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 September 30, 2020
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 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 December 29, 2020,November 14, 2022, there were
Table of Contents
| F-1 | |
| F-1 | |
| F-2 | |
| F-3 | |
| F-5 | |
| F-6 | |
Part I. FinancialFinancial Information
Item 1. Financial Statements.
Alset Inc.
September 30, 2020 | December 31, 2019 | |
| Assets: | ( Unaudited) | |
| Current Assets: | ||
| Cash | $8,754,202 | $2,774,587 |
| Restricted Cash | 4,235,274 | 4,447,678 |
| Account Receivables, Net | 56,191 | 170,442 |
| Other Receivables | 369,888 | 681,677 |
| Note Receivables - Related Parties | 209,398 | - |
| Prepaid Expenses | 1,902,079 | 145,186 |
| Inventory | 63,455 | 116,698 |
| Investment in Securities at Fair Value | 59,745,321 | 3,015,698 |
| Investment in Securities at Cost | 236,756 | 200,128 |
| Investment in Securities at Equity Method | 2,245 | - |
| Deposits | 50,539 | 48,717 |
| Current Assets from Discontinued Operations | - | 139,431 |
| Total Current Assets | 75,625,348 | 11,740,242 |
| Real Estate | ||
| Properties under Development | 24,990,366 | 23,884,704 |
| Operating Lease Right-Of-Use Asset | 546,519 | 146,058 |
| Deposit | 234,134 | 21,491 |
| Property and Equipment, Net | 77,663 | 80,285 |
| Total Assets | $101,474,030 | $35,872,780 |
| Liabilities and Stockholders' Equity: | ||
| Current Liabilities: | ||
| Accounts Payable and Accrued Expenses | $4,812,881 | $3,995,001 |
| Advance from Related Party | 710,524 | - |
| Accrued Interest - Related Parties | 33,828 | 834,536 |
| Deferred Revenue | 3,046,687 | 258,594 |
| Builder Deposits | 1,661,303 | 890,069 |
| Operating Lease Liability | 339,849 | 58,865 |
| Notes Payable | 228,468 | 157,105 |
| Notes Payable- Related Parties | 160,000 | 410,000 |
| Accumulated Losses on Equity Method Investment | 231,418 | - |
| Income Tax Payable | 249,698 | 420,327 |
| Current Liabilities From Discontinued Operations | - | 7,021 |
| Total Current Liabilities | 11,474,656 | 7,031,518 |
| Long-Term Liabilities: | ||
| Builder Deposits | 147,444 | 1,555,200 |
| Operating Lease Liability | 202,038 | 91,330 |
| Note Payable, Net of Debt Discount | 619,329 | - |
| Notes Payable - Related Parties | 2,056,183 | 4,971,401 |
| Total Liabilities | 14,499,650 | 13,649,449 |
| Stockholders' Equity: | ||
| Preferred Stock, $0.001 par value; 5,000,000 shares authorized, none issued | ||
| Common Stock, $0.001 par value; 20,000,000 shares authorized; | ||
| 6,400,000 shares issued and outstanding on September 30, 2020 | ||
| and 10,001,000 shares issued and outstanding on December 31, 2019 | 6,400 | 10,001 |
| Additional Paid In Capital | 94,053,568 | 54,263,717 |
| Accumulated Deficit | (49,803,606) | (40,494,115) |
| Accumulated Other Comprehensive Income | 1,045,584 | 1,468,269 |
| Total Stockholders' Equity | 45,301,946 | 15,247,872 |
| Non-controlling Interests | 41,672,434 | 6,975,459 |
| Total Stockholders' Equity | 86,974,380 | 22,223,331 |
