ||||||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | (499,967 | ) | - | (499,967 | ) | (149,173 | ) | (649,140 | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | (6,467,286 | ) | (6,467,286 | ) | (1,463,167 | ) | (7,930,453 | ) | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | - | $ | - | - | $ | - | 113,187,898 | $ | 113,188 | $ | 320,404,965 | $ | 293,721 | $ | (154,700,759 | ) | $ | 166,111,115 | $ | 22,382,966 | $ | 188,494,081 | ||||||||||||||||||||||||||
| Balance | - | $ | - | - | $ | - | 113,187,898 | $ | 113,188 | $ | 320,404,965 | $ | 293,721 | $ | (154,700,759 | ) | $ | 166,111,115 | $ | 22,382,966 | $ | 188,494,081 | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Rental | $ | 232,582 | $ | - | ||||
| Property | 1,041,524 | 3,894,131 | ||||||
| Biohealth | 617,471 | 1,712,783 | ||||||
| Other | 60,660 | - | ||||||
| Total Revenue | 1,952,237 | 5,606,914 | ||||||
| Operating Expenses | ||||||||
| Cost of Revenue | 1,114,550 | 3,697,854 | ||||||
| General and Administrative | 2,491,228 | 2,312,505 | ||||||
| Total Operating Expenses | 3,605,778 | 6,010,359 | ||||||
| Operating Losses from Operations | (1,653,541 | ) | (403,445 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest Income | 172,400 | 30,632 | ||||||
| Interest Expense | - | (53,582 | ) | |||||
| Foreign Exchange Transaction Gain | 408,095 | 1,462,697 | ||||||
| Unrealized Loss on Securities Investment | (3,899,015 | ) | (9,535,009 | ) | ||||
| Realized Loss on Securities Investment | (3,436,783 | ) | (258,245 | ) | ||||
| Loss on Investment on Security by Equity Method | (136,380 | ) | (24,847 | ) | ||||
| Finance Costs | (448,008 | ) | (582,868 | ) | ||||
| Other Income | 1,284,893 | 11,256 | ||||||
| Total Other Expense, Net | (6,054,798 | ) | (8,949,966 | ) | ||||
| Net Loss Income Before Income Taxes | (7,708,339 | ) | (9,353,411 | ) | ||||
| Income Tax Expense | (222,114 | ) | (451,337 | ) | ||||
| Net Loss | (7,930,453 | ) | (9,804,748 | ) | ||||
| Net Loss Attributable to Non-Controlling Interest | (1,463,167 | ) | (3,569,112 | ) | ||||
| Net Loss Attributable to Common Stockholders | $ | (6,467,286 | ) | $ | (6,235,636 | ) | ||
| Other Comprehensive Loss, Net | ||||||||
| Unrealized Loss on Securities Investment | (9,123 | ) | (1,987 | ) | ||||
| Foreign Currency Translation Adjustment | (649,140 | ) | (1,769,440 | ) | ||||
| Comprehensive Loss | (8,588,716 | ) | (11,576,175 | ) | ||||
| Comprehensive Loss Attributable to Non-controlling Interests | (1,085,395 | ) | (4,328,924 | ) | ||||
| Comprehensive Loss Attributable to Common Stockholders | $ | (7,503,321 | ) | $ | (7,247,251 | ) | ||
| Net Loss Per Share - Basic and Diluted | $ | (0.07 | ) | $ | (0.73 | ) | ||
| Weighted Average Common Shares Outstanding - Basic and Diluted | 99,184,657 | 8,572,222 | ||||||
See accompanying notes to condensed consolidated unaudited financial statements.
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2022
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Alset EHome International Stockholders’ Equity | Non-Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | - | $ | - | - | $ | - | 87,368,446 | $ | 87,368 | $ | 296,181,977 | $ | 341,646 | $ | (148,233,473 | ) | $ | 148,377,518 | $ | 21,912,268 | $ | 170,289,786 | ||||||||||||||||||||||||||
| Issuance of Stock by Exercising Warrants | - | - | - | - | 15,819,452 | 15,820 | (11,925 | ) | - | - | 3,895 | - | 3,895 | |||||||||||||||||||||||||||||||||||
| Convert Related Party Note to Common Stock | - | - | - | - | 10,000,000 | 10,000 | 6,203,000 | - | - | 6,213,000 | - | 6,213,000 | ||||||||||||||||||||||||||||||||||||
| Deconsolidate Alset Capital Acquisition | - | - | - | - | - | - | 17,160,800 | - | - | �� | 17,160,800 | 2,227,744 | 19,388,544 | |||||||||||||||||||||||||||||||||||
| Gain from Purchase of DSS Stock | - | - | - | - | - | - | 737,572 | - | - | 737,572 | - | 737,572 | ||||||||||||||||||||||||||||||||||||
| Beneficial Conversion Feature Intrinsic Value, Net | - | - | - | - | - | - | 450,000 | - | - | 450,000 | - | 450,000 | ||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interests | - | - | - | - | - | - | (316,459 | ) | 459,069 | - | 142,610 | (142,610 | ) | - | ||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | - | - | - | - | (7,027 | ) | - | (7,027 | ) | (2,096 | ) | (9,123 | ) | ||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | - | - | (499,967 | ) | - | (499,967 | ) | (149,173 | ) | (649,140 | ) | ||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (6,467,286 | ) | (6,467,286 | ) | (1,463,167 | ) | (7,930,453 | ) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | - | $ | - | - | $ | - | 113,187,898 | $ | 113,188 | $ | 320,404,965 | $ | 293,721 | $ | (154,700,759 | ) | $ | 166,111,115 | $ | 22,382,966 | $ | 188,494,081 | ||||||||||||||||||||||||||
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2021
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Alset EHome International Stockholders’ Equity | Non-Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2021 (As Combined) | - | $ | - | - | $ | - | 8,570,000 | $ | 8,570 | $ | 102,339,666 | $ | 2,143,338 | $ | (44,793,713 | ) | $ | 59,697,861 | $ | 37,980,325 | $ | 97,678,186 | ||||||||||||||||||||||||||
| Beginning balance, value | - | $ | - | - | $ | - | 8,570,000 | $ | 8,570 | $ | 102,339,666 | $ | 2,143,338 | $ | (44,793,713 | ) | $ | 59,697,861 | $ | 37,980,325 | $ | 97,678,186 | ||||||||||||||||||||||||||
| Issuance of Stock for Services | - | - | 10,000 | 10 | 60,890 | 60,900 | 60,900 | |||||||||||||||||||||||||||||||||||||||||
| Transactions under Common Control | - | - | - | (57,190,499 | ) | (57,190,499 | ) | (57,190,499 | ) | |||||||||||||||||||||||||||||||||||||||
| Sale of Vivacitas to Related Party | - | - | - | 2,279,872 | 2,279,872 | 2,279,872 | ||||||||||||||||||||||||||||||||||||||||||
| Purchase Stock of True Partner from Related Party | - | - | - | 3,274,060 | 3,274,060 | 3,274,060 | ||||||||||||||||||||||||||||||||||||||||||
| Beneficial Conversion Feature Intrinsic Value, Net | - | - | - | 50,770,192 | 50,770,192 | 50,770,192 | ||||||||||||||||||||||||||||||||||||||||||
| Subsidiary’s Issuance of Stock | - | - | - | 46,099 | 46,099 | 34,677 | 80,776 | |||||||||||||||||||||||||||||||||||||||||
| Proceeds from Selling Subsidiary Equity | - | 142,675 | 142,675 | 107,325 | 250,000 | |||||||||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | 76,412 | (39,067 | ) | 37,345 | (37,345 | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Change in Unrealized Gain on Investment | - | (1,135 | ) | (1,135 | ) | (852 | ) | (1,987 | ) | |||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | (1,010,527 | ) | (1,010,527 | ) | (758,913 | ) | (1,769,440 | ) | |||||||||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling Shareholders | - | (82,250 | ) | (82,250 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | (6,235,636 | ) | (6,235,636 | ) | (3,569,112 | ) | (9,804,748 | ) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | - | $ | - | - | $ | - | 8,580,000 | $ | 8,580 | $ | 101,799,367 | $ | 1,092,609 | $ | (51,029,349 | ) | $ | 51,871,207 | $ | 33,673,855 | $ | 85,545,062 | ||||||||||||||||||||||||||
| Ending balance, value | - | $ | - | - | $ | - | 8,580,000 | $ | 8,580 | $ | 101,799,367 | $ | 1,092,609 | $ | (51,029,349 | ) | $ | 51,871,207 | $ | 33,673,855 | $ | 85,545,062 | ||||||||||||||||||||||||||
See accompanying notes to condensed consolidated unaudited financial statements.
| F-3 |
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 20222023 and 20212022
(Unaudited)
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss from Operations | $ | (4,323,182 | ) | $ | (7,930,453 | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | 288,100 | 13,580 | ||||||
| Amortization of Right-Of-Use Assets | 199,193 | 157,068 | ||||||
| Amortization of Debt Discount | - | 450,000 | ||||||
| Foreign Exchange Transaction Loss (Gain) | 788,302 | (408,630 | ) | |||||
| Unrealized Loss on Securities Investment | 2,484,117 | 395,141 | ||||||
| Unrealized (Gain) Loss on Securities Investment - Related Party | (1,296,271 | ) | 3,503,874 | |||||
| Realized Loss on Securities Investment | 131,313 | 3,436,783 | ||||||
| Loss on Equity Method Investment | 268,276 | 136,380 | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Real Estate | (3,192,223 | ) | (336,426 | ) | ||||
| Account Receivables | 108,771 | 19,416 | ||||||
| Prepaid Expense | 42,330 | 679,069 | ||||||
| Trading Securities | (550,307 | ) | 4,068,011 | |||||
| Inventory | 555 | 10,902 | ||||||
| Accounts Payable and Accrued Expenses | 2,028,362 | (8,792,327 | ) | |||||
| Other Receivables - Related Parties | (57,500 | ) | - | |||||
| Deferred Revenue | (21,198 | ) | (508,328 | ) | ||||
| Operating Lease Liability | (187,721 | ) | (153,692 | ) | ||||
| Builder Deposits | - | (31,553 | ) | |||||
| Net Cash Used in Operating Activities | (3,289,083 | ) | (5,291,185 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Fixed Assets | (8,277 | ) | (3,665 | ) | ||||
| Purchase of Real Estate Properties | - | (722,817 | ) | |||||
| Purchase of Investment Securities | (412,500 | ) | (6,585,294 | ) | ||||
| Issuing Loan Receivable - Related Party | (1,521,368 | ) | - | |||||
| Proceeds from Loan Receivable - Related Party | 2,613,629 | - | ||||||
| Net Cash Provided by (Used in) Investing Activities | 671,484 | (7,311,776 | ) | |||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Common Stock Issuance | 3,433,921 | - | ||||||
| Conversion of Related Party Note to Common Stock | - | 6,213,000 | ||||||
| Repayment to Notes Payable | - | (168,360 | ) | |||||
| Net Cash Provided by Financing Activities | 3,433,921 | 6,044,640 | ||||||
| Net Increase (Decrease) in Cash and Restricted Cash | 816,322 | (6,558,321 | ) | |||||
| Effects of Foreign Exchange Rates on Cash | (59,129 | ) | (197,705 | ) | ||||
| Cash and Restricted Cash - Beginning of Period | 18,521,903 | 60,802,179 | ||||||
| Cash and Restricted Cash- End of Period | $ | 19,279,096 | $ | 54,046,153 | ||||
| Cash | $ | 18,675,450 | $ | 51,520,971 | ||||
| Restricted Cash | $ | 603,646 | $ | 2,525,182 | ||||
| Total Cash and Restricted Cash | $ | 19,279,096 | $ | 54,046,153 | ||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | 1,003 | $ | 1,524 | ||||
| Cash Paid for Taxes | $ | - | $ | - | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Unrealized Gain (Loss) on Investment | $ | - | $ | 728,449 | ||||
| Initial Recognition of ROU / Lease Liability | $ | 157,647 | $ | - | ||||
| Deconsolidate Alset Capital Acquisition | $ | - | $ | 19,388,544 | ||||
| Amortization of Debt Discount | $ | - | $ | 450,000 | ||||
| Issuance of Stock by Exercising Warrants | $ | - | $ | 3,895 | ||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss from Operations | $ | (7,930,453 | ) | $ | (9,804,748 | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | 13,580 | 7,873 | ||||||
| Amortization of Right-Of-Use Asset | 157,068 | 81,013 | ||||||
| Amortization of Debt Discount | 450,000 | 553,961 | ||||||
| Shared-based Compensation & Expense | - | 134,192 | ||||||
| Foreign Exchange Transaction Gain | (408,630 | ) | (1,462,697 | ) | ||||
| Unrealized Loss on Securities Investment | 3,899,015 | 9,548,251 | ||||||
| Realized Loss on Securities Investment | 3,436,783 | - | ||||||
| Loss on Equity Method Investment | 133,983 | 24,847 | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Real Estate | (336,426 | ) | 441,764 | |||||
| Account Receivables | 19,416 | 203,816 | ||||||
| Prepaid Expense | 679,069 | (1,458,620 | ) | |||||
| Trading Securities | 4,068,011 | (2,452,754 | ) | |||||
| Inventory | 10,902 | 77,709 | ||||||
| Accounts Payable and Accrued Expenses | (8,792,327 | ) | 596,355 | |||||
| Accrued Interest - Related Parties | - | 41,239 | ||||||
| Deferred Revenue | (508,328 | ) | 563,667 | |||||
| Operating Lease Liability | (153,692 | ) | (66,954 | ) | ||||
| Builder Deposits | (31,553 | ) | (333,771 | ) | ||||
| Net Cash Used in Operating Activities | (5,293,582 | ) | (3,304,857 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Fixed Assets | (3,665 | ) | (3,767 | ) | ||||
| Purchase of Real Estate Properties | (722,817 | ) | - | |||||
| Purchase of Investment Securities | (6,585,294 | ) | (108,208 | ) | ||||
| Sales of Investment Securities to Related Party | - | 2,480,000 | ||||||
| Promissory Note to Related Party | - | (15,489 | ) | |||||
| Net Cash (Used in) Provided by Investing Activities | (7,311,776 | ) | 2,352,536 | |||||
| Cash Flows from Financing Activities | ||||||||
| Conversion of Related Party Note to Common Stock | 6,213,000 | - | ||||||
| Proceeds from Exercise of Subsidiary Warrants | - | 7,484 | ||||||
| Proceeds from Sale of Subsidiary Shares | - | 250,000 | ||||||
| Borrowing from PPP Loan | - | 68,502 | ||||||
| Distribution to Non-controlling Interest Shareholders | - | (82,250 | ) | |||||
| Repayment to Notes Payable | (168,360 | ) | - | |||||
| Repayment to Notes Payable - Related Parties | - | (1,200,000 | ) | |||||
| Net Cash Provided by (Used in) Financing Activities | 6,044,640 | (956,264 | ) | |||||
| Net Decrease in Cash and Restricted Cash | (6,560,718 | ) | (1,908,585 | ) | ||||
| Effects of Foreign Exchange Rates on Cash | (195,308 | ) | (31,788 | ) | ||||
| Cash and Restricted Cash - Beginning of Year | 60,802,179 | 31,235,456 | ||||||
| Cash and Restricted Cash- End of Period | $ | 54,046,153 | $ | 29,295,083 | ||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | 1,524 | $ | 6,627 | ||||
| Cash Paid for Taxes | $ | - | $ | 45,410 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Unrealized Gain (Loss) on Investment | $ | 728,449 | $ | (1,987 | ) | |||
| Initial Recognition of ROU / Lease Liability | $ | - | $ | 256,928 | ||||
| Acquiring True Partner Stock | $ | - | $ | 10,003,689 | ||||
| Sale of Investment in Vivacitas to Related Party | $ | - | $ | 2,279,872 | ||||
| Deconsolidate Alset Capital Acquisition | $ | 19,388,544 | $ | - | ||||
| Intrinsic Value of BCF | $ | 450,000 | $ | - | ||||
| Issuance of Stock by Exercising Warrants | $ | 3,895 | $ | - | ||||
| Transactions under Common Control | $ | - | $ | 57,190,499 | ||||
See accompanying notes to condensed consolidated unaudited financial statements.
| F-4 |
Alset EHome International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 20222023 and 20212022
(Unaudited)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Alset EHome International Inc. (the “Company” or “AEI”), formerly known as Alset EHome International Inc. and HF Enterprises Inc., was incorporated in the State of Delaware on March 7, 2018 and shares of common stock2018. On October 4, 2022, through a merger transaction, the Company was issued to Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company.reincorporated in Texas. 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 and South Korea. The Company manages its principalWe manage a significant portion of our businesses primarily through itsour 85.4% owned subsidiary, Alset International Limited (“Alset International”, f.k.a. Singapore eDevelopment Limited)), a public company publicly traded on the Singapore Stock Exchange.
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, 20222023 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, 20212022 filed on March 31, 2022.2023.
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 50% of the voting common stock and controls operations. All intercompany transactions and balances among consolidated subsidiaries have been eliminated.