| Total Liabilities and Stockholders' Equity | $101,474,030 | $35,872,780 |
(Unaudited)
| September 30, 2022 | December 31, 2021 | |||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 22,605,541 | $ | 56,061,309 | ||||
| Restricted Cash | 630,285 | 4,740,870 | ||||||
| Account Receivables, Net | 171,380 | 39,622 | ||||||
| Other Receivables | 401,405 | 334,788 | ||||||
| Note Receivables - Related Parties | 2,674,074 | 12,792,671 | ||||||
| Prepaid Expense | 206,344 | 1,202,451 | ||||||
| Inventory | 36,410 | 47,290 | ||||||
| Investment in Securities at Fair Value | 30,684,973 | 36,337,023 | ||||||
| Investment in Securities at Cost | 98,129 | 99,216 | ||||||
| Investment in Securities at Equity Method | 52,830,182 | 30,801,129 | ||||||
| Deposit | - | 275,204 | ||||||
| Total Current Assets | 110,338,723 | 142,731,573 | ||||||
| Real Estate | ||||||||
| Rental Properties | 31,485,036 | 24,820,253 | ||||||
| Properties under Development | 20,098,778 | 15,695,127 | ||||||
| Operating Lease Right-Of-Use Asset | 1,265,171 | 659,620 | ||||||
| Deposit | 387,118 | 39,653 | ||||||
| Property and Equipment, Net | 1,089,680 | 263,917 | ||||||
| Total Assets | $ | 164,664,506 | $ | 184,210,143 | ||||
| Liabilities and Stockholders' Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | 3,555,619 | $ | 11,341,789 | ||||
| Deferred Revenue | 65,091 | 728,343 | ||||||
| Builder Deposits | - | 31,553 | ||||||
| Operating Lease Liability | 619,355 | 283,989 | ||||||
| Notes Payable | 193,645 | 317,671 | ||||||
| Notes Payable - Related Parties | 12,088 | 833,658 | ||||||
| Total Current Liabilities | 4,445,798 | 13,537,003 | ||||||
| Long-Term Liabilities: | ||||||||
| Operating Lease Liability | 658,802 | 383,354 | ||||||
| Total Liabilities | 5,104,600 | 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 September 30, 2022 and December 31, 2021, respectively | 148,507 | 87,368 | ||||||
| Additional Paid in Capital | 322,318,500 | 296,181,977 | ||||||
| Accumulated Deficit | (175,407,945 | ) | (148,233,473 | ) | ||||
| Accumulated Other Comprehensive Income | 485,331 | 341,646 | ||||||
| Total Alset Inc. Stockholders' Equity | 147,544,393 | 148,377,518 | ||||||
| Non-controlling Interests | 12,015,513 | 21,912,268 | ||||||
| Total Stockholders' Equity | 159,559,906 | 170,289,786 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 164,664,506 | $ | 184,210,143 |
See accompanying notes to condensed consolidated unaudited financial statements.
| F-1 |
Alset Inc.
Condensed Consolidated Statements of OperationsOperations and Other Comprehensive Loss
For the Three and Nine Months Ended September 30, 20202022 and 2019
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
| Revenue | ||||
| Property Sales | $2,146,992 | $4,938,017 | $7,148,786 | $21,509,197 |
| Biohealth Product Sales | 1,931 | 360,351 | 31,133 | 1,406,951 |
| Others | - | 8,495 | - | 28,350 |
| Total Revenue | 2,148,923 | 5,306,863 | 7,179,919 | 22,944,498 |
| Operating Expenses | ||||
| Cost of Sales | 1,616,377 | 4,130,484 | 5,609,303 | 19,177,800 |
| General and Administrative | 798,186 | 1,445,678 | 4,196,939 | 4,330,751 |
| Impairment of Real Estate | - | - | - | 3,938,769 |
| Total Operating Expenses | 2,414,563 | 5,576,162 | 9,806,242 | 27,447,320 |
| Loss From Continuing Operations | (265,640) | (269,299) | (2,626,323) | (4,502,822) |
| Other Income (Expense) | ||||
| Interest Income | 2,504 | 16,440 | 14,995 | 44,021 |
| Interest Expense | (19,825) | (86,347) | (160,341) | (286,805) |
| Gain on Disposal of Subsidiary | - | - | - | 299,255 |
| Gain on Deconsolidation | 53,200,752 | - | 53,200,752 | - |
| Loss on Consolidation | (21,909,596) | (21,909,596) | ||
| Foreign Exchange Transaction Gain (Loss) | (415,203) | 757,068 | 960,268 | 438,608 |
| Unrealized (Loss) Gain on Securities Investment | (43,761,763) | 507,727 | (42,169,116) | (146,470) |
| Loss on Investment on Security by Equity Method | (52,392) | - | (193,132) | (30,166) |
| Other Income | 8,563 | 2,887 | 52,847 | 38,993 |
| Total Other Income (Expense) | (12,946,960) | 1,197,775 | (10,203,323) | 357,436 |
| Net (Loss) Income from Continuing Operations Before Income Taxes | (13,212,600) | 928,476 | (12,829,646) | (4,145,386) |
| Income Tax Expense from Continuing Operations | (74,106) | - | (188,759) | - |
| Net (Loss) Income from Continuing Operations | (13,286,706) | 928,476 | (13,018,405) | (4,145,386) |
| Loss from Discontinued Operations, Net of Tax | (56,053) | (128,554) | (417,438) | (388,931) |
| Net Loss | (13,342,758) | 799,922 | (13,435,843) | (4,534,317) |
| Net (Loss) Income Attributable to Non-Controlling Interest | (3,505,919) | 36,181 | (4,126,352) | (1,437,202) |
| Net (Loss) Income Attributable to Common Stockholders | $(9,836,839) | $763,741 | $(9,309,491) | $(3,097,115) |
| Other Comprehensive Income (Loss), Net | ||||
| Unrealized Gain on Securities Investment | 29,123 | (53,681) | 29,639 | (36,747) |
| Foreign Currency Translation Adjustment | 462,064 | (584,561) | (585,085) | (325,518) |
| Comprehensive Loss | (12,851,571) | 161,680 | (13,991,289) | (4,896,582) |
| Comprehensive Loss Attributable to Non-controlling Interests | (3,276,947) | (160,972) | (4,190,100) | (1,549,106) |
| Comprehensive Income (Loss) Attributable to Common Stockholders | $(9,574,624) | $322,652 | $(9,801,189) | $(3,347,476) |
| Net Income (Loss) Per Share - Basic and Diluted | ||||
| Continuing Operations | $(1.53) | $0.08 | $(1.07) | $(0.31) |
| Discontinued Operations | $(0.01) | $- | $(0.03) | $(0.00) |
| Net (Loss) Income Per Share | $(1.54) | $0.08 | $(1.10) | $(0.31) |
| Weighted Average Common Shares Outstanding - Basic and Diluted | 6,400,000 | 10,001,000 | 8,712,081 | 10,001,000 |
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three Months Ended on September 30, | Nine Months Ended on September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental | $ | 569,791 | $ | 133,302 | $ | 1,206,273 | $ | 155,249 | ||||||||
| Property | - | 3,414,094 | 1,288,434 | $ | 11,870,820 | |||||||||||
| Biohealth | 22,154 | 1,248,171 | 771,847 | 4,919,844 | ||||||||||||
| Digital Transformation Technology - related party | 6,365 | - | 14,066 | - | ||||||||||||