| 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, 20222023 and December 31, 2021,2022, as follows:
SCHEDULE OF SUBSIDIARIES
| Attributable interest as of, | Attributable interest as of, | |||||||||||||||||||
| Name of subsidiary consolidated under AEI | State or other jurisdiction of incorporation or organization | March 31, 2022 | December 31, 2021 | State or other jurisdiction of incorporation or organization | March 31, 2023 | December 31, 2022 | ||||||||||||||
| % | % | % | % | |||||||||||||||||
| Alset Global Pte. Ltd. | Singapore | 100 | 100 | Singapore | 100 | 100 | ||||||||||||||
| Alset Business Development Pte. Ltd. | Singapore | 100 | 100 | Singapore | 100 | 100 | ||||||||||||||
| Global eHealth Limited | Hong Kong | 100 | 100 | Hong Kong | 100 | 100 | ||||||||||||||
| Alset International Limited | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Singapore Construction & Development Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Art eStudio Pte. Ltd. | Singapore | 39.3 | * | 39.2 | * | Singapore | 43.6 | * | 43.6 | * | ||||||||||
| Singapore Construction Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Global BioMedical Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Alset Innovation Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Health Wealth Happiness Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| SeD Capital Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| LiquidValue Asset Management Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Alset Solar Limited | Hong Kong | 77.0 | 76.8 | Hong Kong | 85.4 | 85.4 | ||||||||||||||
| Alset F&B One Pte. Ltd | Singapore | 69.3 | 69.2 | Singapore | 76.9 | 76.9 | ||||||||||||||
| Global TechFund of Fund Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | - | 100 | ||||||||||||||
| Singapore eChainLogistic Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | - | 100 | ||||||||||||||
| BMI Capital Partners International Limited. | Hong Kong | 77.0 | 76.8 | Hong Kong | 85.4 | 85.4 | ||||||||||||||
| SeD Perth Pty. Ltd. | Australia | 77.0 | 76.8 | Australia | 85.4 | 85.4 | ||||||||||||||
| SeD Intelligent Home Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| LiquidValue Development Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| Alset EHome Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| SeD USA, LLC | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| 150 Black Oak GP, Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| SeD Development USA Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| 150 CCM Black Oak, Ltd. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| SeD Texas Home, LLC | United States of America | 77.0 | 76.8 | United States of America | 100 | 85.4 | ||||||||||||||
| SeD Ballenger, LLC | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| SeD Maryland Development, LLC | United States of America | 64.3 | 64.2 | United States of America | 71.4 | 71.4 | ||||||||||||||
| SeD Development Management, LLC | United States of America | 65.5 | 65.3 | United States of America | 72.6 | 72.6 | ||||||||||||||
| SeD Builder, LLC | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| GigWorld Inc. | United States of America | 76.8 | 76.6 | |||||||||||||||||
| Hapi Metaverse Inc. (f.k.a. GigWorld Inc.) | United States of America | 99.7 | 99.7 | |||||||||||||||||
| HotApp BlockChain Pte. Ltd. | Singapore | 76.8 | 76.6 | Singapore | 99.7 | 99.7 | ||||||||||||||
| HotApp International Limited | Hong Kong | 76.8 | 76.6 | Hong Kong | 99.7 | 99.7 | ||||||||||||||
| HWH International, Inc. (Delaware) | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| Health Wealth & Happiness Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 85.4 | 85.4 | |||||||||||||||||
| SeD REIT Inc. | United States of America | 85.4 | 85.4 | |||||||||||||||||
| Gig Stablecoin Inc. | United States of America | 99.7 | 99.7 | |||||||||||||||||
| HWH World Inc. (Delaware) | United States of America | 99.7 | 99.7 | |||||||||||||||||
| HWH World Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||||||||||||
| UBeauty Limited | Hong Kong | 85.4 | 85.4 | |||||||||||||||||
| WeBeauty Korea Inc | Korea | 85.4 | 85.4 | |||||||||||||||||
| HWH World Limited | Hong Kong | 85.4 | 85.4 | |||||||||||||||||
| HWH World Inc. | Korea | 85.4 | 85.4 | |||||||||||||||||
| GDC REIT Inc. | United States of America | 85.4 | 85.4 | |||||||||||||||||
| BioHealth Water Inc. | United States of America | 85.4 | 85.4 | |||||||||||||||||
| Impact BioHealth Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||||||||||||
| American Home REIT Inc. | United States of America | 100 | 85.4 | |||||||||||||||||
| Alset Solar Inc. | United States of America | 68.3 | 68.3 | |||||||||||||||||
| HWH KOR Inc. | United States of America | 85.4 | 85.4 | |||||||||||||||||
| Open House Inc. | United States of America | 100 | 100 | |||||||||||||||||
| Open Rental Inc. | United States of America | 100 | 100 | |||||||||||||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| SeD REIT Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Gig Stablecoin Inc. | United States of America | 76.8 | 76.6 | |||||||||||||||||
| HWH World Inc. | United States of America | 76.8 | 76.6 | |||||||||||||||||
| HWH World Pte. Ltd. | Singapore | 76.8 | 76.6 | |||||||||||||||||
| UBeauty Limited | Hong Kong | 77.0 | 76.8 | |||||||||||||||||
| WeBeauty Korea Inc | Korea | 77.0 | 76.8 | |||||||||||||||||
| HWH World Limited | Hong Kong | 77.0 | 76.8 | |||||||||||||||||
| HWH World Inc. | Korea | 77.0 | 76.8 | |||||||||||||||||
| Alset BioHealth Pte. Ltd. | Singapore | 77.0 | 76.8 | |||||||||||||||||
| Alset Energy Pte. Ltd. | Singapore | 77.0 | 76.8 | |||||||||||||||||
| Alset Payment Inc. (now known as GDC REIT Inc.) | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Alset World Pte. Ltd. | Singapore | 77.0 | 76.8 | |||||||||||||||||
| BioHealth Water Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Impact BioHealth Pte. Ltd. | Singapore | 77.0 | 76.8 | |||||||||||||||||
| American Home REIT Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Alset Solar Inc. | United States of America | 61.6 | 61.5 | |||||||||||||||||
| HWH KOR Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Open House Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Open Rental Inc. | United States of America | 77.0 | 76.8 | |||||||||||||||||
| Hapi Cafe Inc. (Nevada) | United States of America | 77.0 | 76.8 | United States of America | 100 | 100 | ||||||||||||||
| Global Solar REIT Inc. | United States of America | 77.0 | 76.8 | United States of America | 100 | 100 | ||||||||||||||
| OpenBiz Inc. | United States of America | 77.0 | 76.8 | United States of America | 100 | 100 | ||||||||||||||
| Hapi Cafe Inc. (Texas) | United States of America | 100 | 100 | United States of America | 85.4 | 85.4 | ||||||||||||||
| HWH (S) Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| True Partner International Limited | Hong Kong | 100 | 100 | |||||||||||||||||
| LiquidValue Development Pte. Ltd. | Singapore | 100 | 100 | Singapore | 100 | 100 | ||||||||||||||
| LiquidValue Development Limited | Hong Kong | 100 | 100 | Hong Kong | 100 | 100 | ||||||||||||||
| EPowerTech Inc. | United States of America | 100 | 100 | United States of America | 100 | 100 | ||||||||||||||
| Alset EPower Inc. | United States of America | 100 | 100 | United States of America | 100 | 100 | ||||||||||||||
| AHR Asset Management Inc. | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| HWH World Inc. (Nevada) | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| Alset F&B Holdings Pte. Ltd. | Singapore | 77.0 | 76.8 | Singapore | 85.4 | 85.4 | ||||||||||||||
| Credas Capital Pte. Ltd. | Singapore | 38.5 | * | 38.4 | * | Singapore | 42.7 | * | 42.7 | * | ||||||||||
| Credas Capital GmbH | Switzerland | 38.5 | * | 38.4 | * | Switzerland | 42.7 | * | 42.7 | * | ||||||||||
| Smart Reward Express Limited | Hong Kong | 38.4 | * | 38.3 | * | Hong Kong | 49.8 | * | 49.8 | * | ||||||||||
| Partners HWH Pte. Ltd. | Singapore | 77.0 | 76.8 | |||||||||||||||||
| AHR Texas Two LLC | United States of America | 77.0 | 76.8 | United States of America | 100 | 85.4 | ||||||||||||||
| AHR Black Oak One LLC | United States of America | 77.0 | 76.8 | United States of America | 85.4 | 85.4 | ||||||||||||||
| Hapi Air Inc. | United States of America | 88.5 | 88.4 | United States of America | 92.7 | 92.7 | ||||||||||||||
| AHR Texas Three, LLC | United States of America | 77.0 | 76.8 | United States of America | 100 | 85.4 | ||||||||||||||
| Alset Capital Pte. Ltd. | Singapore | 100 | 100 | Singapore | 100 | 100 | ||||||||||||||
| Hapi Cafe Korea, Inc. | Korea | 100 | 100 | Korea | 85.4 | 85.4 | ||||||||||||||
| Green Energy Inc. | United States of America | 100 | 100 | United States of America | 100 | 100 | ||||||||||||||
| Green Energy Management Inc. | United States of America | 100 | 100 | United States of America | 100 | 100 | ||||||||||||||
| Alset Metaverse Inc. | United States of America | 95.6 | 95.6 | United States of America | 97.2 | 97.2 | ||||||||||||||
| Alset Management Group Inc. | United States of America | 79.7 | 88.2 | United States of America | 83.4 | 83.4 | ||||||||||||||
| Alset Acquisition Sponsor, LLC | United States of America | 79.7 | 79.6 | United States of America | 93.4 | 93.4 | ||||||||||||||
| Alset Capital Acquisition Corp. | United States of America | 23.4 | 79.6 | |||||||||||||||||
| Alset Spac Group Inc. | United States of America | 79.7 | 79.6 | United States of America | 93.4 | 93.4 | ||||||||||||||
| Alset Mining Pte. Ltd. | Singapore | 77.0 | - | Singapore | 85.4 | 85.4 | ||||||||||||||
| Alset Inc. | United States of America | 100 | - | |||||||||||||||||
| Hapi Travel Pte. Ltd. | Singapore | 77.0 | - | Singapore | 85.4 | 85.4 | ||||||||||||||
| Hapi WealthBuilder Pte. Ltd. | Singapore | 77.0 | - | Singapore | 85.4 | 85.4 | ||||||||||||||
| HWH Marketplace Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||||||||||||
| HWH International Inc. (Nevada) | United States of America | 85.4 | 85.4 | |||||||||||||||||
| Hapi Cafe SG Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||||||||||||
| Alset Reits Inc. | United States of America | 100 | 100 | |||||||||||||||||
| Robotic gHome Inc. | United States of America | 76.9 | 76.9 | |||||||||||||||||
| HWH Merger Sub, Inc. | United States of America | 85.4 | 85.4 | |||||||||||||||||
| Alset Home REIT Inc. | United States of America | 100 | 100 | |||||||||||||||||
| Hapi Metaverse Inc. (Texas) | United States of America | 99.7 | 99.7 | |||||||||||||||||
| Hapi Café Limited | Hong Kong | 99.7 | 99.7 | |||||||||||||||||
| MOC HK Limited | Hong Kong | 99.7 | 99.7 | |||||||||||||||||
| AHR Texas Four, LLC | United States of America | 100 | 100 | |||||||||||||||||
| Alset F&B (PLQ) Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||||||||||||
| Hapi Café Sdn. Bhd. | Malaysia | 51.3 | - | |||||||||||||||||
| Shenzhen Leyouyou Catering Management Co., Ltd. | China | 100 | 100 | |||||||||||||||||
| Dongguan Leyouyou Catering Management Co., Ltd. | China | 100 | - | |||||||||||||||||
| * | Although the Company indirectly holds percentage of shares of these entities less than 50%, the subsidiaries of the Company directly hold more than 50% of shares of these entities, and therefore, they are still consolidated into the Company. |
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 could also be allocated based on area method, the size of the lot compared to the total size of all lots in the project.
TransactionsWhen the Company purchases properties but does not receive the assessment information from the county, the Company allocates the values between Entities under Common Controlland 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. On March 31, 2023 and December 31, 2022 the Company adjusted $0 and $4,791,997 between building and land, respectively. During the three months ended March 31, 2023 and 2022, the Company adjusted depreciation expenses of $0 and $0, respectively.
On March 12, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company, for four proposed transactions, consisting of (i) purchase of certain warrants (the “Warrants”) to purchase 1,500,000,000 shares of Alset International Limited, which was valued at $28,363,966; (ii) purchase of all of the issued and outstanding stock of LiquidValue Development Pte Ltd. (“LVD”), which was valued at $173,395; (iii) purchase of ordinary shares in True Partner Capital Holding Limited (HKG: 8657) (“True Partner”), which was valued at $6,729,629; and (iv) purchase of shares of the common stock of American Pacific Bancorp Inc. (“APB”), which was valued at $28,653,138. The total amount of above four transactions was $63,920,129, payable on the Closing Date by the Company, in the convertible promissory notes (“Alset CPNs”), which, subject to the terms and conditions of the Alset CPNs and the Company’s shareholder approval, shall be convertible into shares of the Company’s common stock (“AEI Common Stock”), par value $ per share, at the conversion price of AEI’s Stock Market Price. AEI’s Stock Market Price shall be $ per share, equivalent to the average of the five closing per share prices of AEI’s Common Stock preceding January 4, 2021 as quoted by Bloomberg L.P. The above four acquisitions from Chan Heng Fai were transactions between entities under common control.
On October 15, 2020, American Pacific Bancorp (which subsequently became a majority-owned subsidiary of the Company) entered into an acquisition agreement to acquire 3,500,001 common shares of HengFeng Finance Limited (“HFL”), representing 100% of the common shares of HFL, in consideration for $1,500,000, to be satisfied by the issuance and allotment of shares of the Class A Common Stock of American Pacific Bancorp. HFL is incorporated in Hong Kong with limited liability. The principal activities of HFL are money lending, securities trading and investment. This transaction closed on April 21, 2021. This transaction between the Company and Chan Heng Fai is under common control of Chan Heng Fai.
The common control transactions resulted in the following basis of accounting for the financial reporting periods:
AEI’s stock price was $ on March 12, 2021, the commitment date. The Beneficial Conversion Feature (“BCF”) intrinsic value was $50,770,192 for the four convertible promissory notes and was recorded as debt discount of convertible notes after these transactions. The debt discount attributable to the BCF is amortized over period from issuance to the date that the debt becomes convertible using the effective interest method. If the debt is converted, the discount is amortized to finance cost in full immediately. On May 13, 2021 and June 14, 2021 all Alset CPNs of $63,920,128 and accrued interests of $306,438 were converted into shares of series B preferred stock and shares of common stock of the Company.
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. There were 0no cash equivalents as of March 31, 20222023 and December 31, 2021.2022.
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 $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans.loan. The fund wasfunds were required to remain as collateral for the loan until the loan is paid off in full and the loan agreement terminated. InOn March 15, 2022 approximately $2.3 million$2,300,000 was released from the accountcollateral, leaving approximately $300,000 as the loan was fully paid off and partially closed. The remaining $300,000 still remains in the restricted account as a collateral for outstanding letters of credit. The Company also maintainedhas an escrow account with M&T Bank to deposit a portion of cash proceeds from lot sales. The fundfunds in the escrow account waswere specifically to be used for the payment of the loan from M&T Bank. The fund wasfunds were required to remain in the escrow account for the loan payment until the loan agreement terminates. TheseIn May 2022 the funds are now freely accessible tofrom this escrow account were released and the Company.account closed. As of March 31, 20222023 and December 31, 2021,2022, the total balance of these two accounts was $2,082,860309,295 and $4,399,984309,219, respectively.
As a condition to the loan agreement with National Australian Bank Limited in conjunction with the Perth project, an Australian real estate development project, the Company iswas required to maintain Australian Dollar 50,000, in a non-interest-bearing account. As of March 31, 2022 and December 31, 2021, the account balance was $37,58036,316. In February 2022 the Company repaid the loan and $36,316, respectively. Thesethe funds will remain as collateral for the loans until paid in fulwere subsequently released.l.
The Company puts money into brokerage accounts specifically for equity investment. As of March 31, 20222023 and December 31, 2021,2022, the cash balance in these brokerage accounts was $404,742294,352 and $304,570385,304, respectively.
Account Receivables and Allowance for Doubtful Accounts
Account receivables is stated at amounts due from buyers, contractors, and all third parties, net of an allowance for doubtful accounts. As of March 31, 20222023 and December 31, 2021,2022, the balance of account receivables was $90,40754,976 and $39,62246,522, respectively. Approximately $0 and $2,500 of account receivables as of March 31, 2022 and December 31, 2021, respectively, was from DSS with a merchant agreement, under which the Company uses DSS credit card platform to collect money from our direct sales.
| F-8 |
The Company monitors its account receivables balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company uses its historical experience to estimate its allowance for doubtful account receivables. The Company’s allowance for doubtful accounts represents an estimate of the losses expected to be incurred based on specifically identified accounts as well as nonspecific amount, when determined appropriate. Generally, the amount of the allowance is primarily decided by division management’s historical experience, the delinquency trends, the resolution rates, the aging of receivables, the credit quality indicators and financial health of specific customers. As of March 31, 20222023 and December 31, 2021,2022, the allowance was $0.
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 DecemberMarch 31, 2021, inventory consisted of finished goods from HWH World Inc. As of March2023 and December 31, 2022, inventory consisted of finished goods from HWH WorldInternational Inc. and Hapi Cafe Korea Inc.its subsidiaries. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventories to net realizable value.
Investment Securities
Investment Securities at Fair Value
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. Holista CollTech Limited (“Holista”), Amarantus BioScience Holdings, Inc. (“AMBS”) and, True Partner Capital Holding Limited (“True Partner”) and Lucy Scientific Discovery Inc. (“Lucy”) are publicly traded companies. The Company does not have significant influence over Holista, AMBS, and True Partner and Lucy, as the Company is the beneficial owner of approximately 15.2% of common shares of Holista, 4.3% of the common shares of AMBS and less than 15.50.1% of common shares of True Partner.Partner and Lucy. The stock’s fair value is determined by quoted stock prices.
On April 12, 2021 the Company acquired common shares of Value Exchange International, Inc. (“Value Exchange International”), an OTC listed company, for an aggregate subscription price of $650,000. After the transaction the Company owns approximately 18% of Value Exchange International and does not have significant influence on it. The stock’s fair value is determined by quoted stock prices.
During the year ended December 31,Since 2021, the Company’s subsidiaries establishedhave maintained 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 reference to 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. Holista CollTech Limited (“Holista”), DSS, Inc. (“DSS”), New Electric CV Corporation (“NECV” formerly known as “American Premium Mining Corporation” (“APM”)) and American Premium Water CorpValue Exchange International Inc. (“APW”Value Exchange International” or “VEII”) 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 elect fair value accounting.
| ● | The Company has significant influence over DSS. As of March 31, | |
| ● | The Company has significant influence over | |
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| ● | The Company has significant influence over |
| F-9 |
On March 2, 2020 and October 29, 2021, the Company received warrants to purchase shares of American Medical REIT Inc. (“AMRE”), a related party private startup company, in conjunction with the Company lending two $200,000$200,000 promissory notes. For further details on this transaction, refer to Note 8 - Related Party Transactions, Note Receivable from a Related Party Company. As of March 31, 20222023 and December 31, 2021,2022, AMRE was a private company. Based on management’s analysis, the fair value of the AMRE warrants was $0 as of March 31, 2022 and December 31, 2021. In March 2022 both loans, together with warrants were converted into common shares of AMRE. After the conversion, the Company owns approximately 15.8% of AMRE.
The Company held a stock option to purchase shares of Vivacitas common stock at $ per share at any time prior to the date of a public offering by Vivacitas. As of December 31, 2020, Vivacitas was a private company. Based on management’s analysis, the fair value of the Vivacitas stock option was $0 as of December 31, 2020. On March 18, 2021 the Company sold the subsidiary holding the ownership and stock option in Vivacitas to an indirect subsidiary of DSS. For further details on this transaction, refer to Note 8 - Related Party Transactions, Sale of Investment in Vivacitas to DSS.
The Company accounts for certain of its investments in funds without readily determinable fair values in accordance with ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (“2015-07”). In the first quartersix months of 2022 the Company invested $$100,000 in Class A Shares of Novum Alpha Global Opportunity Digital Asset Fund I SP, a segregated portfolio of Novum Alpha SPC (“Novum Alpha Fund”). This fund invests in long-short digital assets. The Company subscribed in participating shares which are redeemable and non-voting. The Company closed the fund in July 2022 recording $74,827 loss on this investment.
On February 3, 2022 Alset Capital Acquisition Corp. (“Alset Capital”), a special purpose acquisition company sponsored by the Company and certain affiliates, closed its initial public offering of units at $per unit. As a result of the offering, the Company lost its majority ownership in Alset Capital and deconsolidated it. Upon deconsolidation, the Company elected to apply fair value accounting to measure the stocks and units’ value it owns. At March 31, 2022 the Company owned 23.4% of Alset Capital.
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 a similar investment 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.
The Company had an equity holding in Vivacitas Oncology Inc. (“Vivacitas”), a private company that is currently not listed on an exchange. We measured Vivacitas at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Our ownership in Vivacitas was sold on March 18, 2021 to DSS for $2,480,000. The difference of $2,279,872 between the selling price and our original investment cost was recorded as additional paid capital considering a related party transaction. For further details on this transaction, refer to Note 8 – Related Party Transactions, Sale of Investment in Vivacitas to DSS.
On September 8, 2020, the Company acquired shares, approximately 1.45% ownership, from Nervotec Pte Ltd (“Nervotec”), a private company, at the purchase price of $37,826. The Company applied ASC 321 and measured Nervotec at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
On September 30, 2020, the Company acquired shares, representing the ownership of approximately 19% ownership,, from HWH World Company Limited (f.k.a. Hyten Global (Thailand) Co., Ltd.) (“HWH World Co.”), a private company, at a purchase price of $42,562.
During 2021, the Company invested $19,609 in K Beauty Research Lab Co., Ltd (“K Beauty”) for 18% ownership.of such company. K Beauty was established for sourcing, developing and producing variety of Korea-made beauty products as well as Korea - originated beauty contents for the purpose of distribution to HWH’s membership distribution channel.
There has been no indication of impairment or changes in observable prices via transactions of similar securities and 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, but discloses the losses in the footnotes. 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 Group 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 less than 15.83.4% of American Medical REIT Inc. (“AMRE”) as of March 31,September 30, 2022, a startup REIT company concentrating on medical real estate. AMRE acquires state-of-the-art, purpose-built healthcare facilities and leases them to leading clinical operators with dominant market share under secure triple net leases. AMRE targets hospitals (both Critical Access and Specialty Surgical), Physician Group Practices, Ambulatory Surgical Centers, and other licensed medical treatment facilities. Chan Heng Fai, our Chairman and CEO, is the executive chairman and director of AMRE. LiquidValue did not invest equity but provided a loan to AMRE (for further details on this transaction, refer Note 8, Related Party Transactions). On balance sheet, the prorate loss from AMRE was not recorded as a liability because toDSS, of which we own 45.2% and have significant influence over, owns 80.8% of AMRE. Therefore, the Company is not liable for the obligations of AMRE and also not committed to provide additional financial support.
Joint Venture with Novum
On April 20, 2021, one of Company’s indirect subsidiaries, SeD Capital Pte. Ltd. (“SeD Capital”), entered into joint venture agreement with a digital asset management firm Novum Alpha Pte Ltd (“Novum”). Pursuant to this agreement, SeD Capital will own 50% of the issued and paid-up capital in the joint venture company, Credas Capital Pte. Ltd. (“Credas”) with the remaining 50% shareholding stake held by Novum. On the condensed consolidated balance sheet, the prorate loss from Credas was not recorded as a liability because the Company is not liable for the obligations of Credas and has not committed to provide additional financial support.significant influence on AMRE.
American Pacific Bancorp, Inc.
Pursuant to Securities Purchase Agreement from March 12, 2021 the Company purchased of shares of the common stock of American Pacific Bancorp Inc. (“APB”) and gained majority ownership in that entity. APB was consolidated into the Company under common control accounting (See Transactions between Entities under Common Control for details). On September 8, 2021 APB sold shares Series A Common Stock to DSS, Inc. for $40,000,200cash. As a result of the new share issuances, the Company’s ownership percentage of APB fell below 50% to 41.3%, and subsequently to 36.9% and the entity was deconsolidated in accordance with ASC 810-10. Upon deconsolidation the Company elected to apply the equity method accounting as the Company still retained significant influence. As a result of the deconsolidation, the Company recognized gain of approximately $28.2 millionmillion. . The gain represents the difference between the fair value of retained equity method investment of $30.8million and $2.6 million, the Company’s investment percentage of carrying amount of APB’s net assets of $2.9million. Considering the transaction was between related parties, the Company recorded the gain as additional paid in capital in its equity. From September 8 to DecemberDuring three months ended March 31, 2021,2023 the investment loss was $51,99917,749 . Duringand during three months ended March 31, 2022 the investment gain was $141,343. As of March 31, 20222023 and December 31, 2021,2022, the investment in APB was $30,942,47231,650,497 and $31,668,246, respectively.
Alset Capital Acquisition Corp.
On February 3, 2022, Alset Capital Acquisition Corp. (“Alset Capital”), a special purpose acquisition company (SPAC) sponsored by the Company and certain affiliates, closed its initial public offering of units at $ per unit (the “Offering”). At the same time the exercise of underwriters’ over-allotment option of additional units closed. The Company is majority owner of Alset Acquisition Sponsor, LLC, the sponsor (the “Sponsor”) of Alset Capital. On February 3, 2022, the Sponsor purchased units pursuant to a private placement for a purchase price of $4,737,500. Previously, the Sponsor had purchased shares of Class B common stock pursuant to a private placement for a purchase price of $25,000. After the Offering the Company holds 23.4% of Alset Capital. Chan Heng Fai, the Chairman and CEO of the Company, is the CEO and director of Alset Capital. In June 2022, the Company made an adjustment of $2,830,961 to Additional Paid in Capital and the fair value of investment in Alset Capital, and reversed the previously recorded unrealized loss of $237,578, because of the change of valuation methods of the investment on Class B Common Stock and units the company held. Initially, the Company used market trading prices of Class A common stock and units to calculate the fair value of these investment securities and recorded $237,578 unrealized loss on security investment during three months ended March 31, 2022. In June 2022, the Company determined the fair value of Class B common shares and units by using a put option model and a Monte Carlo simulation considering some restrictions and risks related to these securities the Company held. On September 30, 2022 the Company purchased the remaining 10% ownership in the Sponsor for $476,250 and currently owns 100% of it. During the three months ended March 31, 2023, the Company recorded investment loss of $45,199 by equity method. The Company’s investment in Alset Capital was $21,066,376 and $30,801,12921,111,575, as of March 31, 2023 and December 31, 2022, respectively.
| F-11 |
Ketomei Pte Ltd
On June 10, 2021 the Company’s indirect subsidiary Hapi Cafe Inc. (“Hapi Cafe”) lent $76,723$76,723 to Ketomei Pte Ltd (“Ketomei”). On March 21, 2022 Hapi Cafe entered into an agreement pursuant to which the principleprincipal of the loan together with accrued interest were converted into an investment in Ketomei. At the same time, Hapi Cafe invested an additional $179,595$179,595 in Ketomei. After the conversion and fund investment the Company now holds 28%28% of Ketomei. Ketomei is in the business of selling cooked food and drinks. As ofDuring three months ended March 31, 2023 and 2022 the Company recognized investment loss of $3,273was $53,199 and investment$3,273, respectively. Investment in Ketomei was $253,045$154,203 and $207,402 at March 31, 2021.2023 and December 31, 2022, respectively.
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.
The Company invested $50,000 in a convertible promissory note of Sharing Services Global Corporation (“Sharing Services Convertible Note”), a company quoted on the US OTC market. The value of the convertible note is estimated by management using a Black-Scholes valuation model. The fair value of the note was $6769,799 on December 31, 2021. The note was redeemed on July 14, 2022 and $9,79950,000 on March 31, 2022 and December 31, 2021, respectively.principal together with $28,636 accrued interests were received from Sharing Services.
On February 26, 2021, the Company invested approximately $88,599 in the convertible note of Vector Com Co., Ltd (“Vector Com”), a private company in South Korea. The interest rate is 2% per annum and maturity is two years. The conversion price is approximately $21.26 per common share of Vector Com. As of March 31, 2023 and December 31, 2022, the Managementour management estimated the fair value of the note to be $88,599, the initial transaction price.
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.
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.
HWH World Company Limited
HWH World Co. is a direct sales company in Thailand. The Company has a 19% ownership and lent a loan ofloaned $187,500 with zero interest and due on demand, to HWH World Co. The current level of equity in HWH World Co. is not sufficient to determine if HWH World Co. can operate on its own without additional subordinated financial support. The Company has a variable interest in HWH World Co. However, The, however, the Company is not deemed to absorb losses or receive benefits that could potentially be significant to HWH World Co. Ltd. The Company does not also have the ultimate power over the activities which can impact VIE’s economic performance, like developing company budgets or overseeing and controlling the management. The power to direct the activities are held by the manager in Thailand who owns 51% of the HWH World Co. Therefore, the Company is not a primary beneficiary of this VIE and does not consolidate it. On March 31, 20222023 and December 31, 20212022 variable interest and amount receivable in the non-consolidated VIE was $236,699 and $236,699, respectively, which represents the Company’s maximum risk of loss from non-consolidated VIE. The Company applied ASC 321 and measured HWH World Co. investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
| F-12 |
American Medical REIT Inc.
TheIn 2021 the Company hadowned 3.4% ownership inof AMRE and lentmade a loan in the amount of $8,350,000 to AMRE, as well as two loans of $200,000 each, and one loan of $8,350,000, all with 8% per annum interest rate. One of the $200,000 loans was due on March 3, 2022, the other one is due on October 29, 2024. The $8,350,000 loan is due on November 29, 2023. The Company has a variable interest in AMRE. However, the Company is not deemed to absorb losses or receive benefits that could potentially be significant to AMRE. The Company does not also have the ultimate power over the activities which can impact VIE’s economic performance, like developing company budgets or overseeing and controlling the management. The power to direct these activities are held by the AMRE’s largest shareholder which owns approximately 9380.8% of AMRE and AMRE’s management team. Therefore, the Company is not a primary beneficiary of this VIE and does not consolidate it. In March 2022, the Company converted both $200,000 loans and accrued interests, together with accompanying warrants into AMRE common shares. After the conversion the Company owns 15.8% of AMRE. On July 12, 2022, pursuant to Assignment and Assumption Agreement from February 25, 2022, as amended on July 12, 2022, the Company sold the $8,350,000 loan, together with accrued interest, to DSS for a purchase price of shares of DSS’s common stock. The loss from this transaction of $1,089,675 was calculated as the difference between the face value of promissory note together with accrued interest and the fair value of DSS stock on July 12, 2022, and was recorded under Other Expense in Statement of Operations. On March 31, 20222023 and December 31, 20212022 variable interest and amount receivable in the non-consolidated VIE was $8,350,0000 and $8,901,285, respectively, which represents the Company’s maximum risk of loss from non-consolidated 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 Financial Accounting Standards Board (“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 $0.42.5 million and $1.20.4 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
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, such as the project in Perth, Australia.Australia, which was completed during the year 2022. 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 not record impairment on any of its projects during the three months ended on March 31, 20222023 and 2021.2022.
Recent Agreements to Sell Lots
Agreement to Sell 110 Lots
On March 16, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company (“Rausch Coleman”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 110 single-family detached residential lots which comprise a section of the Lakes at Black Oak. The price of the lots and certain community enhancement fees the Seller will be entitled to receive are anticipated to equal an aggregate of $6,586,250.
| F-13 |
The closing of the sale of these 110 lots depends on the satisfaction of certain conditions set forth in the Purchase and Sale Agreement. There can be no assurance that such closings will be completed on the terms outlined herein or at all. Commencing on March 16, 2023, Rausch Coleman had a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, Rausch Coleman was entitled to decline to proceed with the closing of these transactions. Rausch Coleman did not exercise its right to decline, and pursuant to the Purchase and Sale Agreement, has made an additional deposit in escrow. Through the date hereof, Rausch Coleman has deposited $957,250 in escrow.
The Seller shall be required to complete certain improvements at the property at the Seller’s cost prior to the closing.
Agreement to Sell 189 Lots
On March 17, 2023, the Seller entered into a Contract of Sale (the “Contract of Sale”) with Davidson Homes, LLC, an Alabama limited liability company (“Davidson Homes”). Pursuant to the terms of the Contract of Sale, the Seller has agreed to sell approximately 189 single-family detached residential lots comprising an additional section of the Lakes at Black Oak. The price of the lots and certain community enhancement fees the Seller will be entitled to receive are anticipated to equal an aggregate of $10,022,500.
The closing of the transactions described in the Contract of Sale depends on the satisfaction of certain conditions set forth therein. There can be no assurance that such closings will be completed on the terms outlined herein or at all. Davidson Homes has agreed to purchase the lots in stages, comprising an initial closing of 94 lots, the remaining lots to be purchase on or before December 29, 2023. Commencing on March 17, 2023, Davidson Homes had a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, Davidson Homes was entitled to decline to proceed with the closing of these transactions. Davidson Homes did not exercise its right to decline, and pursuant to the Contract of Sale, has made an additional deposit in escrow. Through the date hereof, Davidson Homes has deposited $1,425,000 in escrow.
The Seller shall be required to complete certain improvements at the property at the Seller’s cost prior to the closing.
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. During the three months endedAs of March 31, 2022 and the year ended December 31, 2021,2022, the Company signed multipleowned 132 homes. The aggregate purchase agreements to acquire 3 and 109cost of all the homes is $30,998,258. These homes are located in Montgomery and Harris Counties, Texas, respectively. By March 31, 2022, all of the 112 homes were closed with an aggregate purchase cost of $25,663,582.Texas. All of these purchased homes are properties of our rental business.
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, improvements and existing leases 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 10 to 27.5 years, respectively, using the straight-line method.
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 months endended March 31, 20222023 and 2021.2022.
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. The Company adopted this new standard on January 1, 2018 under the modified retrospective method. The adoption of this new standard did not have a material effect on our financial statements.
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
The Company’s main 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. The builders enter into sales contracts with the Company before they take the lots. The prices and timeline are determined and agreed upon in the contracts. The 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 Ballenger project, which represented approximately 320% and 6932%, respectively, of the Company’s revenue in the three months ended on March 31, 20222023 and 2021,2022, is as follows:
| ● | 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. |
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. |
| F-15 |
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.
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 yearone-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, 2022,2023, the Company didn’tdid not recognize any deferred revenue and collected all rents due.
Sale of the Front Foot Benefit Assessments
We have established a front foot benefit (“FFB”) assessment on all of the NVR lots. This is a 30-year annual assessment allowed in Frederick County which requires homeowners to reimburse the developer for the costs of installing public water and sewer to the lots. These assessments become effective as homes are settled, at which time we can sell the collection rights to investors who will pay an upfront lump sum, enabling us to more quickly realize the revenue more quickly.revenue. The selling prices range from $3,000 to $4,500 per home depending on the type of the home. Our total revenue from the front foot benefit assessment is approximately $1$1 million. To recognize revenue of the FFB assessment, both our and NVR’s performance obligation musthave to be satisfied. Our performance obligation is completed once we complete the construction of water and sewer facility and close the lot sales with NVR, which inspects these water and sewer facility prior to close lot sales to ensure all specifications are met. NVR’s performance obligation is to sell homes they build to homeowners. Our FFB revenue is recognized on quarterly basis after NVR closes sales of homes to homeowners. The agreement with these FFB investors is not subject to amendment by regulatory agencies and thus our revenue from the FFB assessment is not either. During the three months ended on March 31, 20222023 and 2021,2022, we recognized revenue of $77,0120 and $107,07177,012 from the FFB assessment, respectively.assessments, respectively
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-16 |
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.
Biohealth
| ● | Product Direct Sales |
The Company’s net sales consist of product sales. The Company’s performance obligation is to transfer ownership of its products to its third-party independent distributors (“Distributors”).members. The Company generally recognizes revenue when product is shippeddelivered to its Distributors.
The Company’s Distributors may receive distributormembers. Revenue is recorded net of applicable taxes, allowances, which are comprised of discounts, rebates and wholesale commission payments from the Company. Distributor allowances resulting from the Company’s sales of its products to its Distributors are recorded against net sales because the distributor allowances represent discounts from the suggested retail price.
In addition to distributor allowances, the Company compensates its sales leader Distributors with leadership incentives for services rendered, relating to the development, retention, and management of their sales organizations. Leadership incentives are payable based on achieved sales volume, which are recorded in general and administrative expenses. The Company recognizes revenue when it ships products.refund or returns. The Company receives the net sales price in cash or through credit card payments at the point of sale.
If a Distributorany member returns a product to the Company on a timely basis, he/shethey may obtain a replacement product from the Company for such returned products. In addition,We do not have buyback program. However, when the Company maintainscustomer requests a buyback program pursuant to which it will repurchase products sold toreturn and management decides that the refund is necessary, we initiate the refund after deducting all the benefits that a Distributor whomember has decided to leave the business.earned. The returns are deducted from our sales revenue on our financial statements. Allowances for product and membership returns primarily in connection with the Company’s buyback program, are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale. Product and membership returns for the three months ended March 31, 2023 and 2022 were approximately $1,162 and $35,528, respectively.
| ● | Annual Membership |
The Company collects an annual membership fee from its Distributors.members. The fee is fixed, paid in full at the time ofupon joining the membership and non-refundable.membership; the fee is not refundable. The membership providesCompany’s performance obligation is to provide its members the member accessright to (a) purchase products at a discount,from the Company, (b) access to certain back-office services, (c) receive commissions for signing up new members, and (d) attend corporate events. The Company recognizes revenue associated withperformance obligation is satisfied over time, generally over the term of the membership over the period of the membership.agreement which is for a one-year period. Before the membership fee is recognized as revenue, it is recorded as deferred revenue. Deferred revenue relating to membership was $220,0150 and $728,34321,198 at March 31, 20222023 and December 31, 2021,2022, respectively. Starting in 2020 the revenue from sale of membership declined to $0 in 2022. The Company is currently working on a new membership model.
Other Businesses
| ● |
The Company, through Alset F&B One Pte. Ltd. (“Alset F&B”&B One”), and Alset F&B (PLQ) Pte. Ltd. (“Alset F&B PLQ”) each acquired a restaurant franchise licenselicenses at the end of 2021 and has2022 respectively, both of which have since commenced operations. This licenseThese licenses will 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 toast products, soft-boiled eggstraditional coffee and coffee.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.
| F-17 |
The cafes are operated by subsidiaries of HCI-T, namely Hapi Café SG Pte. Limited (“HCSG”) in Singapore and Hapi Café Korea Inc. (“HCKI”) 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 recent months the Company incorporated two new subsidiaries Shenzhen Leyouyou Catering Management Co., Ltd. and Dongguan Leyouyou Catering Management Co., Ltd. in the People’s Republic of China. Both 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.
| ● | Remaining performance obligations |
As of March 31, 20222023 and December 31, 2021,2022, there were no remaining performance obligations or continuing involvement, as all service obligations within the other business activities segment have been completed.
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. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services. During the three months ended on March 31, 20222023 and 2021,2022, the Company recorded $
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 and South Korea are maintained in their local currencies, the Singapore Dollar (S$), Hong Kong Dollar (HK$), Australian Dollar (“AUD”) and South Korean Won (“KRW”), 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 gainloss of $408,095788,302 and $1,462,697408,095 gain during the three months ended on March 31, 20222023 and 2021,2022, respectively. The foreign currency transactional gains and losses are recorded in operations.
Translation of consolidated entities’ financial statements
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. The Company’s entities with functional currency of S$, HK$, AUD and KRW, 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 lossgain of $649,1401,095,943 from foreign currency translation for the three months ended March 31, 20222023 and $1,769,440649,140 loss for the three months ended March 31, 2021,2022, in accumulated other comprehensive loss.
| F-18 |
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.
On March 31, 20222023 and December 31, 2021,2022, the aggregate non-controlling interests in the Company were $22,382,96610,703,531 and $21,912,26811,009,149, respectively.
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 estates.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 March 31, 20222023 and December 31, 2021,2022, the capitalized financing costs were $3,247,739.
Beneficial Conversion Features
The Company evaluates the conversion feature for whether it was beneficial as described in ASC 470-30. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.
Recent Accounting Pronouncements
Accounting pronouncement adopted
In October 2021, the FASB issued ASU No. 202108,2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021082021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, “Revenue from Contracts with Customers”. At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in this Updateupdate are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company adopted these requirements prospectively, effective on the first day of the year 2022.
Accounting pronouncement not yet adopted2023.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, and a modified retrospective approach is required, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In November of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company is currently evaluating the impact of ASU 2016-13 on its future consolidated financial statements.
| F-19 |
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Reference Rate Reform on Financial Reporting. The amendments in this Updateupdate provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Updateupdate apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company’s line of credit agreement provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable. The amendments in this Updateupdate are effective for all entities as of March 12, 2020 through December 31, 2022.2024. The Company is currently evaluating the impact ofdoes not believe that ASU 2020-04 will have significant impact on its future consolidated financial statements.
Accounting pronouncement not yet adopted
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2023 for smaller reporting companies, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its future consolidated financial statements.
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. As of March 31, 20222023 and December 31, 2021,2022, uninsured cash and restricted cash balances were $51,171,10816,354,869 and $57,905,30315,723,599, respectively.
For the three monthsyear ended MarchDecember 31, 2022, threetwo customers accounted for approximately 41%, 5281%, and 719% of the Company’s property development revenue. For the three months ended March 31, 2021, two customers accounted for approximately 97%, and3% of the Company’s property development revenue.