| Other | 123,595 | - | 319,862 | - | ||||||||||||
| Total Revenue | 721,905 | 4,795,567 | 3,600,482 | 16,945,913 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Cost of Sales | 813,369 | 2,204,401 | 2,478,596 | 8,510,205 | ||||||||||||
| General and Administrative | 1,979,548 | 2,539,584 | 6,500,701 | 13,466,414 | ||||||||||||
| Total Operating Expenses | 2,792,917 | 4,743,985 | 8,979,297 | 21,976,619 | ||||||||||||
| Operating Losses from Operations | (2,071,012 | ) | 51,582 | (5,378,815 | ) | (5,030,706 | ) | |||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest Income | (319,768 | ) | 22,614 | 49,271 | 78,902 | |||||||||||
| Interest Expense | - | (330 | ) | - | (316,615 | ) | ||||||||||
| Foreign Exchange Transaction Gain (Loss) | 132,092 | (578,903 | ) | 2,617,896 | 1,842,128 | |||||||||||
| Unrealized Loss on Securities Investment | (11,006,833 | ) | (5,268,531 | ) | (21,773,223 | ) | (35,972,445 | ) | ||||||||
| Realized Loss on Securities Investment | (145,122 | ) | (2,515,949 | ) | (6,500,573 | ) | (2,218,988 | ) | ||||||||
| (Loss) Gain on Investment on Security by Equity Method | (171,385 | ) | 189,696 | (387,435 | ) | 87,390 | ||||||||||
| Finance Costs | 887 | (27,798 | ) | (450,000 | ) | (50,871,869 | ) | |||||||||
| Other Income | 346,591 | 53,135 | 897,129 | 77,591 | ||||||||||||
| Total Other Expense, Net | (11,163,538 | ) | (8,126,066 | ) | (25,546,935 | ) | (87,293,906 | ) | ||||||||
| Net Loss Income Before Income Taxes | (13,234,550 | ) | (8,074,484 | ) | (30,925,750 | ) | (92,324,612 | ) | ||||||||
| Income Tax Benefit (Expense) | 153,159 | - | (68,955 | ) | (446,757 | ) | ||||||||||
| Net Loss | (13,081,391 | ) | (8,074,484 | ) | (30,994,705 | ) | (92,771,369 | ) | ||||||||
| Net Loss Attributable to Non-Controlling Interest | (1,369,265 | ) | (964,347 | ) | (3,827,934 | ) | (12,771,919 | ) | ||||||||
| Net Loss Attributable to Common Stockholders | $ | (11,712,126 | ) | $ | (7,110,137 | ) | $ | (27,166,771 | ) | $ | (79,999,450 | ) | ||||
| Other Comprehensive Loss, Net | ||||||||||||||||
| Unrealized Gain (Loss) on Securities Investment | 49,915 | (19,060 | ) | 40,201 | (56,969 | ) | ||||||||||
| Foreign Currency Translation Adjustment | 434,011 | (1,238,356 | ) | (3,729,724 | ) | (4,077,987 | ) | |||||||||
| Comprehensive Loss | (12,597,465 | ) | (9,331,900 | ) | (34,684,228 | ) | (96,906,325 | ) | ||||||||
| Comprehensive Loss Attributable to Non-controlling Interests | (1,183,223 | ) | (1,350,889 | ) | (4,554,792 | ) | (14,264,651 | ) | ||||||||
| Comprehensive Loss Attributable to Common Stockholders | $ | (11,414,242 | ) | $ | (7,981,011 | ) | $ | (30,129,436 | ) | $ | (82,641,674 | ) | ||||
| Net Loss Per Share - Basic and Diluted | $ | (0.08 | ) | $ | (0.19 | ) | $ | (0.22 | ) | $ | (4.14 | ) | ||||
| Weighted Average Common Shares Outstanding - Basic and Diluted | 148,507,188 | 38,030,098 | 124,122,891 | 19,785,922 | ||||||||||||
See accompanying notes to condensed consolidated unaudited financial statements.
| F-2 |
Alset Inc.