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 maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-maker is the CEO. The Company operates in and reports four business segments: real estate, digital transformation technology, biohealth, and other business activities. The Company’s reportable segments are determined based on the services they perform and the products they sell, not on the geographic area in which they operate. The Company’s chief operating decision maker evaluates segment performance based on segment revenue. 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.
| F-20 |
The following table summarizes the Company’s segment information for the following balance sheet dates presented, and for the three months ended March 31, 20222023 and 2021:2022:
SCHEDULE OF SEGMENT INFORMATION
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Three Months Ended on March 31, 2022 | ||||||||||||||||||||
| Revenue | $ | 1,274,106 | $ | - | $ | 617,471 | $ | 60,660 | $ | 1,952,237 | ||||||||||
| Cost of Sales | (1,093,709 | ) | - | (12,038 | ) | (8,803 | ) | (1,114,550 | ) | |||||||||||
| Gross Margin | 180,397 | - | 605,433 | 51,857 | 837,687 | |||||||||||||||
| Operating Expenses | (536,765 | ) | (114,263 | ) | (620,342 | ) | (1,219,858 | ) | (2,491,228 | ) | ||||||||||
| Operating Loss | (356,368 | ) | (114,263 | ) | (14,909 | ) | (1,168,001 | ) | (1,653,541 | ) | ||||||||||
| Other Income (Expense) | 98 | (455,000 | ) | (1,205,349 | ) | (4,394,547 | ) | (6,054,798 | ) | |||||||||||
| Net Loss Before Income Tax | (356,270 | ) | (569,263 | ) | (1,220,258 | ) | (5,562,548 | ) | (7,708,339 | ) | ||||||||||
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Three Months Ended on March 31, 2023 | ||||||||||||||||||||
| Revenue | $ | 633,811 | $ | 14,040 | $ | 12,786 | $ | 266,299 | $ | 926,936 | ||||||||||
| Cost of Sales | (602,340 | ) | (4,568 | ) | (14,367 | ) | (68,006 | ) | (689,281 | ) | ||||||||||
| Gross Margin | 31,471 | 9,472 | (1,581 | ) | 198,293 | 237,655 | ||||||||||||||
| Operating Expenses | (440,017 | ) | (139,903 | ) | (141,290 | ) | (1,606,175 | ) | (2,327,385 | ) | ||||||||||
| Operating Loss | (408,546 | ) | (130,431 | ) | (142,871 | ) | (1,407,882 | ) | (2,089,730 | ) | ||||||||||
| Other Income (Expense) | 45 | (1,061,068 | ) | 319,635 | (1,492,064 | ) | (2,233,452 | ) | ||||||||||||
| Net Loss Before Income Tax | (408,501 | ) | (1,191,499 | ) | 176,764 | (2,899,946 | ) | (4,323,182 | ) | |||||||||||
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||||||||||||||||||||||
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||||||||||||||||||||||
| Three Months Ended on March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended on March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 3,894,131 | $ | - | $ | 1,712,783 | $ | - | $ | 5,606,914 | $ | 1,274,106 | $ | - | $ | 617,471 | $ | 60,660 | $ | 1,952,237 | ||||||||||||||||||||
| Cost of Sales | (3,614,832 | ) | - | (83,022 | ) | - | (3,697,854 | ) | (1,093,709 | ) | - | (12,038 | ) | (8,803 | ) | (1,114,550 | ) | |||||||||||||||||||||||
| Gross Margin | 279,299 | - | 1,629,761 | - | 1,909,060 | 180,397 | - | 605,433 | 51,857 | 837,687 | ||||||||||||||||||||||||||||||
| Operating Expenses | (359,489 | ) | (30,128 | ) | (846,480 | ) | (1,076,408 | ) | (2,312,505 | ) | (536,765 | ) | (114,263 | ) | (620,342 | ) | (1,219,858 | ) | (2,491,228 | ) | ||||||||||||||||||||
| Operating (Loss) Income | (80,190 | ) | (30,128 | ) | 783,281 | (1,076,408 | ) | (403,445 | ) | (356,368 | ) | (114,263 | ) | (14,909 | ) | (1,168,001 | ) | (1,653,541 | ) | |||||||||||||||||||||
| Other Expense | (9,873 | ) | (36,471 | ) | (8,371,117 | ) | (532,505 | ) | (8,949,966 | ) | 98 | (455,000 | ) | (1,205,349 | ) | (4,394,547 | ) | (6,054,798 | ) | |||||||||||||||||||||
| Other Income (Expense) | 98 | (455,000 | ) | (1,205,349 | ) | (4,394,547 | ) | (6,054,798 | ) | |||||||||||||||||||||||||||||||
| Net Loss Before Income Tax | (90,063 | ) | (66,599 | ) | (7,587,836 | ) | (1,608,913 | ) | (9,353,411 | ) | (356,270 | ) | (569,263 | ) | (1,220,258 | ) | (5,562,548 | ) | (7,708,339 | ) | ||||||||||||||||||||
| �� | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Cash and Restricted Cash | $ | 4,613,299 | $ | 210,576 | $ | 2,443,494 | $ | 46,778,784 | $ | 54,046,153 | $ | 1,927,056 | $ | 400,473 | $ | 1,135,681 | $ | 15,815,886 | $ | 19,279,096 | ||||||||||||||||||||
| Total Assets | 53,290,942 | 1,708,769 | 9,199,987 | 128,630,889 | 192,830,587 | 70,151,426 | 3,122,276 | 4,501,219 | 77,914,561 | 155,689,482 | ||||||||||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Cash and Restricted Cash | $ | 7,493,921 | $ | 245,780 | $ | 2,629,464 | $ | 50,433,014 | $ | 60,802,179 | $ | 2,592,577 | $ | 514,260 | $ | 1,338,404 | $ | 14,076,662 | $ | 18,521,903 | ||||||||||||||||||||
| Total Assets | 55,465,600 | 2,199,466 | 11,056,779 | 115,488,298 | 184,210,143 | 57,951,324 | 3,184,416 | 4,861,615 | 87,492,981 | 153,490,336 | ||||||||||||||||||||||||||||||
5. REAL ESTATE ASSETS
As of March 31, 20222023 and December 31, 2021,2022, real estate assets consisted of the following:
SCHEDULE OF REAL ESTATE ASSETS
| March 31, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| Construction in Progress | $ | 7,319,106 | $ | 8,597,023 | $ | 17,987,471 | $ | 15,506,572 | ||||||||
| Land Held for Development | 8,130,264 | 7,098,104 | 7,943,126 | 7,943,126 | ||||||||||||
| Rental Properties, net | 25,402,436 | 24,820,253 | 31,641,452 | 31,169,031 | ||||||||||||
| Total Real Estate Assets | $ | 40,851,806 | $ | 40,515,380 | $ | 57,572,049 | $ | 54,618,729 | ||||||||
Single family residential properties
As of March 31, 20222023 and December 31, 2021,2022, the Company owned 112 and 109132 Single Family Residential Properties (“SFRs”) in Montgomery and Harris Counties, Texas, respectively.. The Company’s aggregate investment in those SFRs was $25.731 million. Depreciation expense was $140,635243,702 and $0140,635 in the three months ended March 31, 20222023 and 2022, respectively. These homes are located in Montgomery and Harris Counties, Texas.
The following table presents the summary of our SRFs as of March 31, 2022:2023:
SUMMARY OF SINGLE FAMILY RESIDENTIAL PROPERTIES
Number of Homes | Aggregate investment | Average Investment per Home | ||||||||||
| SFRs | 112 | $ | 25,663,582 | $ | 229,139 | |||||||
Number of Homes | Aggregate investment | Average Investment per Home | ||||||||||
| SFRs | 132 | $ | 31,641,452 | $ | 239,708 | |||||||
6. BUILDER DEPOSITS
In November 2015, SeD Maryland Development, LLC (“SeD Maryland”) entered into lot purchase agreements with NVR, Inc. (“NVR”) relating to the sale of single-family home and townhome lots to NVR in the Ballenger Run Project. The purchase agreements were amended three times thereafter. Based on the agreements, NVR iswas entitled to purchase lots for a price of approximately $64,000,000, which escalates 3%escalated 3% annually after June 1, 2018.2018.
As part of the agreements, NVR was required to give a deposit in the amount of $5,600,000. Upon the sale of lots to NVR, 9.9% of the purchase price is taken as payback of the deposit. A violation of the agreements by NVR would cause NVR to forfeit the deposit. On January 3, 2019 and April 28, 2020, NVR gave SeD Maryland two more deposits in the amounts of $100,000 and $220,000, respectively, based on the 3rd Amendment to the Lot Purchase Agreement. On March 31, 20222023 and December 31, 2021,2022, there was $0 and held on deposit. Remaining balance of $31,553 held on deposit, respectively.was repaid during 2022.
7. NOTES PAYABLE
As of March 31, 20222023 and December 31, 2021,2022, notes payable consisted of the following:
SCHEDULE OF NOTES PAYABLE
| March 31, 2022 | December 31, 2021 | |||||||
| PPP Loan | 68,502 | 68,502 | ||||||
| Australia Loan | - | 162,696 | ||||||
| Hire Purchase | 82,808 | 86,473 | ||||||
| Total notes payable | $ | 151,310 | $ | 317,671 | ||||
March 31, 2023 | December 31, 2022 | |||||||
| Motor Vehicle Loans | 178,819 | 181,846 | ||||||
| Total notes payable | $ | 178,819 | $ | 181,846 | ||||
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 $8,000,000, with a cumulative loan advance amount of $18,500,000. The line of credit bears interest rate of 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 will be 1.5% per annum on the face amount of the L/C. Other standard lender fees will 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 $2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. As of March 31, 2022,2023, the the outstanding balance of the revolving loan was $0. As part of the transaction, the Company incurred loan origination fees and closing fees in the amount of $381,823 and capitalized it into construction in process. On March 15, 2022, approximately $2,300,000 was released from collateral, leaving approximately $300,000 as collateral for outstanding letters of credit.
On June 18, 2020, Alset EHome Inc. (“Alset EHome”), a wholly owned subsidiary of LiquidValue Development Inc., entered into a Loan Agreement with Manufacturers and Traders Trust Company (the “Lender”).
Pursuant to the Loan Agreement, the Lender provided a non-revolving loan to Alset EHome in an aggregate amount of up to $2,990,000 (the “Loan”). The line of credit bears interest rate of LIBOR plus 375 basis points. Repayment of the Loan is secured by a Deed of Trust issued to the Lender on the property owned by certain subsidiaries of Alset EHome. The maturity date of this Loan is July 1, 2022. LiquidValue Development Inc. and one of its subsidiaries are guarantors of this Loan. The guarantors are required to maintain during the term of the loan a combined minimum net worth in an aggregate amount equal to not less than $20,000,000.
During the year ended December 31, 2020, Alset EHome borrowed $664,810 from M&T Bank, incurring at the same time a loan origination fees of $61,679 which were amortized over the term of the loan. As of December 31, 2020, the remaining unamortized debt discount was $42,906. The loan in the amount of $664,810, together with all accrued interests of $25,225, was paid off on May 28, 2021. The loan was closed in June 2021. Additionally, the debt discount of $42,907 was fully amortized during the year ended December 31, 2021.
Paycheck Protection Program Loan
On February 11, 2021, the Company entered into a five year note with M&T Bank with a principal amount of $68,502pursuant to the Paycheck Protection Program (“PPP Term Note”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan iswas evidenced by a promissory note. The PPP Term Note bears interest athad a fixed annual rate of 1.00%, with the first sixteen months of principal and interest deferred or until we applyapplied for the loan forgiveness. The PPP Term Note may be acceleratedwas subject to acceleration upon the occurrence of an event of default.
| F-22 |
The PPP Term Note iswas unsecured and guaranteed by the United States Small Business Administration. The Company applied to M&T Bank for forgiveness of the PPP Term Note, with the amount which may be forgiven equal to at least 60% of payroll costs and other eligible payments incurred by the Company, calculated in accordance with the terms of the CARES Act. As of March 31, 2022, we owed $68,502 to M&T Bank. In April 2022 the Company received confirmation that the loanPPP Loan was fully forgiven.
Australia Loan
On January 7, 2017, SeD Perth Pty Ltd (“SeD Perth”) entered into a loan agreement with National Australian Bank Limited (the “Australia Loan”) for the purpose of funding land development. The loan facility provides SeD Perth with access to funding of up to approximately $460,000 and matures on December 31, 2018. The Australia Loan is secured by both the land under development and a pledged deposit of $36,059.$36,059. This loan is denominated in AUD. Personal guarantees amounting to approximately $500,000 have been provided by our CEO, Chan Heng Fai and by Rajen Manicka, the CEO of Holista CollTech and Co-founder of iGalen Inc. The interest rate on the Australia Loan is based on the weighted average interest rates applicable to each of the business markets facility components as defined within the loan agreement, ranging from 4.484.12% to 4.494.86% per annum for the threenine months ended March 31, 2022 and from 4.12% to 4.58% per annum for the three months ended March 31,September 30, 2021. On September 7, 2017 the Australia Loan was amended to reduce the maximum borrowing capacity to approximately $179,000. During 2020, the terms of the Australia Loan were amended to reflect an extended maturity date of April 30, 2022. This was accounted for as a debt modification. The Company did not pay fees to the National Australian Bank Limited for the modification of the loan agreement. In February 2022, SeD Perth repaid the loan and is in the process of closing of the loan.
Singapore Car LoanMotor Vehicle Loans
On May 17, 2021, Alset International Limited entered into a Hire Purchase Agreementan agreement with Hong Leong Finance Limited to purchase a car for business. The total purchase price of the car, including associated charges, was approximately $184,596. Alset International paid an initial deposit of $78,640, and would make monthly instalment of approximately $1,300, including interest of 1.88% per annum,, for the 84 months.
On September 22, 2022 Alset International entered into an agreement with United Overseas Bank Limited to purchase additional car for business. The total purchase price of the car, including associated charges, was approximately $182,430. Alset International paid an initial deposit of $66,020 and would make monthly installments of approximately $1,472, including interest of 1.88% per annum, for the 84 months.
Future minimum principal payments under existing motor vehicle loans at March 31, 2023 in each calendar year through the end of their terms are as follows:
SCHEDULE OF FUTURE MINIMUM PAYMENTS
| 2024 | 30,545 | |||
| 2025 | 30,545 | |||
| 2026 | 30,545 | |||
| 2027 | 30,545 | |||
| 2028 | 30,545 | |||
| Thereafter | 26,094 | |||
| Total Future Receipts | $ | 178,819 |
8. RELATED PARTY TRANSACTIONS
Personal Guarantees by Directors
As of March 31, 2022 and December 31, 2021, a director of the Company had provided personal guarantees amounting to approximately $500,000, to secure external loans from financial institutions for AEI and the consolidated entities.
Purchase of Shares and Warrants from APWNECV
On July 17, 2020, the Company purchased shares, approximately 9.99% ownership, and warrants to purchase 1,220,390,000 warrantsshares with an exercise price of $0.0001 per share, from APW,NECV, for an aggregatedaggregate purchase price of $122,039. We value APWthe NECV warrants under level 3 category through a Black Scholes option pricing model and the fair value of the NECV warrants from APW were $860,342 as of July 17, 2020, the purchase date, $815,514389,910 as of March 31, 20222023 and $1,009,854327,565 as of December 31, 2021, respectively.2022. The difference of $ of fair value of stock and warrants, total $ and the purchase price $122,039, was recorded as additional paid in capital at December 31, 2021, as it was a related party transaction.
Sale of Investment in Vivacitas to DSS
On March 18, 2021, the Company sold equity investment in Vivacitas, a U.S.-based biopharmaceutical company, equaling to shares of common stock and a stock option to purchase shares of Vivacitas common stock at $ per share at any time prior to the date of a public offering, to a subsidiary of DSS for $2,480,000. Chan Heng Fai, CEO and the founder of our Company, holds a director position on both Vivacitas and DSS. After this transaction, we do not own any investment in Vivacitas. Our original cost of common stock and stock option of Vivacitas was $200,128. We did not recognize gain or loss in this transaction. The difference of $2,279,872 between the selling price and our original investment cost was recorded as additional paid capital considering it was a related party transaction.
Purchase and Sale of stockStock in True Partners Capital Holding Limited
On March 12, 2021, the Company purchased ordinary shares of True Partners Capital Holding Limited for $6,729,629 from a related party. The fair market value of such stock on the acquisition date was $10,003,689. The difference between the purchase price and the fair market value of $3,274,060 was recorded as an equity transaction on Company’s condensed consolidated statement of stockholders’ equity at December 31, 2021. Pursuant to a Stock Purchase Agreement from February 2022, the Company sold shares of True Partner to DSS Inc. (through the transfer of subsidiary and otherwise), for a purchase price of shares of common stock of DSS. DSS shareholders approved the Stock Purchase Agreement on May 17, 2022 (which is deemed to be the effective date of this transaction). The transaction loss of $446,104, which is the difference between the fair value of True Partner stock and fair value of DSS stock at the agreement’s effective date, was recorded as other expense in the Company’s Statement of Operations.
| F-23 |
Notes Payable
Chan Heng Fai provided an interest-free, due on demand advance to LiquidValue Development Pte. Ltd. and its subsidiary LiquidValue Development Limited for the general operations. As of March 31, 2022 and December 31, 2021, the outstanding balance was approximately $820,113.
Chan Heng Fai provided an interest-free, due on demand advance to Alset EHome International for the Company’s general operations. The advance was paid back during the year ended December 31, 2021 and as of March 31, 2022 and December 31, 2021, the outstanding balance was $0.
Chan Heng Fai provided an interest-free, due on demand advance to SeD Perth Pty. Ltd. for its general operations. As of March 31, 20222023 and December 31, 2021,2022, the outstanding balance was $ and $, respectively.
On August 20, 2020, the Company acquired common shares from Chan Heng Fai in exchange for a two-year non-interest bearing note of $1,333,429. During the year ended December 31, 2021, the Company paid back all $1,333,429 and as of March 31, 2022 and December 31, 2021 the amount outstanding was $0.
On March 12, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company, for four proposed transactions, consisting of (i) purchase of certain warrants (the “Warrants”) to purchase 1,500,000,000 shares of Alset International Limited, which was valued at $28,363,966; (ii) purchase of all of the issued and outstanding stock of LiquidValue Development Pte Ltd. (“LVD”), which was valued at $173,395; (iii) purchase of ordinary shares in True Partner Capital Holding Limited (HKG: 8657) (“True Partner”), which was valued at $6,729,629; and (iv) purchase of shares of the common stock of American Pacific Bancorp Inc. (“APB”), which was valued at $28,653,138. The total amount of above four transactions was $63,920,129, payable on the Closing Date by the Company, in the convertible promissory notes (“Alset CPNs”), which, subject to the terms and conditions of the Alset CPNs and the Company’s shareholder approval, shall be convertible into shares of the Company’s common stock (“AEI Common Stock”), at par value of $ per share, at the conversion price of AEI’s Stock Market Price. AEI’s Stock Market Price shall be $ per share, equivalent to the average of the five closing per share prices of AEI Common Stock preceding January 4, 2021 as quoted by Bloomberg L.P. AEI’s stock price was $ on March 12, 2021, the commitment date. The Beneficial Conversion Feature (“BCF”) intrinsic value was $50,770,192 for the four convertible promissory notes and was recorded as debt discount of convertible notes after the transaction. On May 13 and June 14, 2021 all Alset CPNs of $63,920,128 and accrued interests of $306,438 were converted into shares of series B preferred stock and shares of common stock of the Company.
On May 14, 2021, the Company borrowed S$7,395,472 Singapore Dollars (equal to approximately $5,545,495 U.S. Dollars) from Chan Heng Fai. The unpaid principal amount of the Loan is due and payable on May 14, 2022 and the Loan has no interest. The loan was paid back in full during 2021 and the outstanding balance was $0 as of March 31, 2022 and December 31, 2021.
Chan Heng Fai provided an interest-free, due on demand advance to HengFeng Finance LimitedHapi Metaverse Inc. for theits general operations. As of March 31, 20222023 and December 31, 2021,2022, the outstanding balance was $ and $, respectively..
Management Fees
MacKenzie Equity Partners, LLC, an entity owned by Charles MacKenzie, a Directorthe Chief Development Officer of the Company’s subsidiary LiquidValue Development,Company, has had a consulting agreement with a majority-owned subsidiary of the Company since 2015. PerPursuant to the terms of the agreement, as amended on January 1, 2018, the Company hasCompany’s subsidiary paid a monthly fee of $20,000 for these consulting services. Pursuant to an agreement entered into in June of 2022, the Company’s subsidiary has paid $25,000 per month for consulting services, effective as of January 2022.
In addition, MacKenzie Equity Partners will be paid certain bonuses, including (i) a sum of $50,000 on June 30, 2022; (ii) a sum of $50,000 upon the successful financing of 100 homes owned by American Housing REIT Inc. with an entity not affiliated with SeD Development Management LLC (a subsidiary of the Company); and (iii) a sum of $50,000 upon the successful leasing of 30 homes in the Alset of Black Oak development.
The Company incurred expenses of $60,00075,000 and $60,000 forin the three months ended March 31, 20222023 and 2021,2022, respectively, which were capitalized as part of Real Estate on the Company’s Condensed Consolidated Balance Sheetsbalance sheet as the services relate to property and project management. During 2021,In June 2022, MacKenzie Equity Partners was granted an additionalpaid $120,00050,000 bonus payment.payment (as described above). On March 31, 20222023 and December 31, 2021,2022, the Company owed this related party $ and $, respectively.
Notes Receivable from Related Party Companies
On March 2, 2020 and on October 29, 2021, LiquidValue Asset Management Pte. Ltd. (“LiquidValue”) received two $200,000 Promissory Notes and on October 29, 2021 Alset International received $8,350,000 Promissory Note from American Medical REIT Inc. (“AMRE”), a company which is 15.8% owned by LiquidValue as of March 31,September 30, 2022. Chan Heng Fai and Chan Tung Moe are directors of American Medical REIT Inc. The notes carry interestsinterest rates of 8% and are payable in two, three years and 25 months,, respectively. LiquidValue also received warrants to purchase AMRE shares at the exercise price of $5.00 per share. The amount of the warrants equals to the note principleprincipal divided by the exercise price. If AMRE goes to IPO in the future and IPO price is less than $10.00 per share, the exercise price shall be adjusted downward to fifty percent (50%) of the IPO priceprice.. In March 2022 the Company converted two $ loans, together with associated warrants into common shares of AMRE, and increased its ownership in AMRE from 3.4% to 15.8%. AsOn July 12, 2022, pursuant to Assignment and Assumption Agreement from February 25, 2022, as amended on July 12, 2022, the Company sold the $8,350,000 loan, together with accrued interest, to DSS for a purchase price of March 31, shares of DSS’s common stock. The loss from this transaction of $1,089,675 was calculated as the difference between the face value of promissory note together with accrued interest and the fair value of DSS stock on July 12, 2022, and December 31, 2021, the fair market value of the warrants was $0. The Company accrued $167,000 and $130,000 interest income as of March 31, 2022 and December 31, 2021, respectively.
On January 24, 2017, SeD Capital Pte Ltd, a 100% owned subsidiary of Alset International lent $350,000 to iGalen Inc. The term of the loan was two years, with an interest rate of 3% per annum for the first year and 5% per annum for the second year. The expiration term was renewed as due on demand after two years with 5% per annum interest rate. As of December 31, 2020, the outstanding principle was $350,000 and accrued interest $61,555. On December 31, 2021, the management of the Company evaluated the financial and the operation results of iGalen and concluded that possibility to repay this loan is not probable, and the principal and accrued interests total of $412,754was recorded as bad debt expense.under Other Expense in Statement of Operations.
As of March 31, 2023 and December 31, 2022, the Company provided advances for operation of $ to HWH World Co., a direct sales company in Thailand of which the Company holds approximately 19% ownership.
On October 13, 2021 BMI Capital Partners International Limited (“BMI”) entered into loan agreement with Liquid Value Asset Management Limited (“LVAML”), pursuant to which BMI agreed to lend $3,000,000 to LVAML. The loan has variable interest rate and matures on October 12, 2022. As of March 31, 2022 and December 31, 2021 LVAML owes $2,971,494 and $2,987,039, respectively.
During 2021In the Company estimated $4,800,000 bonus due to Chan Heng Fai which was paid in January 2022. Once the final financial statements of the Company were available, the actual amount of bonus due was calculated, resulting in approximately $1.2 million of overpayment to Chan Heng Fai. As of March 31, 2022 Chan Heng Fai owes $1,185,251 to the Company. Chan Heng Fai paid the overpayment back in April 2022.
In first quarter of 2022, a subsidiary of the Company lentmade a non-interest bearing loanadvance in the amount of $476,250 toon behalf of Alset Investment Pte. Ltd., thea company 100% owned by Chan Heng Fai. Asone of March 31,our directors. Such advance was made in connection with a private placement into Alset Capital Acquisition Corp. by its sponsor, Alset Acquisition Sponsor, LLC. During 2022, Alset Investment Pte. Ltd. owedrepaid all balance due of $476,250 to the Company..
In June 2022, Alset International Limited, a subsidiary of the Company, entered into a stock purchase agreement with one of our directors and paid $1,746,279 to one of our directors as the consideration for purchase of common shares of Value Exchange International. This transaction was terminated under the agreement of both parties thereafter. On October 17, 2022 the Company purchased common shares of Value Exchange International for an aggregate purchase price of $1,743,734. After the transaction the Company owns approximately 38.3% of Value Exchange International. Due to differences in purchase prices the director owes the Company $2,545.
The Company paid some operating expenses for Alset Capital Acquisition Corp., a special purpose acquisition company of which the Company holds 23.4%. The advances are interest free with no set repayment terms. OnAs of March 31, 20222023 and December 31, 2021,2022, the balance of these advances was $7,1710.
On July 28, 2022 Hapi Café Inc. entered into binding term sheet (the “First Term Sheet”) with Ketomei Pte Ltd and Tong Leok Siong Constant, pursuant to which Hapi Café lent Ketomei $41,750. This loan has a 0% interest rate for the first 60 days and an interest rate of 8% per annum afterwards. On August 4, 2022 the same parties entered into another binding term sheet (the “Second Term Sheet”) pursuant to which Hapi Café agreed to lend Ketomei up to S$360,000 Singapore Dollars (equal to approximately $250,500 US Dollars) pursuant to a convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will be 8%. In addition, pursuant to the Second Term Sheet, the July 28, 2022 loan was modified to include conversion rights. In August 2022, Ketomei drew $29,922 from the loan. As of March 31, 2023 and December 31, 2022, Ketomei owed $219,841 and $0197,596 to Hapi Café, respectively.
On October 13, 2021 BMI Capital Partners International Limited (“BMI”) entered into loan agreement with Liquid Value Asset Management Limited (“LVAML”), a subsidiary of DSS, pursuant to which BMI agreed to lend $3,000,000 to LVAML. The loan has variable interest rate and matures on January 12, 2023, with automatic three-month extension. The purpose of the loan is to purchase a portfolio of trading securities by LVAM. BMI participates in the losses and gains from portfolio based on the calculations included in the loan agreement. As of March 31, 2023 and December 31, 2022 LVAML owes the Company $559,938 and $3,042,811, respectively.
Loan to Employees
On November 24, 2020, American Pacific Bancorp.January 27, 2023, the Company’s subsidiary Hapi Metaverse Inc. lentand New Electric CV Corp. (“NECV,” and together with Hapi Metaverse Inc., the “Lenders”) entered into a Convertible Credit Agreement (the “Credit Agreement”) with Value Exchange International, Inc. (“Value Exchange”), a Nevada corporation. The Credit Agreement provides Value Exchange with a maximum credit line of $560,0001,500,000 to Chan Tung Moe, an officer of one(“Maximum Credit Line”) with simple interest accrued on any advances of the subsidiariesmoney under the Credit Agreement at 8%. The principal amount of any advance of money under the Credit Agreement (each being referred to as an “Advance”) is due in a lump sum, balloon payment on the third annual anniversary of the Company and son of Chan Heng Fai, Chairman and Chief Executive Officerdate of the Company, bearingAdvance (“Advance Maturity Date”). Accrued and unpaid interest at 6%,on any Advance is due and payable on a semi-annual basis with a maturity dateinterest payments due on the last business day of November 23, 2023. This loan was securedJune and last business day of December of each year. A Lender may demand that any portion or all of the unpaid principal amount of any Advance as well as accrued and unpaid interest thereon may be paid by an irrevocable letter of instruction on 80,000 shares of Alset EHome International. On November 24, 2020, American Pacific Bancorp. Inc. lentValue Exchange Common Stock in lieu of cash payment. As of 31 March 2023, $280,0001,400,000.00 to Lim Sheng Hon Danny, an employee of one of the subsidiaries of the Company, bearing interest at 6%, with a maturity date of November 23, 2023. This loancredit was secured by an irrevocable letter of instruction on 40,000 shares of Alset EHome International. Subsequent to the making of these loans, the Company acquired the majority of the issued and outstanding common stock of American Pacific Bancorp. During the year ended December 31, 2021, both principalused, and interest income of $840,00011,047 and $28,031, of both loans to Chan Tung Moe and Lim Sheng Hong, were fully paid off.is included in interest income for the three months ended March 31, 2023.
9. EQUITY
On June 14, 2021, the Company filed an amendment (the “Amendment”) to its Third Amended and Restated Certificate of Incorporation, as amended, to increase the Company’s authorized share capital. The Amendment increased the Company’s authorized share capital to common shares and preferred shares, from common shares and preferred shares, respectively.
The Company has designated preferred shares as Series A Preferred Stock and as Series B Preferred Stock.
On December 6, 2022 the Company filed a certificate of Amendment to the Company’s Certificate of Formation with the Texas Secretary of State to effect a 1-for-20 reverse stock split. The reverse stock split was effective as of December 28, 2022.
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.
| F-25 |
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 19, 2021, the Company issued shares of its common stock as compensation for public relations services at a fair value of $60,900.
On May 3, 2021, the Company entered into a Loan and Exchange Agreement with its Chief Executive Officer, Chan Heng Fai pursuant to which he loaned the Company his shares of Common Stock of the Company by exchanging 6,380,000 shares of common stock which he owned for an aggregate of shares of the Company’s newly designated Series A Convertible Preferred Stock. Effective upon the filing of the Amendment in June 2021, the Company issued an entity owned by Chan Heng Fai shares of common stock upon the automatic conversion of all outstanding shares of the Company’s Series A Convertible Preferred Stock.
On May 12, 2021,February 6, 2023, the Company entered into an ExchangeUnderwriting Agreement (the “Underwriting Agreement”) in connection with Chan Heng Fai, pursuant to which he converted $13,000,000 of note payable for shares of the Company’s newly designated Series B Preferred Stock. Effective upon the filing of the Amendment in June 2021, the Company issued Chan Heng Fai shares of common stock upon the automatic conversion of all outstanding shares of the Company’s Series B Convertible Preferred Stock.
On May 10, 2021, the Company entered into an underwriting agreement with Aegis Capital Corp., as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “May Offering”“Offering”) of (i) common units (the “Common Units”), at a price to the public of $ per Common Unit, with each Common Unit consisting of (a) one share ofits common stock, par value $ per share (the “Common Stock”), (b) one Series A warrant (the “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of Common Stock with an initial exercise price of $5.07 per whole share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of Common Stock with an initial exercise price of $6.59 per whole share, exercisable until the fifth anniversary of the issuance date and (ii) pre-funded units (the “Pre-funded Units”), at a price to the public of $ per Pre-funded Unit, with each Pre-funded Unit consisting of (a) one pre-funded warrant (the “Pre-funded Warrant” and collectively, the “Pre-funded Warrants”) to purchase one share of Common Stock, (b) one Series A Warrant and (c) one Series B Warrant. The shares of Common Stock, the Pre-funded Warrants, and the Warrants were offered together, but the securities contained in the Common Units and the Pre-funded Units were issued separately. Following the May Offering, all the investors exercised their Pre-funded Units and additional shares of common stock and Series A and Series B Warrants were issued.
The Company also granted the Underwriters a 45-day over-allotment option to purchase up to additional shares of Common Stock and/or up to additional Series A Warrants to purchase shares of Common Stock, and/or up to 808,363 additional Series B warrants to purchase 404,181 shares of Common Stock. The May Offering, including the partial exercise of the Underwriters’ over-allotment option to purchase Series A Warrants and Series B Warrants, closed on May 13, 2021. During the month of June, 2021, Aegis exercised its option to purchase an additional common shares at a price of $ per common share and as of March 31, 2022 still holds 808,363 Series B Warrants. Through March 31, 2022, investors exercised 1,364,025 of Series A Warrants and 6,598 of Series B Warrants. As a result of the May Offering and subsequent exercise notice received for the pre-funded units and warrants, the Company issued 8,487,324 common shares. As a result of the May Offering and subsequent exercise notice received for the pre-funded units and warrants, and the net proceeds to the Company were $39,765,440.
The Company incurred approximately $88,848 in expenses related to the May Offering and subsequent warrants exercises, including SEC fees, FINRA fees, auditor fees and filing fees.
The following table presents net funds received from the May Offering and warrants exercised as of March 31, 2022.
SCHEDULE OF NET FUNDS RECEIVED ON OFFERING AND WARRANTS EXERCISED
| Shares | Par value | Amount received | ||||||||||
| Offering | 4,700,637 | $ | 4,701 | $ | 29,145,056 | |||||||
| Exercise of Pre-Funded Units | 1,611,000 | $ | 1,611 | $ | 16,110 | |||||||
| Exercise of Underwriter’s Series A Warrants | 808,363 | $ | 808 | $ | 3,755,774 | |||||||
| Exercise of Series A and Series B Warrants | 1,367,324 | $ | 1,367 | $ | 6,937,347 | |||||||
| Offering Expenses | - | $ | - | $ | (88,848 | ) | ||||||
| Total | 8,487,324 | $ | 8,487 | $ | 39,765,439 | |||||||
On July 27, 2021, the Company entered into another underwriting agreement with Aegis Capital Corp., (the “Underwriter”) as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”),underwriter, relating to an underwritten public offering (the “July Offering”) of (i) shares of common stock, par value $ per share (the “Common Stock”), at a price to the public of $ per share of Common Stock and (ii) pre-funded warrants (the “Pre-funded Warrants”) to purchase 9,770,2001,727,273 shares of Common Stock at a public offering price to the public of $ per Pre-funded Warrant.share. The Offering closed on July 30, 2021. AsUnderwriting Agreement provides the Underwriter a result45-day option to purchase up to an additional shares of the July Offering and subsequent exercise notice received for the pre-funded warrants, theCommon Stock to cover over-allotments, if any.
The net proceeds to the Company were $33,392,444.
The Company granted the Underwriters a 45-day over-allotment option to purchase up to 2,264,150 additional shares of Common Stock. The Company also paid the Underwriters an underwriting discount equal to 7.0% of the gross proceeds offrom the Offering were approximately $3.4 million, after deducting underwriting discounts and a non-accountable expense fee equal to 1.5%the payment of the gross proceeds of the Offering. In addition, the Company agreed to issue to the representative warrants (the “Representative’s Warrants”) to purchase a number of shares equal to 3.0% of the aggregate number of shares (including shares underlying the Pre-funded Warrants) sold under inother offering expenses associated with the Offering or warrants to purchase up to an aggregate of 520,754 shares, assumingthat are payable by the Underwriters exercise their over-allotment option in full. The Representative’s Warrants have an exercise price equal to 125% of the public offering price, or $ per share, with an exercise period of 24 months from issuance. On September 9, 2021 the Underwriters exercised their over-allotment option and were issued 2,264,150 shares of our Common Stock. On September 9, 2021 the Underwriters exercised the option and the Company received $4,386,998 proceeds from this exercise.
The Pre-funded Warrants were offered and sold to purchasers whose purchase of Common Stock in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Offering in lieu of Common Stock that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of the Company’s outstanding Common Stock (or, at the election of the purchaser, 9.99%). Each Pre-funded Warrant is exercisable for one share of Common Stock at an exercise price of $0.01 per share. The Pre-funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. All of the Pre-Funded Warrants were exercised during 2021.Company.
The Company incurred approximately $49,553 in expenses related to the July Offering and subsequent warrants exercises, including SEC fees, FINRA fees, auditor fees and filing fees.
The following table presents net funds received from the July Offering and warrants exercised as of March 31, 2022.
| Shares | Par value | Amount received | ||||||||||
| Offering | 5,324,139 | $ | 5,324 | $ | 28,957,297 | |||||||
| Exercise of Pre-Funded Units | 9,770,200 | $ | 9,770 | $ | 97,702 | |||||||
| Exercise of Underwriter’s Over-Allotment Option | 2,264,150 | $ | 2,264 | $ | 4,386,998 | |||||||
| Offering Expenses | - | $ | - | $ | (49,553 | ) | ||||||
| Total | 17,358,489 | $ | 17,358 | $ | 33,392,444 | |||||||
On December 5, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp., as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “December Offering”) of (i) shares of common stock, par value $ per share (the “Common Stock”), at a price to the public of $ per share of Common Stock and (ii) 31,076,666 pre-funded warrants (the “Pre-funded Warrants”) to purchase 31,076,666 shares of Common Stock, at a price to the public of $ per Pre-funded Warrant. The December Offering closed on DecemberFebruary 8, 2021. As2023. The Common Stock was being offered pursuant to an effective registration statement on Form S-3 (File No. 333-264234), as well as a result ofprospectus supplement in connection with the December Offering filed with the Securities and subsequent exercise notice received for the pre-funded warrants, the net proceeds to the Company were $27,231,875.Exchange Commission.
The Company granted the Underwriters a 45-day over-allotment option to purchase up to 7,500,000 additional shares of Common Stock. The Company also paid the Underwriters an underwriting discount equal to 7% of the gross proceeds of the Offering and a non-accountable expense fee equal to 1% of the gross proceeds of the Offering. On December 14, 2021, the Company consummated the sale of these 7,500,000 shares of Common Stock, representing 15% of the shares of common stock and the shares underlying the Pre-funded Warrants sold in the offering, that were subject to the underwriters’ over-allotment option at a price of $ per share, generating net proceeds of $4,115,000.
The Company granted the Underwriters a 45-day over-allotment option to purchase up to 7,500,000 additional shares of Common Stock. The Company also paid the Underwriters an underwriting discount equal to 7% of the gross proceeds of the Offering and a non-accountable expense fee equal to 1% of the gross proceeds of the Offering. On December 14, 2021, the Company consummated the sale of these 7,500,000 shares of Common Stock, representing 15% of the shares of common stock and the shares underlying the Pre-funded Warrants sold in the offering, that were subject to the underwriters’ over-allotment option at a price of $ per share, generating net proceeds of $4,115,000.
The Pre-funded Warrants were offered and sold to purchasers whose purchase of Common Stock in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Offering. Each Pre-funded Warrant is exercisable for one share of Common Stock at an exercise price of $0.001 per share. The Pre-funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. At March 31, 2022 31,076,666 warrants were exercised, some in cashless exercise transactions.
The Company incurred approximately $40,621 in expenses related to the December Offering and subsequent warrants exercises, including SEC fees, FINRA fees, auditor fees and filing fees.
The following table presents net funds received from the December Offering and warrants exercised as of March 31, 2022.
| Shares | Par value | Amount received | ||||||||||
| Offering | 18,923,334 | $ | 18,923 | $ | 27,263,673 | |||||||
| Exercise of Pre-Funded Units | 15,223,333 | $ | 15,223 | $ | 8,823 | |||||||
| Exercise of Underwriter’s Over-Allotment Option | 7,500,000 | $ | 7,500 | $ | 4,115,000 | |||||||
| Offering Expenses | - | $ | - | $ | (40,621 | ) | ||||||
| Total | 41,646,667 | $ | 41,647 | $ | 31,346,875 | |||||||
On March 31, 2022,2023, there were common shares issued and outstanding.
The following table summarizes the warrant activity for the three months ended March 31, 2022.2023.
SCHEDULE OF WARRANT ACTIVITY
Warrant for Common Shares | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Warrants Outstanding as of December 31, 2021 | 28,533,147 | $ | 1.79 | $ | - | |||||||||||
| Warrants Vested and exercisable at December 31, 2021 | 28,533,147 | $ | 1.79 | $ | - | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | (15,843,378 | ) | 0.001 | |||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Warrants Outstanding as of March 31, 2022 | 12,689,769 | $ | 4.02 | $ | - | |||||||||||
| Warrants Vested and exercisable at March 31, 2022 | 12,689,769 | $ | 4.02 | $ | - | |||||||||||
Warrant for Common Shares | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Warrants Outstanding as of December 31, 2022 | 634,488 | $ | 80.32 | $ | - | |||||||||||
| Warrants Vested and exercisable at December 31, 2022 | 634,488 | $ | 80.32 | $ | - | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Warrants Outstanding as of March 31, 2023 | 634,488 | $ | 80.32 | $ | - | |||||||||||
| Warrants Vested and exercisable at March 31, 2023 | 634,488 | $ | 80.32 | $ | - | |||||||||||
GigWorld Inc. Sale of Shares
During the three months ended, March 31, 2021, the Company sold shares of GigWorld to international investors for the amount of $250,000, which was booked as addition paid-in capital. The Company held shares of the total outstanding shares before the sale. After the sale, the Company still owns approximately 99% of GigWorld’s total outstanding shares.
During the three months ended March 31, 2021, the sales of GigWorld’s shares were de minimis compared to its outstanding shares and did not change the minority interest.
Distribution to Minority Shareholder
During the three months ended March 31, 2021, SeD Maryland Development LLC Board approved the payment distribution plan to members and paid $82,250 in distribution to the minority shareholder.
Changes of Ownership of Alset International
In the year ended December 31, 2021, Alset International issued 1,721,303,416 common shares through warrants exercise with exercise price of approximately $0.04 per share and received $60,300,464 cash, which included approximately $58 million from Alset EHome International to exercise its warrants to purchase Alset International common shares. The warrant exercise transactions between Alset EHome International and Alset International were intercompany transactions and only affected change in non-controlling interest on the condensed consolidated statements of stockholders’ equity. During the year ended December 31, 2021, the stock-based compensation expense of Alset International was $ with the issuance of shares to an officer. In three months ended March 31, 2022 the Company purchased shares of Alset International from the market.
On January 17, 2022 the Company entered into a securities purchase agreement with Chan Heng Fai, pursuant to which the Company agreed to purchase from Chan Heng Fai ordinary shares of Alset International for a purchase price of newly issued shares of the Company’s common stock. On February 28, 2022, the Company and Chan Heng Fai entered into an amendment to this securities purchase agreement pursuant to which the Company shall purchase these ordinary shares of Alset International for a purchase price of newly issued shares of the Company’s common stock. The closing of this transaction with Chan Heng Fai was subject to approval of the Nasdaq and the Company’s stockholders. These ordinary shares of Alset International represent approximately % of the total issued and outstanding shares of Alset International. The Company had a Special Meeting of Stockholders to vote on the approval of this transaction on June 6, 2022.