Condensed Consolidated Statements of Stockholders’Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2022
(Unaudited)
| 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 Inc. Stockholders' Equity | Non-Controlling Interests | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| 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 Inc. 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 | |||||||||||||||||||||||||||||||||||
| Issuance of Common Stock | 35,319,290 | $ | 35,319 | $ | (35,319 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Change in Valuation on Investment | - | - | - | - | - | - | (2,624,585 | ) | - | - | (2,624,585 | ) | (206,377 | ) | (2,830,962 | ) | ||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interests | - | - | - | - | - | - | 4,557,454 | 3,266,996 | - | 7,824,450 | (7,824,450 | ) | - | |||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | - | - | - | - | (505 | ) | - | (505 | ) | (86 | ) | (591 | ) | ||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | - | - | (3,002,167 | ) | - | (3,002,167 | ) | (512,428 | ) | (3,514,595 | ) | ||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (8,987,359 | ) | (8,987,359 | ) | (995,502 | ) | (9,982,861 | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | - | - | - | - | 148,507,188 | 148,507 | 322,302,515 | 558,045 | (163,688,118 | ) | 159,320,949 | 12,844,123 | 172,165,072 | |||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interests | - | - | - | - | - | - | 15,985 | (486,134 | ) | - | (470,149 | ) | 470,149 | - | ||||||||||||||||||||||||||||||||||
| Change in Unrealized Gain on Investment | - | - | - | - | - | - | - | 42,642 | - | 42,642 | 7,273 | 49,915 | ||||||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | - | - | 370,778 | - | 370,778 | 63,233 | 434,011 | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (11,719,827 | ) | (11,719,827 | ) | (1,369,265 | ) | (13,089,092 | ) | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | - | $ | - | - | $ | - | 148,507,188 | $ | 148,507 | $ | 322,318,500 | $ | 485,331 | # | $ | (175,407,945 | ) | $ | 147,544,393 | $ | 12,015,513 | $ | 159,559,906 | |||||||||||||||||||||||||
| F-3 |
Alset Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended September 30, 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 Inc. Stockholders’ Equity | Non-Controlling Interests | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2021 (As Combined) | - | $ | - | - | $ | - | 8,570,000 | $ | 8,570 | $ | 102,729,944 | $ | 2,143,338 | $ | (44,910,297 | ) | $ | 59,971,555 | $ | 38,023,260 | $ | 97,994,815 | ||||||||||||||||||||||||||
| 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 | - | - | - | - | - | - | 142,675.00 | - | - | 142,675 | 107,325 | 250,000 | ||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | - | - | - | - | - | 76,412 | (39,067 | ) | - | 37,345 | (37,345 | ) | - | ||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss 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 | - | - | - | - | - | - | - | - | (6,238,449 | ) | (6,238,449 | ) | (3,569,112 | ) | (9,807,561 | ) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | - | - | - | - | 8,580,000 | 8,580 | 102,189,645 | 1,092,609 | (51,148,746 | ) | 52,142,088 | 33,716,790 | 85,858,878 | |||||||||||||||||||||||||||||||||||
| Issuance of Common Stock | 8,389,324 | 8,389 | 39,260,191 | - | - | 39,268,580 | - | 39,268,580 | ||||||||||||||||||||||||||||||||||||||||
| Change Common stock to Series A Preferred Stock | 6,380 | 6 | - | - | (6,380,000 | ) | (6,380 | ) | 6,374 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of Series B Preferred Stock | 2,132 | 2 | - | - | 12,999,998 | - | - | 13,000,000 | - | 13,000,000 | ||||||||||||||||||||||||||||||||||||||
| Convert Preferred Stock Series A and B to Common | (6,380 | ) | (6 | ) | (2,132 | ) | (2 | ) | 8,512,000 | 8,512 | (8,503 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | - | - | - | (2,885,117 | ) | (343,225 | ) | - | (3,228,342 | ) | 3,228,342 | - | |||||||||||||||||||||||||||||||||||