Due to this purchasethese transactions the Company’s ownership of Alset International changed from 76.8% as of December 31, 2021 to 77.085.4% as of March 31, 2023 and December 31, 2022.
| F-26 |
Promissory Note Converted into Shares
On December 13, 2021 the Company entered into a Securities Purchase Agreement with Chan Heng Fai for the issuance and sale of a convertible promissory note in favor of Chan Heng Fai, in the principal amount of $6,250,000. The note bears interest of 3% per annum and iswas due on the earlier of December 31, 2024 or when declared due and payable by Chan Heng Fai. The note cancould be converted in part or whole into common shares of the Company at the conversion price of $0.625 or into cash. The loan closed on January 26, 2022 after all closing conditions were met. Chan Heng Fai opted to convert all of the amount of such note into shares of the Company’s common stock, which shares were issued on January 27, 2022.
Registration Statement on Form S-3
On April 11, 2022 the Company filed a Registration Statement on Form S-3 using a “shelf” registration or continuous offering process. Under this shelf registration process, the Company may, from time to time, sell any combination of the securities (common stock, preferred stock, warrants, rights, units) described in the filed prospectus in one or more offerings up to a total aggregate offering price of $75,000,000.
10. LEASE INCOME
The Company generally rents its SFRs under lease agreements with a term of one year or two years. Future minimum rental revenue under existing leases on our properties at March 31, 20222023 in each calendar year through the end of their terms are as follows:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS
| 2022 | $ | 594,866 | ||||||
| 2023 | 90,575 | 946,600 | ||||||
| 2024 | 7,450 | 93,880 | ||||||
| Total Future Receipts | $ | 692,891 | $ | 1,040,480 | ||||
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, 20222023 and 2021,2022, property management fees incurred by the property managers were $11,02531,950 and $011,025, respectively. For the three months ended March 31, 20222023 and 2021,2022, leasing fees incurred by the property managers were $25,79025,010 and $025,790, respectively.
11. ACCUMULATED OTHER COMPREHENSIVE INCOME
Following is a summary of the changes in the balances of accumulated other comprehensive income, net of tax:
SCHEDULE OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2022 | $ | (90,031 | ) | $ | (367,895 | ) | $ | 799,572 | $ | 341,646 | ||||||
| Other Comprehensive Income | (7,027 | ) | (499,967 | ) | 459,069 | (47,925 | ) | |||||||||
| Balance at March 31, 2022 | $ | (97,058 | ) | $ | (867,862 | ) | $ | 1,258,641 | $ | 293,721 | ||||||
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2023 | $ | (54,921 | ) | $ | 121,272 | $ | 3,769,712 | $ | 3,836,063 | |||||||
| Other Comprehensive Income | - | 936,265 | - | 936,265 | ||||||||||||
| Balance at March 31, 2023 | $ | (54,921 | ) | $ | 1,057,537 | $ | 3,769,712 | $ | 4,772,328 | |||||||
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2021 | $ | (48,758 | ) | $ | 2,258,017 | $ | (65,921 | ) | $ | 2,143,338 | ||||||
| Other Comprehensive Income | (1,135 | ) | (1,010,527 | ) | (39,067 | ) | (1,050,729 | ) | ||||||||
| Balance at March 31, 2021 | $ | (49,893 | ) | $ | 1,247,490 | $ | (104,988 | ) | $ | 1,092,609 | ||||||
| F-27 |
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2022 | $ | (90,031 | ) | $ | (367,895 | ) | $ | 799,572 | $ | 341,646 | ||||||
| Balance at beginning | $ | (90,031 | ) | $ | (367,895 | ) | $ | 799,572 | $ | 341,646 | ||||||
| Other Comprehensive Income | (7,027 | ) | (499,967 | ) | 459,069 | (47,925 | ) | |||||||||
| Balance at March 31, 2022 | $ | (97,058 | ) | $ | (867,862 | ) | $ | 1,258,641 | $ | 293,721 | ||||||
| Balance at end | $ | (97,058 | ) | $ | (867,862 | ) | $ | 1,258,641 | $ | 293,721 | ||||||
12. INVESTMENTS 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, 20222023 and December 31, 2021:2022:
SCHEDULE OF FINANCIAL ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS
| Amount at | Fair Value Measurement Using | Amount at | ||||||||||||||||||
| Cost | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investment Securities- Fair Value | $ | 76,264,051 | $ | 47,389,726 | $ | - | $ | - | $ | 47,389,726 | ||||||||||
| Investment Securities- Trading | 2,387,149 | 2,397,169 | - | - | 2,397,169 | |||||||||||||||
| Convertible Note Receivable | 138,599 | - | - | 89,275 | 89,275 | |||||||||||||||
| Warrants - American Premium Water | - | - | - | 815,514 | 815,514 | |||||||||||||||
| Warrants - AMRE | - | - | - | - | - | |||||||||||||||
| Total | $ | 78,789,799 | $ | 49,786,895 | $ | - | $ | 904,789 | $ | 50,691,684 | ||||||||||
| Investment Securities - Fair Value NAV as Practical Expedient | 100,000 | |||||||||||||||||||
| Total Investment in securities at Fair Value | 50,791,684 | |||||||||||||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| March 31, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment Securities- Fair Value | $ | 554,020 | $ | - | $ | - | $ | 554,020 | ||||||||
| Investment Securities- Fair Value - Related Party | 14,099,446 | - | - | 14,099,446 | ||||||||||||
| Investment Securities- Trading | 3,767,880 | - | - | 3,767,880 | ||||||||||||
| Convertible Note Receivable | - | - | 88,599 | 88,599 | ||||||||||||
| Warrants - New Electric CV Corp. | - | - | 389,913 | 389,913 | ||||||||||||
| Total Investment in securities at Fair Value | $ | 18,421,346 | $ | - | $ | 478,512 | $ | 18,899,858 | ||||||||
| Amount at | Fair Value Measurement Using | Amount at | Fair Value Measurement Using | Amount at | ||||||||||||||||||||||||||||||||
| Cost | Level 1 | Level 2 | Level 3 | Fair Value | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||
| Investment Securities- Fair Value | $ | 72,000,301 | $ | 25,320,694 | $ | - | $ | - | $ | 25,320,694 | $ | 884,432 | $ | - | $ | - | $ | 884,432 | ||||||||||||||||||
| Investment Securities- Fair Value - Related Party | 12,865,525 | - | - | 12,865,525 | ||||||||||||||||||||||||||||||||
| Investment Securities- Trading | 9,809,778 | 9,908,077 | - | - | 9,908,077 | 5,315,204 | - | - | 5,315,204 | |||||||||||||||||||||||||||
| Convertible Note Receivable | 138,599 | - | - | 98,398 | 98,398 | - | - | 88,599 | 88,599 | |||||||||||||||||||||||||||
| Warrants - American Premium Water | 696,791 | - | - | 1,009,854 | 1,009,854 | |||||||||||||||||||||||||||||||
| Warrants - AMRE | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Warrants - New Electric CV Corp. | - | - | 327,565 | 327,565 | ||||||||||||||||||||||||||||||||
| Total Investment in securities at Fair Value | $ | 82,645,469 | $ | 35,228,771 | $ | - | $ | 1,108,252 | $ | 36,337,023 | $ | 19,065,161 | $ | - | $ | 416,164 | $ | 19,481,325 | ||||||||||||||||||
Realized loss on investment securities for the three months ended March 31, 20222023 was $3,436,783131,313 and realized loss on investment securities for the three months ended March 31, 20212022 was $258,2453,436,783. Unrealized loss on securities investment was $3,899,0151,187,846 and $9,535,0093,899,015 in the three months ended March 31, 20222023 and 2021,2022, respectively. These gains and losses were recorded directly to net income (loss). The change in fair value of the convertible note receivable in the three months ended March 31, 20222023 and 20212022 was $9,1230 and $1,9879,123, respectively, and was recorded in condensed consolidated statements of stockholders’ equity.
| F-28 |
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, 20222023 and December 31, 2021,2022, respectively.
SCHEDULE OF FAIR VALUE OF EQUITY SECURITY INVESTMENT
| Share price | Market Value | |||||||||||||
| 3/31/2023 | Shares | 3/31/2023 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.200 | 62,812,264 | $ | 12,537,327 | Investment in Securities at Fair Value | ||||||||
| AMBS (Related Party) | $ | 0.001 | 20,000,000 | $ | 18,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.011 | 42,310,621 | $ | 453,520 | Investment in Securities at Fair Value | ||||||||
| American Premium Mining (Related Party) | $ | 0.001 | 354,039,000 | $ | 247,827 | Investment in Securities at Fair Value | ||||||||
| Value Exchange | $ | 0.095 | 13,834,643 | $ | 1,314,291 | Investment in Securities at Fair Value | ||||||||
| Lucy Scientific Discovery | $ | 1.100 | 75,000 | $ | 82,500 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 3,767,880 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 18,421,346 | ||||||||||||
| Nervotech | N/A | 1,666 | $ | 37,631 | Investment in Securities at Cost | |||||||||
| HWH World Co. | N/A | 3,800 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| Ubeauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 18,521,148 | ||||||||||||
| Share price | Market Value | |||||||||||||
| 3/31/2022 | Shares | 3/31/2022 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.573 | $ | 13,680,455 | Investment in Securities at Fair Value | |||||||||
| AMBS (Related Party) | $ | 0.008 | 20,000,000 | $ | 158,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.025 | 43,626,621 | $ | 1,111,173 | Investment in Securities at Fair Value | ||||||||
| American Premium Water (Related Party) | $ | 0.002 | 354,039,000 | $ | 531,059 | Investment in Securities at Fair Value | ||||||||
| True Partner | $ | 0.112 | 62,122,908 | $ | 6,981,617 | Investment in Securities at Fair Value | ||||||||
| Value Exchange | $ | 0.230 | 6,500,000 | $ | 1,495,000 | Investment in Securities at Fair Value | ||||||||
| Alset Capital Acquisition - Common Stock (Related Party) | $ | 9.860 | 1,940,625 | $ | 19,134,563 | Investment in Securities at Fair Value | ||||||||
| Alset Capital Acquisition – Unit (Related Party) | $ | 10.080 | 426,375 | $ | 4,297,860 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 2,397,170 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 49,786,896 | ||||||||||||
| Nervotech | N/A | 1,666 | $ | 37,045 | Investment in Securities at Cost | |||||||||
| Hyten Global | N/A | 3,800 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| Ubeauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 49,886,112 | ||||||||||||
| Share price | Market Value | |||||||||||||
| 12/31/2022 | Shares | 12/31/2022 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.164 | 62,812,264 | $ | 10,301,211 | Investment in Securities at Fair Value | ||||||||
| AMBS (Related Party) | $ | 0.002 | 20,000,000 | $ | 34,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.020 | 42,999,621 | $ | 850,432 | Investment in Securities at Fair Value | ||||||||
| American Premium Mining (Related Party) | $ | 0.001 | 354,039,000 | $ | 212,423 | Investment in Securities at Fair Value | ||||||||
| Value Exchange | $ | 0.170 | 13,834,643 | $ | 2,351,889 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 5,315,204 | Investment in Securities at Fair Value | |||||||||||
Total Level 1 Equity Securities | $ | 19,065,161 | ||||||||||||
| Nervotech | N/A | 1,666 | $ | 35,958 | Investment in Securities at Cost | |||||||||
| HWH World Co. | N/A | 3,800 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| Ubeauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 19,163,290 | ||||||||||||
| Share price | Market Value | |||||||||||||
| 12/31/2021 | Shares | 12/31/2021 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.672 | $ | 13,364,912 | Investment in Securities at Fair Value | |||||||||
| AMBS (Related Party) | $ | 0.016 | 20,000,000 | $ | 328,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.034 | 43,626,621 | $ | 1,489,179 | Investment in Securities at Fair Value | ||||||||
| American Premium Water (Related Party) | $ | 0.002 | 354,039,000 | $ | 778,886 | Investment in Securities at Fair Value | ||||||||
| True Partner | $ | 0.119 | 62,122,908 | $ | 7,409,717 | Investment in Securities at Fair Value | ||||||||
| Value Exchange | $ | 0.300 | 6,500,000 | $ | 1,950,000 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 9,908,077 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 35,228,771 | ||||||||||||
| Nervotech | N/A | 1,666 | $ | 37,045 | Investment in Securities at Cost | |||||||||
| Hyten Global | N/A | 3,800 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| Ubeauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 35,327,987 | ||||||||||||
| F-29 |
DSS convertible preferred stock
During the three months ended March 31, 2021, Global BioMedical Pte Ltd. held preferred stock of DSS which could convert to common shares of DSS.
Sharing Services Convertible Note
The fair value of the Sharing Services Convertible Note under level 3 category as of March 31, 2022 and December 31, 2021 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:model.
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
March 31, 2022 | December 31, 2021 | |||||||
| Dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 126.23 | % | 138.85 | % | ||||
| Risk free interest rate | 3.25 | % | 3.25 | % | ||||
| Contractual term (in years) | 0.51 | 0.76 | ||||||
| Exercise price | $ | $ | ||||||
We assumed dividend yield rate isof 0.00%0.00% in Sharing Services. The volatility iswas based on the historical volatility of the Sharing Services’ common stock. Risk-free interest rates were obtained from U.S. Treasury rates for the applicable periods.
The Sharing Services Convertible Note was redeemed in July 2022.
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, 20222023 and 2021:2022:
SCHEDULE OF CHANGE IN FAIR VALUE
| Total | ||||
| Balance at January 1, 2023 | $ | 416,164 | ||
| Total gains | 62,348 | |||
| Balance at March 31, 2023 | $ | 478,512 | ||
| Total | ||||
| Balance at January 1, 2022 | $ | 1,108,252 | ||
| Total losses | (203,463 | ) | ||
| Balance at March 31, 2022 | $ | 904,789 | ||
| Total | ||||
| Balance at January 1, 2021 | $ | 66,978 | ||
| Total losses | (1,987 | ) | ||
| Balance at March 31, 2021 | $ | 64,991 | ||
Vector Com Convertible Bond
On February 26, 2021, the Company invested approximately $88,599 in the convertible bond of Vector Com Co., Ltd (“Vector Com”), a private company in South Korea. The interest rate is 2%2% per annum and maturity is two years. The conversion price is approximately $21.26, per common share of Vector Com. As of March 31, 2022,2023, the management estimated that the fair value of this note remained unchanged from its initial purchase price.
Warrants
On March 2, 2020 and October 29, 2021, the Company received warrants to purchase shares of AMRE, a related party private startup company, in conjunction with the Company lending two $ promissory notes. For further details on this transaction, refer to Note 8 - Related Party Transactions, Note Receivable from a Related Party Company. As of March 31,September 30, 2022 and December 31, 2021, AMRE was a private company. Based the management’s analysis, the fair value of the warrants was $0 as of March 31, 2022 and December 31, 2021. All warrants were converted into common shares in March 2022.
| F-30 |
On July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99%9.99% ownership, and 1,220,390,000 warrants with an exercise price of $ per share, from APW,NECV, for an aggregated purchase price of $122,039. During 2021, the Company exercised of the warrants to purchase 232,000,000 shares of APWNECV for the total consideration of $232,000, leaving the balance of outstanding warrants of at December 31, 2021.2021 and 2022. The Company did not exercise any warrants during three months ended March 31, 2022.2023. We value APB warrants under level 3 category through a Black Scholes option pricing model and the fair value of the warrants from APWNECV was $815,514389,913 as of March 31, 20222023 and $1,009,854327,565 as of December 31, 2021.2022.
The fair value of the APWNECV warrants under level 3 category as of March 31, 20222023 and December 31, 20212022 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
March 31, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| Stock Price | $ | 0.0015 | $ | 0.0022 | $ | 0.0007 | $ | 0.0006 | ||||||||
| Exercise price | 0.001 | 0.001 | 0.001 | 0.001 | ||||||||||||
| Risk free interest rate | 2.39 | % | 1.48 | % | 3.54 | % | 3.95 | % | ||||||||
| Annualized volatility | 111.5 | % | 186.5 | % | 188.3 | % | 186.1 | % | ||||||||
| Dividend Yield | 0.00 | 0.00 | ||||||||||||||
| Year to maturity | 8.31 | 8.58 | 7.32 | 7.56 | ||||||||||||
13. COMMITMENTS AND CONTINGENCIES
Lots Sales Agreement
On November 23, 2015, SeD Maryland Development LLC completed the $15,700,000 acquisition of Ballenger Run, a 197-acre land sub-division development located in Frederick County, Maryland. Previously, on May 28, 2014, the RBG Family, LLC entered into a $15,000,000 assignable real estate sales contract with NVR, by which RBG Family, LLC would facilitate the sale of the 197 acres of Ballenger Run to NVR. On December 10, 2014, NVR assigned this contract to SeD Maryland Development, LLC through execution of an assignment and assumption agreement and entered into a series of lot purchase agreements by which NVR would purchase 443 subdivided residential lots from SeD Maryland Development, LLC. On December 31, 2018, SeD Maryland entered into the Third Amendment to the Lot Purchase Agreement for Ballenger Run with NVR. Pursuant to the Third Amendment, SeD Maryland will convert the 5.9 acre CCRC parcel to 36 lots (the 28 feet wide villa lot) and sell to NVR. SeD Maryland pursued the required zoning approval to change the number of such lots from 85 to 121, which was approved in July 2019. Subsequently, SeD Maryland Development signed Fourth Amendment to the Lot Purchase Agreement, pursuant to which NVR agreed to purchase all of the new 121 lotslots..
During the three months ended on March 31, 20222023 and 2021,2022, NVR purchased 30 lots and 273 lots, respectively. Through March 31, 20222023 and December 31, 2021,2022, NVR had purchased a total of 479 and 476 lots, respectively.lots.
As partCertain arrangements for the sale of the contract withbuildable lots to NVR upon establishment of FFB assessments on the lots,require the Company is obligated to credit NVR with an amount equal to one year of the FFB assessment per each lot purchased by NVR.assessment. Under ASC 606, the credits to NVR are not in exchange for a distinct good or service and accordingly, the amount of the credit was recognized as the reduction of revenue. As of March 31, 20222023 and December 31, 20212022, the accrued balance due to NVR was $189,475 and $188,125, respectively..
Leases
The Company leases offices in Bethesda, Maryland, Singapore, Magnolia, Texas, Singapore, Hong Kong and South Korea through leased spaces aggregating approximately 15,81121,066 square feet, under leases expiring on various dates from April 2022May 2023 to March 2024.August 2025. The leases have rental rates ranging from $2,2651,401 to $21,50023,020 per month. Our total rent expense under these office leases was $156,470259,678 and $140,271156,575 in the three months ended March 31, 20222023 and 2021,2022, respectively. The following table outlines the details of lease terms:
SCHEDULE OF OPERATING AND RENEWED LEASE TERMS RENTAL
| Office Location | Lease Term as of December 31, 2021 | |
| Singapore - AI | June | |
| Singapore – F&B | October 2021 to October 2024 | |
| Singapore – Four Seasons Park | July 2022 to July 2024 | |
| Singapore – Hapi Cafe | July 2022 to June 2024 | |
| Singapore - PLQ | December 2022 to July 2024 | |
| Hong Kong - Office | October | |
| Hong Kong - Warehouse | November 2022 to October 2024 | |
| Hong Kong - Shop | October 2022 to September 2024 | |
| South Korea – Hapi Cafe | August | |
| South Korea – HWH World | August 2022 to July 2025 | |
| Magnolia, Texas | ||
| Bethesda, Maryland | January 2021 to March 2024 | |
| China - Cafe | December 2022 - November 2023 | |
| China - Office | March 2023 – March 2027 |
| F-31 |
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.As our leases do not provide a readily determinable implicit rates, we estimate our incremental borrowing rates to discount the lease payments based on information available at lease commencement. Our incremental borrowings rates are at a range from 0.35% to 3.9% in 20222023 and 2021,2022, which were used as the discount ratesrates.. The balances of operating lease right-of-use assets and operating lease liabilities as of March 31, 20222023 were $502,5521,565,468 and $513,6511,592,765 respectively. The balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 20212022 were $659,6201,614,159 and $667,3431,628,039, respectively.
The table below summarizes future payments due under these leases as of March 31, 2022.2023.
For the Years Ended March 31:
SCHEDULE OF LEASE PAYMENTS
| 2022 | 302,207 | |||||||
| 2023 | 185,111 | |||||||
| 2024 | 36,398 | 952,948 | ||||||
| 2025 | 553,137 | |||||||
| 2026 | 159,626 | |||||||
| 2027 | 40,471 | |||||||
| Total Minimum Lease Payments | 523,716 | 1,706,182 | ||||||
| Less: Effect of Discounting | (10,065 | ) | (113,417 | ) | ||||
| Present Value of Future Minimum Lease Payments | 513,651 | 1,592,765 | ||||||
| Less: Current Obligations under Leases | (168,145 | ) | (130,778 | ) | ||||
| Long-term Lease Obligations | $ | 345,506 | $ | 1,461,987 | ||||
AEI Stock Option plans AEI
The Company previously reservedUnder our 2018 Incentive Compensation Plan (the “Plan”), adopted by our board of directors and holders of a majority of our outstanding shares of common stock in September 2018, shares of common stock (subject to certain adjustments) were reserved for issuance upon exercise of stock options and grants of other equity awards. No options or other equity awards have been granted under the Incentive Compensation Plan for high-quality executives and other employees, officers, directors, consultants and other persons who provide services to the Company or its related entities. This plan is meant to enable such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s shareholders, and providing such persons with performance incentives to expand their maximum efforts in the creation of shareholder value. As of March 31, 2022 and December 31, 2021, there have been no options granted.Plan. The reservation of shares under the Incentive Compensation Plan was cancelled in May of 2021.
Alset International Stock Option plans
On November 20, 2013, Alset International approved a Stock Option Plan (the “2013 Plan”). Employees, executive directors, and non-executive directors (including the independent directors) are eligible to participate in the 2013 Plan.
SCHEDULE OF OPTION ACTIVITY
| Options for Common Shares | Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | Options for Common Shares | Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||||||||||||||
| Outstanding as of January 1, 2021 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Vested and exercisable at January 1, 2021 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Outstanding as of January 1, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Vested and exercisable at January 1, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Granted | - | - | - | - | ||||||||||||||||||||||||||||
| Exercised | - | - | - | - | ||||||||||||||||||||||||||||
| Forfeited, cancelled, expired | - | - | - | - | ||||||||||||||||||||||||||||
| Outstanding as of December 31, 2021 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Vested and exercisable at December 31, 2021 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Outstanding as of December 31, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Vested and exercisable at December 31, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Granted | - | - | - | - | ||||||||||||||||||||||||||||
| Exercised | - | - | - | - | ||||||||||||||||||||||||||||
| Forfeited, cancelled, expired | - | - | - | - | ||||||||||||||||||||||||||||
| Outstanding as of March 31, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Vested and exercisable at March 31, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Outstanding as of March 31, 2023 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
| Vested and exercisable at March 31, 2023 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||||||||||||||||||
15. SUBSEQUENT EVENTS
On April 8, 202213, 2023, 150 CCM Black Oak Ltd., a Texas Limited Partnership and a wholly owned subsidiary of the Company, completed the sale of 131 single-family detached residential lots in a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak” to Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). The Company has received confirmationa total consideration of $6,615,500 from Small Business Administration that the PPP loan together with accrued interest was fully forgiven.Buyer in aggregate purchase price and community enhancement fees.
On April 11, 2022May 4, 2023, DSS distributed approximately million shares of Sharing Services Global Corporation (“SHRG”) beneficially held by DSS and its subsidiaries in the form of a dividend to the shareholders of DSS common stock. As a result of this distribution, the Company filed Registration Statement on Form S-3 using a “shelf” registration or continuous offering process. Under this shelf registration process,directly received shares of SHRG, and through its majority-owned subsidiary Alset International Limited, and certain subsidiaries of Alset International Limited, indirectly received an additional shares of SHRG. The Company and its majority-owned subsidiaries now collectively own shares of SHRG, representing 33.4% of the issued and outstanding shares of SHRG Common Stock (such number of SHRG shares held and ownership percentage do not include any shares held by affiliates of the Company may,which we do not hold a majority interest in). Additionally, our founder, Chairman and Chief Executive Officer, Chan Heng Fai, directly and indirectly is the owner of an additional shares of SHRG and is a beneficial owner of approximately 43.5% of SHRG shares (including those shares owned by Alset Inc. and its majority-owned subsidiaries).
On May 1, 2023, Alset Capital Acquisition Corp. (“Alset Capital”) held a Special Meeting of Stockholders. In connection with the Special Meeting and certain amendments to Alset Capital’s Amended and Restated Certificate of Incorporation, shares of Alset Capital’s Class A Common Stock were rendered for redemption. Following the redemption, shares of Class A Common Stock of Alset Capital remain issued and outstanding, including shares held by the Company. The Company also owns shares of Alset Capital’s Class B Common Stock. Following the redemptions, Company’s ownership in Alset Capital has increased from time to time, sell any combination% of the securities (commontotal shares of common stock preferred stock, warrants, rights, units) describedto % of the total number of outstanding shares of the two classes. The Company is currently evaluating the impact of these redemptions on our financial statements and accounting policies that will be applied to the investment in the filed prospectus in one or more offerings up to a total aggregate offering price of $75,000,000.Alset Capital.
On April 29, 2022 Chan Heng Fai paid back the overpayment made to him of $1,185,251 for the bonus paid to him in January 2022.
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 by 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 and South Korea. We manage a significant portion of our principal businesses primarily through our 77%85.4% owned subsidiary, Alset International Limited, 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 and in Frederick, Maryland, in our real estate segment. Recently, the Company expanded its real estate portfolio to single family rental homes, and we currently own 112 homes that are rented or are available for rent. We have designed applications for enterprise messaging and e-commerce software platforms in the United States and Asia inIn our digital transformation technology business unit.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.
AsWe also have ownership interests outside of March 31, 2022, additional interests we held includedAlset International, including a 41.3%36.9% equity interest in American Pacific Bancorp Inc., an indirect 15.8%15.2% equity interest in Holista CollTech Limited, a 15.5% equity interest in True Partner Capital Holding Limited, a 28.2%45.2% equity interest in DSS Inc. (“DSS”), an 18%a 38.3% equity interest in Value Exchange International, Inc., a 7.7%0.8% equity interest in AmericanNew Electric CV Corporation (“NECV” formerly known as “American Premium Mining Corporation” or “APM,” and earlier known as “American Premium Water Corp.”), and an interest in Alset Capital Acquisition Corp. (“Alset Capital”). American Pacific Bancorp Inc. is a financial network holding company. Holista CollTech Limited is a public Australian company that produces natural food ingredients (ASX: HCT). True Partner Capital Holding Limited is a public Hong Kong company which operates as a fund management company in the U.S. and Hong Kong. DSS is a multinational company operating businesses within nine divisions: product packaging, biotechnology, direct marketing, commercial lending, securities and investment management, alternative trading, digital transformation, secure living, and alternative energy. 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). American Premium Water Corp.NECV is a publicly traded company that was engaged in the sale of consumer products company (OTCPK: HIPH). Subsequent to the period covered by this report, American Premium Water Corp. changed its name to American Premium Mining Corporation to reflect its new line of business, crypto-mining. Our equity interest in American Premium Mining Corporation has been reduced to 0.8% following stock issuances by that company. Alset Capital is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses and is listed on the Nasdaq (Nasdaq: ACAXU, ACAX, ACAXW and ACAXR).
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.
Recent Developments
Sale of Securities of True Partner Limited
On January 18, 2022, the Company entered into a stock purchase agreement with DSS, Inc., pursuant to which the Company has agreed to sell, through the transfer of subsidiary and otherwise, 62,122,908 shares of stock of True Partner Capital Holding Limited in exchange for 11,397,080 shares of the common stock of DSS. On February 28, 2022 the Company entered into a revised Stock Purchase Agreement with DSS, Inc., pursuant to which the Company has agreed to replace the January 18, 2022 agreement with a new agreement to sell a subsidiary holding 44,808,908 shares of stock of True Partner Capital Holding Limited, together with an additional 17,314,000 shares of True Partner Capital Holding Limited (for a total of 62,122,908 shares, representing all of our shares in such entity) in exchange for 17,570,948 shares of common stock of DSS (the “DSS Shares”). The issuance of the DSS Shares will be subject to the approval of the NYSE American (on which the common stock of DSS is listed) and DSS’s shareholders.
Purchase of Shares of DSS
On January 25, 2022, the Company agreed to purchase 44,619,423 shares of DSS’s common stock for a purchase price of $0.3810 per share, for an aggregate purchase price of $17,000,000. On February 28, 2022, the Company and DSS agreed to amend this stock purchase agreement. The number of shares of the common stock of DSS that the Company agreed to purchase was reduced to 3,986,877 shares for an aggregate purchase price of $1,519,000. Such acquisition of shares of DSS closed on March 9, 2022.
Sale of Note to DSS
On February 25, 2022, Alset International entered into an assignment and assumption agreement with DSS pursuant to which DSS has agreed to purchase a convertible promissory note from Alset International. The note has a principal amount of $8,350,000 and accrued but unpaid interest of $367,400 through May 15, 2022. The note was issued by American Medical REIT, Inc. The consideration to be paid for the note will be 21,366,177 shares of DSS’s common stock. The number of DSS shares to be issued as consideration was calculated by dividing $8,717,400, the aggregate of the principal amount and the accrued but unpaid interest under the Note, by $0.408 per share. The number of shares of DSS common stock to be issued as consideration may be adjusted based on the accrued interest if the parties should agree to close this transaction on a date other than the originally anticipated date of May 15, 2022. The closing of the assumption agreement and the issuance of the DSS shares described above will be subject to the approval of the NYSE American and DSS’s shareholders.
Purchase of Alset International shares
On January 17, 2022 the Company entered into securities purchase agreement with Chan Heng Fai, pursuant to which the Company agreed to purchase from Chan Heng Fai 293,428,200 ordinary shares of Alset International for a purchase price 29,468,977 newly issued shares of the Company’s common stock. On February 28, 2022, the Company and Mr. Chan entered into an amendment to this securities purchase agreement pursuant to which the Company shall purchase these 293,428,200 ordinary shares of Alset International for a purchase price of 35,319,290 newly issued shares of the Company’s common stock. The closing of this transaction with Mr. Chan is subject to approval of the Nasdaq and the Company’s stockholders. These 293,428,200 ordinary shares of Alset International represent approximately 8.4% of the 3,492,713,362 total issued and outstanding shares of Alset International. The Company has scheduled a Special Meeting of Stockholders to vote on the approval of this transaction for June 6, 2022.
Initial Public Offering of Alset Capital Acquisition Corp.
On February 3, 2022 Alset Capital Acquisition Corp. (“Alset Capital”), a special purpose acquisition company sponsored by the Company and certain affiliates, closed its initial public offering of 7,500,000 units at $10 per unit. Each unit consisted of one of Alset Capital’s shares of Class A common stock, one-half of one redeemable warrant and one right to receive one-tenth of one share of Class A common stock upon the consummation of an initial business combination. Each whole warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share. Only whole warrants are exercisable. The underwriters exercised their over-allotment option in full for an additional 1,125,000 units on February 1, 2022, which closed at the time of the closing of the Offering. As a result, the aggregate gross proceeds of this offering, including the over-allotment, were $86,250,000, prior to deducting underwriting discounts, commissions, and other offering expenses.
On February 3, 2022, simultaneously with the consummation of Alset Capital’s initial public offering, Alset Capital consummated the private placement of 473,750 units (the “Private Placement Units”) to the Sponsor, which amount includes 33,750 Private Placement Units purchased by the Sponsor in connection with the underwriters’ exercise of the over-allotment option in full, at a price of $10.00 per Private Placement Unit, generating gross proceeds of approximately $4.7 million (the “Private Placement”) the proceeds of which were placed in the trust account. No underwriting discounts or commissions were paid with respect to the Private Placement. The Private Placement Units are identical to the units sold in the initial public offering, except that (a) the Private Placement Units and their component securities will not be transferable, assignable or saleable until 30 days after the consummation of Alset Capital’s initial business combination except to permitted transferees and (b) the warrants and rights included as a component of the Private Placement Units, so long as they are held by the Sponsor or its permitted transferees, will be entitled to registration rights, respectively.
The Company and its majority-owned subsidiary Alset International eachtogether own 45% of the sole member of Alset Acquisition Sponsor, LLC, the sponsor of Alset Capital.
| 3 |
On September 9, 2022, Alset Capital entered into an agreement and plan of merger (the “Merger Agreement”) by and among Alset Capital, HWH International Inc., a Nevada corporation (“HWH”) and HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of Alset Capital (“Merger Sub”). Pursuant to the Merger Agreement, a business combination between Alset Capital and HWH will be effected through the merger of Merger Sub with and into HWH, with HWH surviving the remaining 10%merger as a wholly owned subsidiary of Alset Capital (the “Merger”). HWH is an indirect subsidiary of the sole memberCompany through its subsidiary Alset International Limited. The Merger has not closed as of the sponsor owned by Alset Investment Pte. Ltd., a company owneddate of this Report and is subject to the receipt of the required approval by the Company’s Chairman, Chief Executive Officerstockholders of Alset Capital, the shareholder of HWH and largest stockholder, Chan Heng Fai.the satisfaction of certain other customary closing conditions.
On May 1, 2023, Alset Capital amended its Investment Management Trust Agreement with Wilmington Trust, National Association, a national banking association, which was entered into on January 31, 2022. The Trust Agreement is now amended, in part, so that Alset Capital’s ability to complete a business combination may be extended in additional increments of one month up to a total of twenty-one (21) additional months from the closing date of its initial public offering, subject to the payment into the trust account by Alset Capital of one-third of 1% of the funds remaining in the trust account following any redemptions in connection with the approval of the amendment to Alset Capital’s Amended and Restated Certificate of Incorporation.
As approved by its stockholders at the Special Meeting of Stockholders held on May 1, 2023 (the “Alset Capital Special Meeting”), Alset Capital filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State on May 2, 2023, to (i) give Alset Capital the right to extend the date by which it has to consummate a business combination from May 3, 2023, to November 3, 2023, on a month-to-month basis; and (ii) expand the methods that it may employ to not become subject to the “penny stock” rules of the Securities and Exchange Commission.
In connection with the Alset Capital Special Meeting, 6,648,964 shares of the Class A Common Stock of Alset Capital were tendered for redemption. Following this redemption, 2,449,786 shares of the Class A Common Stock of Alset Capital remain issued and outstanding, including 473,750 shares held by Alset Acquisition Sponsor, LLC and 1,976,036 public shares. Alset Acquisition Sponsor, LLC owns 2,156,250 shares of Class B Common Stock.
Potential Name Change
The Company has scheduledDuring a Special Meeting of Stockholders on June 6, 2022, to approvethe stockholders approved the reincorporation of the Company in Texas and the change of the Company’s name to “Alset Inc.” Should stockholders approve the new name, we believeThe management believes that such new name will more fully reflect its current business model.
Purchase of Rental Business from Majority-Owned Subsidiary
On December 9, 2022, Alset Inc. entered into an agreement with Alset EHome Inc. and Alset International Limited pursuant to which Alset Inc. agreed to reorganize the ownership of its home rental business. Previously, Alset Inc. and certain majority-owned subsidiaries collectively owned 132 single-family rental homes in Texas. 112 of these rental homes are owned by subsidiaries of American Home REIT Inc. (“AHR”). Alset Inc. owns 85.4% of Alset International Limited, and Alset International Limited indirectly owns approximately 99.9% of Alset EHome Inc.
The closing of the transaction contemplated by this agreement was completed on January 13, 2023. Pursuant to this agreement, Alset Inc. has become the direct owner of AHR and its subsidiaries that collectively own these 112 homes, instead of such homes being owned indirectly through Alset International Limited’s subsidiaries.
Alset EHome Inc. sold AHR to Alset Inc. for a total consideration of $26,250,933, including the forgiveness of debt in the amount of $13,900,000, a promissory note in the amount of $11,350,933 and a cash payment of $1,000,000. This purchase price represents the book value of AHR as of November 30, 2022.
The closing of this transaction was approved by the shareholders of Alset International Limited and the transaction was closed on January 13, 2023. Certain members of Alset Inc.’s Board of Directors and management are also members of the Board of Directors and management of each of Alset International Limited and Alset EHome Inc.
Public Offering
On February 6, 2023, we entered into an Underwriting Agreement (the “Underwriting Agreement”) in connection with an offering (the “Offering”) of our common stock, par value $0.001 per share (the “Common Stock”), with Aegis Capital Corp. (the “Underwriter”) as the underwriter, relating to an underwritten public offering of 1,727,273 shares of Common Stock at a public offering price of $2.20 per share. The Underwriting Agreement provides the Underwriter a 45-day option to purchase up to an additional 212,863 shares of Common Stock to cover over-allotments, if any.
The net proceeds to the Company from the Offering were approximately $3.3 million, after deducting underwriting discounts and the payment of other offering expenses associated with the Offering that are payable by the Company.
The Offering closed on February 8, 2023. The Common Stock was being offered pursuant to an effective registration statement on Form S-3 (File No. 333-264234), as well as a prospectus supplement in connection with the Offering filed with the Securities and Exchange Commission.
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Sale of Certain Lots
Sale of 131 Lots
On October 28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and an indirect, majority-owned subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Agreement, the Seller agreed to sell all of the approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.”
On November 28, 2022, the parties to the Agreement entered into an amendment to the Agreement, pursuant to which the Seller agreed to sell approximately 131 lots instead of 242 lots, and the anticipated purchase price was reduced.
On April 13, 2023, the sale of the 131 lots was completed and the Seller received a total consideration of $6,615,500 from the Buyer.
The Seller was required to develop and improve the property at the Seller’s cost pursuant to certain development plans and government regulations prior to the closing described above.
Agreement to Sell 110 Lots
On March 16, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company (“Rausch Coleman”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 110 single-family detached residential lots which comprise a section of the Lakes at Black Oak. The price of the lots and certain community enhancement fees the Seller will be entitled to receive are anticipated to equal an aggregate of $6,586,250.
The closing of the sale of these 110 lots depends on the satisfaction of certain conditions set forth in the Purchase and Sale Agreement. There can be no assurance that such closings will be completed on the terms outlined herein or at all. Commencing on March 16, 2023, Rausch Coleman had a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, Rausch Coleman was entitled to decline to proceed with the closing of these transactions. Rausch Coleman did not exercise its right to decline, and pursuant to the Purchase and Sale Agreement, has made an additional deposit in escrow. Through the date hereof, Rausch Coleman has deposited $957,250 in escrow.
The Seller shall be required to complete certain improvements at the property at the Seller’s cost prior to the closing.
Agreement to Sell 189 Lots
On March 17, 2023, the Seller entered into a Contract of Sale (the “Contract of Sale”) with Davidson Homes, LLC, an Alabama limited liability company (“Davidson Homes”). Pursuant to the terms of the Contract of Sale, the Seller has agreed to sell approximately 189 single-family detached residential lots comprising an additional section of the Lakes at Black Oak. The price of the lots and certain community enhancement fees the Seller will be entitled to receive are anticipated to equal an aggregate of $10,022,500.
The closing of the transactions described in the Contract of Sale depends on the satisfaction of certain conditions set forth therein. There can be no assurance that such closings will be completed on the terms outlined herein or at all. Davidson Homes has agreed to purchase the lots in stages, comprising an initial closing of 94 lots, the remaining lots to be purchase on or before December 29, 2023. Commencing on March 17, 2023, Davidson Homes had a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, Davidson Homes was entitled to decline to proceed with the closing of these transactions. Davidson Homes did not exercise its right to decline, and pursuant to the Contract of Sale, has made an additional deposit in escrow. Through the date hereof, Davidson Homes has deposited $1,425,000 in escrow.
The Seller shall be required to complete certain improvements at the property at the Seller’s cost prior to the closing.
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Purchase of Value Exchange International, Inc. Shares
On October 17, 2022, our majority-owned subsidiary Hapi Metaverse entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Chan Heng Fai, who is the Chairman of Hapi Metaverse’s Board of Directors and the Chairman, Chief Executive Officer and largest stockholder of Alset Inc. Pursuant to the Stock Purchase Agreement, Hapi Metaverse bought an aggregate of 7,276,163 shares of Value Exchange International Inc. (“VEII”) for the following purchase prices: (i) $1,733,079.12 for 7,221,163 shares, representing a price of $0.24 per share; (ii) $2,314 for 10,000 shares, representing a price of $0.2314 per share; (iii) $5,015 for 25,000 shares, representing a price of $0.2006 per share; and (iv) $3,326 for 20,000 shares, representing a price of $0.1663 per share. Collectively, these purchases represent an aggregate purchase price of $1,743,734.12 for 7,276,163 shares of VEII. Such purchase prices were negotiated between the parties to the Stock Purchase Agreement.
Mr. Chan 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 (Mr. Wong Shui Yeung and Mr. Wong Tat Keung).
Financial Impact of the COVID-19 Pandemic
Real Estate Projects
The extent to which the COVID-19 pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted.developments. The COVID-19 pandemic’s far-reaching impact on the global economy could negatively affect various aspects of our business, including demand for real estate. From March 2020 through the first quarter of 2022,March 2023, we continued to sell lots at our Ballenger Run project (in Maryland) to NVR for the construction of single-family homes.town homes to NVR. At this time, all of the lots at Ballenger Run have been sold to NVR, however we continue to complete our development requirements under our agreements with NVR. We do not anticipate that the COVID-19 pandemic will have a material impact on the timing of the completion of our remaining tasks at Ballenger Run.
We have received strong indications that buyers and renters across the country are expressing interest in moving from more densely populated urban areas to the suburbs. We believe this trend, should it continue, will encourage interest in some of our Lakes at Black Oak project, an Alset EHome community.projects.
The COVID-19 pandemic could impact the ability of our staff and contractors to continue to work, and our ability to conduct our operations in a prompt and efficient manner. In 2020, we experienced a slowdown in the construction of a clubhouse at the Ballenger Run project, which was completed behind schedule. We believe this delay was caused in part by policies requiring lower numbers of contractors working in indoor space. The infrastructure design, engineering and construction for the Black Oak project, and other planned projects, could be impacted by the COVID-19 pandemic in the future. In addition, we believe the COVID-19 pandemic could continue to have an impact on supply chains and commodities in the future, which may impact our real estate business by causing increased costs and longer project durations.
TheIn addition, the COVID-19 pandemic may adversely impact the timeliness of local government in granting required approvals. Accordingly, the COVID-19 pandemic may cause the completion of important stages in our real estate projects to be delayed.
At our Black Oak project in Texas, we have strategically redesigned the lots for a smaller “starter home” products that we believe will be more resilient in fluctuating markets. Should we initiate sales at Black Oak, we believe the same implications described above, regarding our Ballenger Run project, may apply to our Black Oak project (including the general trend of customers’ interest shifting from urban to suburban areas). Our Black Oak project may include our involvement in single family rental home development.
Other Business Activities
The COVID-19 pandemic may adversely impact our potential to expand our business activities in ways that are difficult to assess or predict. The COVID-19 pandemic continues to evolve. The COVID-19 pandemic has impacted, and may continue to impact, the global supply of certain goods and services in ways that may impact the sale of products to consumers that we, or companies we may invest in or partner with, will attempt to make. The COVID-19 pandemic may prevent us from pursuing otherwise attractive opportunities.
COVID-19 pandemic has impacted our operations in South Korea; since the start of the pandemic, the South Korean government has at various times placed certain restrictions on business meetings to reduce the spread of COVID-19. Such restrictions have impacted our ability to recruit potential affiliate sales personnel, and to introduce products to a larger audience.
Impact on Staff
Most of our U.S. staff works out of our Bethesda, Maryland office.
OurSome of our U.S. staff has shifted to mostly working from home since March 2020, but this has had a minimal impact on our operations to date. Our staff in Singapore and Hong Kong has been able to work from home when needed with minimal impact on our operations, however our staff’s ability to travel between our Hong Kong and Singapore offices has beenwas significantly limited and our staff’s travel between the U.S. and non-U.S. offices has been suspended since March 2020.until early 2022. The COVID-19 pandemic has alsoinitially impacted the frequency with which our management would otherwise travel to the Black Oaks project;project, however, we have a contractor in Texas providing supervision ofthis is no longer the project. Management continues to regularly supervise the Ballenger Run project.case. Limitations on the mobility of our management and staff, mayshould they arise in the future, could slow down our ability to enter into new transactions and expand existing projects.
We have not reduced our staff in connection with the COVID-19 pandemic. To date, we did not have to expend significant resources related to employee health and safety matters related to the COVID-19 pandemic. We have a small staff, however, and the inability of any significant number of our staff to work due to illness or the illness of a family member could adversely impact our operations.
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 operation;
● Our ability to attract competent, skilled technical and sales personnel for each of our businesses at acceptable compensation levels to manage our overhead; and
● Our ability to control our operating expenses as we expand each of our businesses and product and service offerings.
Results of Operations
Summary of Statements of Operations for the Three Months Ended March 31, 20222023 and 20212022
| Three- Months Ended | Three-months Ended | |||||||||||||||
March 31, 2022 | March 31, 2021 | March 31, 2023 | March 31, 2022 | |||||||||||||
| Revenue | $ | 1,952,237 | $ | 5,606,914 | $ | 926,936 | $ | 1,952,237 | ||||||||
| Operating Expenses | $ | (3,605,778 | ) | $ | (6,010,359 | ) | $ | (3,016,666 | ) | $ | (3,605,778 | ) | ||||
| Other Expense | $ | (6,054,798 | ) | $ | (8,949,966 | ) | ||||||||||
| Other Expenses | $ | (2,233,452 | ) | $ | (6,054,798 | ) | ||||||||||
| Income Tax Expense | $ | (222,114 | ) | $ | (451,337 | ) | $ | - | $ | (222,114 | ) | |||||
| Net Loss | $ | (7,930,453 | ) | $ | (9,804,748 | ) | $ | (4,323,182 | ) | $ | (7,930,453 | ) | ||||
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Revenue
The following tables set forth period-over-period changes in revenue for each of our reporting segments:
Three Months Ended March 31, | Change | Three Months Ended March 31, | Change | |||||||||||||||||||||||||||||
| 2022 | 2021 | Dollars | Percentage | 2023 | 2022 | Dollars | Percentage | |||||||||||||||||||||||||
| Real Estate | $ | 1,274,106 | $ | 3,894,131 | $ | (2,620,025 | ) | -67 | % | $ | 633,811 | $ | 1,274,106 | $ | (640,295 | ) | -50 | % | ||||||||||||||
| Biohealth | 617,471 | 1,712,783 | (1,095,312 | ) | -64 | % | 12,786 | 617,471 | (604,685 | ) | -98 | % | ||||||||||||||||||||
| Digital Transformation Technology | 14,040 | - | 14,040 | 100 | % | |||||||||||||||||||||||||||
| Other | 60,660 | - | 60,660 | 100 | % | 266,299 | 60,660 | 205,639 | 339 | % | ||||||||||||||||||||||
| Total revenue | $ | 1,952,237 | $ | 5,606,914 | $ | (3,654,677 | ) | -65 | % | $ | 926,936 | $ | 1,952,237 | $ | (1,025,301 | ) | -53 | % | ||||||||||||||
Revenue was $1,952,237$926,936 and $5,606,914$1,952,237 for the three months ended March 31, 20222023 and 2021,2022, respectively. The decrease in property sales from the Ballenger Project and direct sales from our indirect subsidiary HWH World in the first quarterthree months of 20222023 contributed to lower revenue in those periods.this period. In the first three months of 2022 the last three homes in Ballenger Project were sold. In this project, builders arewere required to purchase a minimum number of lots based on their applicable sale agreements. We collectcollected revenue from the sale of lots to builders. We are not involved in the construction of homes at the present time.
Income from the sale of Front Foot Benefits (“FFBs”), assessed on Ballenger project lots, decreased from $107,071 in the three months ended March 31, 2021 to $77,012 in the three months ended March 31, 2022. The decrease is a result of2022 to $0 in the decreased sale ofthree months ended March 31, 2023. Remaining properties were sold to homebuyers in 2022.2022, hence the decrease in revenue in 2023.
In the second quarter of 2021, the Company started renting homes to tenants. Revenue from this rental business was $633,811 and $232,582 in the three months ended March 31, 2022.2023 and 2022, respectively. The Company expects that the revenue from this business will continue to increase as we acquire more rental houses and successfully rent them.
In recent years, the Company expanded its biohealth segment to the South Korean market through one of the subsidiaries of Health Wealth Happiness Pte. Ltd.HWH International Inc., HWH World Inc (“HWH World”). HWH World operates based on a direct sale model of health supplements. HWH World recognized $617,471$12,786 and $1,712,783$617,471 in revenue in the three months ended March 31, 2023 and 2022, and 2021, respectively. The decrease in revenue from HWH World is caused mainly by decreased sales of annual memberships.
The category described as “Other” includes corporate and financial services, food and beverage business 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, 20222023 and 2021,2022, the revenue from other businesses was $60,660$266,299 and $0,$60,660, respectively, generated by Korean and Singaporean café shop.shops and restaurants.
Operating Expenses
The following tables sets forth period-over-period changes in cost of revenues for each of our reporting segments:
Three Months Ended March 31, | Change | Three Months Ended March 31, | Change | |||||||||||||||||||||||||||||
| 2022 | 2021 | Dollars | Percentage | 2023 | 2022 | Dollars | Percentage | |||||||||||||||||||||||||
| Real Estate | $ | 1,093,709 | $ | 3,614,832 | $ | (2,521,123 | ) | -70 | % | $ | 602,340 | $ | 1,093,709 | $ | (491,369 | ) | -45 | % | ||||||||||||||
| Biohealth | 12,038 | 83,022 | (70,984 | ) | -86 | % | 14,367 | 12,038 | 2,329 | 19 | % | |||||||||||||||||||||
| Digital Transformation Technology | 4,568 | - | 4,568 | 100 | % | |||||||||||||||||||||||||||
| Other | 8,803 | - | 8,803 | 100 | % | 68,006 | 8,803 | 59,203 | 673 | % | ||||||||||||||||||||||
| Total Cost of Revenues | $ | 1,114,550 | $ | 3,697,854 | $ | (2,583,304 | ) | -70 | % | $ | 689,281 | $ | 1,114,550 | $ | (425,269 | ) | -38 | % | ||||||||||||||
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Cost of revenues decreased from 3,697,854 in the three months ended March 31, 2021 to $1,114,550 in the three months ended March 31, 2022 asto $689,281 in the three months ended March 31, 2023. The decrease is a result of the decrease in sales in the Ballenger Run project and HWH World sales. Capitalized construction expenses, finance costs and land costs are allocated to sales. We anticipate the total cost of revenues to increase as revenue increases.
The gross margin decreased from $1,909,060$837,687 to $837,687$237,655 in the three months ended March 31, 20212022 and 2022,2023, respectively. The decrease of gross margin was caused by the decrease in sales in the Ballenger Run project and HWH World sales.
The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments.
Three Months Ended March 31, | Change | Three Months Ended March 31, | Change | |||||||||||||||||||||||||||||
| 2022 | 2021 | Dollars | Percentage | 2023 | 2022 | Dollars | Percentage | |||||||||||||||||||||||||
| Real Estate | $ | 536,765 | $ | 359,489 | $ | 177,276 | 49 | % | $ | 440,017 | $ | 536,765 | $ | (96,748 | ) | -18 | % | |||||||||||||||
| Biohealth | 620,342 | 846,480 | (226,138 | ) | -27 | % | 141,290 | 620,342 | (479,052 | ) | -77 | % | ||||||||||||||||||||
| Digital transformation technology | 114,263 | 30,128 | 84,135 | 279 | % | 139,903 | 114,263 | 25,640 | 22 | % | ||||||||||||||||||||||
| Other | 1,219,858 | 1,076,408 | 143,450 | 13 | % | 1,606,175 | 1,219,858 | 386,317 | 32 | % | ||||||||||||||||||||||
| Total operating expenses | $ | 2,491,228 | $ | 2,312,505 | $ | 178,723 | 8 | % | $ | 2,327,385 | $ | 2,491,228 | $ | (163,843 | ) | -7 | % | |||||||||||||||
The increasedecrease of operating expenses of real estate in 2022the first three months of 2023 compared with 2021to the same period of 2022 was mostly caused by the increasedecrease in sales and rental related expenses. Decrease in expenses in our biohealth business is caused by the decreased commission payments to our distributors, which is connected to decreased sales. Additionally, the increase in professional fees and employee salaries and bonuses in our other businesses contributed to increased operating expenses in three months ended March 31, 2022, as compared to the same period in 2021.
Other Income (Expense)
In the three months ended March 31, 2022,2023, the Company had other expense of $6,054,798$2,233,452 compared to other expenses of $8,949,966$6,054,798 in the three months ended March 31, 2021.2022. The change in realized and unrealized loss on securities investments and other income are the primary reasons for the volatility in these two periods. Unrealized loss on securities investment was $3,899,015$1,187,846 in the three months ended March 31, 2022,2023, compared to $9,535,009$3,899,015 loss in the three months ended March 31, 2021.2022. Realized loss on security investment was $3,436,783$131,313 the three months ended March 31, 2022,2023, compared to a loss of $258,245$3,436,783 in the three months ended March 31, 2021.2022. Other income was $103,007 in the three months ended March 31, 2023, compared to other income of $1,284,893 in the three months ended March 31, 2022.
Net Loss
In the three months ended March 31, 20222023 the Company had net loss of $7,930,453$4,323,182 compared to net loss of $9,804,748$7,930,453 in the three months ended March 31, 2021.2022.
Liquidity and Capital Resources
Our real estate assets have increased to $40,851,806$57,572,049 as of March 31, 20222023 from $40,515,380$54,618,729 as of December 31, 2021.2022. This increase primarily reflects the additional rental properties we purchased in first quarter of 2022. In the three months ended March 31, 2022, we purchased 3 homes, which will be usedan increase in the Company’s rental business. Our rental properties assets were $25,402,436 as of March 31, 2022. In February of 2022, one ofcapitalized costs related to the Company’s subsidiaries sold one ofconstruction in progress recorded on the two plots of land it owns in Australia (which had been planned to be part of the SeD Perth project).Black Oak project.
Our cash has decreasedincreased from $56,061,309$17,827,383 as of December 31, 20212022 to $51,520,971$18,675,450 as of March 31, 2022.2023. Our liabilities decreasedincreased from $13,920,357$4,827,221 at December 31, 20212022 to $4,336,506$6,819,685 at March 31, 2022.2023. Our total assets have increased to $192,830,587$155,689,482 as of March 31, 20222023 from $184,210,143$153,490,336 as of December 31, 20212022 mainly due to the increase in investments in securities.real estate assets.
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.
Summary of Cash Flows for the Three Months Ended March 31, 20222023 and 20212022
| Three Months Ended March 31 | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (5,293,582 | ) | $ | (3,304,857 | ) | ||
| Net cash (used in) provided by investing activities | $ | (7,311,776 | ) | $ | 2,352,536 | |||
| Net cash provided by (used in) financing activities | $ | 6,044,640 | $ | (956,264 | ) | |||
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (3,289,083 | ) | $ | (5,293,582 | ) | ||
| Net cash provided by (used in) investing activities | $ | 671,484 | $ | (7,311,776 | ) | |||
| Net cash provided by financing activities | $ | 3,433,921 | $ | 6,044,640 | ||||
Cash Flows from Operating Activities
Net cash used in operating activities was $5,293,582$3,289,083 in the first three months of 2022,2023, as compared to net cash used in operating activities of $3,304,857$5,293,582 in the same period of 2021. The payment2022. Development of accrued $4,800,000 contributed toreal estate and other expenses were the decrease ofmain reason for the cash used in operating activities in the first three months of 2022.2023.
Cash Flows from Investing Activities
Net cash used inprovided by investing activities was $7,311,776$671,484 in the first three months of 2022,2023, as compared to net cash provided byused in investing activities of $2,352,536$7,311,776 in the same period of 2021.2022. In the three months ended March 31, 2023 we invested $412,500 in marketable securities, issued $1,521,368 in loans to related parties and received $2,613,629 from repayment of related party notes receivable. In the three months ended March 31, 2022 we invested $6,585,294 in marketable securities and invested $722,817 to purchase real estate properties and $3,665 in office equipment. In the three months ended March 31, 2021 we invested $108,208 in marketable securities and we received approximately $2.5 million from the sale of Vivacitas Oncology to a related party.properties.
Cash Flows from Financing Activities
Net cash provided by financing activities was $3,433,921 in the three months ended March 31, 2023, compared to net cash provided of $6,044,640 in the three months ended March 31, 2022, compared to net cash used of $956,264 the three months ended March 31, 2021.2022. The increase in cash provided by financing activities in the first three months of 20222023 is primarily caused by the proceeds from stock issuance of $6,213,000. Additionally, the Company repaid $168,360 to loan payable.$3,433,921. During the three months ended March 31, 2021,2022, we received cash proceeds$6,213,000 from conversion of $7,484 from exerciserelated party note payable to common stock and we repaid $168,360 of subsidiary warrants, $250,000 from the sale of our GigWorld shares to individual investors and $68,502 from a loan. The Company also distributed $82,250 to one minority interest investor and repaid $1,200,000 of promissory note held by related parties.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.party debt.
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, 20222023 or the year ended December 31, 2021. Our current and anticipated costs in our real estate and other business lines have increased due to recent inflation, including projected costs of materials and salaries, and such increases may be significant as we engage in additional operations.2022. 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 $42$37 million and $43$51 million on March 31, 20222023 and December 31, 2021,2022, 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 $42$37 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2022,2023, 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 also 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 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, 20222023 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, 20222023 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
On September 27, 2019, iGalen International Inc., which was at that time one of our majority-owned subsidiaries, and iGalen Inc., its wholly-owned subsidiary, filed a complaint in the Superior Court of the State of California, County of San Diego, Central Division, against Gara Group, Inc., a Delaware corporation, and certain affiliated or related entities, including the Chief Executive Officer of the Gara Group (collectively these entities are referred to herein as the “Gara Group”). The complaint, as amended on October 24, 2019, enumerated causes of action for breach of contract, breach of covenant of good faith and fair dealing and intentional interference with economic relations.
On October 10, 2019, Gara Group filed a complaint in the Superior Court of the State of California, County of San Diego, Central Division against iGalen International Inc., iGalen Inc., Alset International Limited, Chan Heng Fai, Dr. Rajen Manicka and David Price, an executive of iGalen Inc. Gara Group filed an amended complaint filed on March 13, 2020.
iGalen International Inc. was sold by one of the Company’s subsidiaries on December 30, 2020.
On April 13, 2022, the parties to these lawsuits entered into a settlement agreement, resolving these matters.Not applicable.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company has not sold any unregistered shares during the period covered by this report or through May 13, 2022, however on January 27, 2022 the Company issued 10,000,000 shares to Chan Heng Fai. On December 13, 2021, the Company entered into a Securities Purchase Agreement with Chan Heng Fai for the issuance and sale of a convertible promissory note in favor of Chan Heng Fai, in the principal amount of $6,250,000. The note could be converted in part or whole into common shares of the Company at the conversion price of $0.625 or into cash. The loan closed on January 26, 2022 after all closing conditions were met. Chan Heng Fai opted to convert all of the amount of such note into 10,000,000 shares of the Company’s common stock. Such restricted shares were issued pursuant to the exemption provided by Regulation D promulgated under the Securities Act of 1933, as amended.
On January 17, 2022 the Company entered into securities purchase agreement with Chan Heng Fai, pursuant to which the Company agreed to purchase from Chan Heng Fai 293,428,200 ordinary shares of Alset International for a purchase price $29,468,977 newly issued shares of the Company’s common stock. On February 28, 2022, the Company and Chan Heng Fai entered into an amendment to this securities purchase agreement pursuant to which the Company shall purchase these 293,428,200 ordinary shares of Alset International for a purchase price of $35,319,290 newly issued shares of the Company’s common stock. The closing of this transaction with Chan Heng Fai is subject to approval of the Nasdaq and the Company’s stockholders. These 293,428,200 ordinary shares of Alset International represent approximately 8.4% of the 3,492,713,362 total issued and outstanding shares of Alset International.
On January 24, 2022 the Company entered into stock purchase agreement with Chan Heng Fai, pursuant to which the Company agreed to issue to Chan Heng Fai 35,012,120 shares of the Company’s common stock for a purchase price of $0.3713 per share (for an aggregate purchase price of $13,000,000). On February 28, 2022 the Company entered into an agreement with Chan Heng Fai to terminate this stock purchase agreement.
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
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Item 5. Other Information
None.Not applicable.
Item 6. Exhibits
The following documents are filed as a part of this report:
| * | Filed herewith. |
| ** | Furnished herewith. |
(1) Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
(2) Portions of this exhibit (indicated by asterisks) have been omitted under rules of the SEC permitting the confidential treatment of select information. The Registrant agrees to furnish a copy of all omitted information to the SEC upon its request.
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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 | ||
| May | By: | /s/ Chan Heng Fai |
Chan Heng Fai Chairman of the Board and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May | By: | /s/ Chan Tung Moe |
| Chan Tung Moe | ||
| Co-Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May | By: | /s/ Rongguo Wei |
Rongguo Wei Co-Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| May | By: | /s/ Lui Wai Leung Alan |
Lui Wai Leung Alan Co-Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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