| Convertible Note to Stock | - | - | - | - | 9,163,965 | 9,164 | 51,217,402 | - | - | 51,226,566 | - | 51,226,566 | ||||||||||||||||||||||||||||||||||||
| Subsidiary's Issuance of Stock | - | - | - | - | - | - | 1,961,349 | - | - | 1,961,349 | 784,100 | 2,745,449 | ||||||||||||||||||||||||||||||||||||
| Proceeds from Selling Subsidiary Equity | - | - | - | - | - | - | 21,432 | - | - | 21,432 | 8,568 | 30,000 | ||||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | - | - | - | - | (25,663 | ) | - | (25,663 | ) | (10,259 | ) | (35,922 | ) | ||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | - | - | (764,544 | ) | - | (764,544 | ) | (305,647 | ) | (1,070,191 | ) | ||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling Shareholders | - | - | - | - | - | - | - | - | - | - | (1,069,250 | ) | (1,069,250 | ) | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (66,650,864 | ) | $ | (66,650,864 | ) | (8,238,460 | ) | (74,889,324 | ) | |||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | - | - | - | - | 28,265,289 | 28,265 | 204,762,770 | (40,823 | ) | (117,799,610 | ) | 86,950,602 | 28,114,184 | 115,064,786 | ||||||||||||||||||||||||||||||||||
| Beginning balance, value | - | - | - | - | 28,265,289 | 28,265 | 204,762,770 | (40,823 | ) | (117,799,610 | ) | 86,950,602 | 28,114,184 | 115,064,786 | ||||||||||||||||||||||||||||||||||
| Issuance of Common Stock | - | - | - | - | 17,456,490 | 17,457 | 33,871,847 | - | - | 33,889,304 | 33,889,304 | |||||||||||||||||||||||||||||||||||||
| Subsidiary's Issuance of Stock | - | - | - | - | - | - | 166,655 | - | - | 166,655 | 55,256 | 221,911 | ||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | - | - | - | - | - | (910,067 | ) | (17,070 | ) | - | (927,137 | ) | (1,272,853 | ) | (2,199,990 | ) | |||||||||||||||||||||||||||||||
| Deconsolidate American Pacific Bancorp Inc. | - | - | - | - | - | - | 28,287,920 | - | - | 28,287,920 | (383,063 | ) | 27,904,857 | |||||||||||||||||||||||||||||||||||
| Exercise American Premium Water Corp. Warrant to Purchase Stock | - | - | - | - | - | - | 454,355 | - | - | 454,355 | 150,645 | 605,000 | ||||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | - | - | - | - | (14,314 | ) | - | (14,314 | ) | (4,746 | ) | (19,060 | ) | ||||||||||||||||||||||||||||||||
| Change in Unrealized Gain (Loss) on Investment | - | - | - | - | - | - | - | (14,314 | ) | - | (14,314 | ) | (4,746 | ) | (19,060 | ) | ||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | - | - | (930,005 | ) | - | (930,005 | ) | (308,351 | ) | (1,238,356 | ) | ||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling Shareholders | - | - | - | - | - | - | - | - | - | - | (246,750 | ) | (246,750 | ) | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (7,110,137 | ) | (7,110,137 | ) | (964,347 | ) | (8,074,484 | ) | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | - | - | - | - | 45,721,779 | $ | 45,722 | $ | 266,633,480 | $ | (1,002,212 | ) | $ | (124,909,747 | ) | $ | 140,767,243 | $ | 25,139,975 | $ | 165,907,218 | |||||||||||||||||||||||||||
| Ending balance, value | - | - | - | - | 45,721,779 | $ | 45,722 | $ | 266,633,480 | $ | (1,002,212 | ) | $ | (124,909,747 | ) | $ | 140,767,243 | $ | 25,139,975 | $ | 165,907,218 | |||||||||||||||||||||||||||
See accompanying notes to condensed consolidated unaudited financial statements.
| F-4 |
Alset Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 20202022 and 2021
(Unaudited)
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss from Operations | $ | (30,994,705 | ) | $ | (92,771,369 | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | 533,820 | 85,354 | ||||||
| Amortization of Right-Of-Use Asset | 529,418 | 284,730 | ||||||
| Amortization of Debt Discount | 450,000 | 50,871,869 | ||||||
| Shared-based Compensation & Expense | - | 134,192 | ||||||
| Impairment of Promissory Note | - | 421,754 | ||||||
| Foreign Exchange Transaction Gain | (2,617,896 | ) | (1,842,128 | ) | ||||
| Unrealized Loss on Securities Investment | 21,773,223 | 35,972,445 | ||||||
| Realized Loss on Securities Investment | 6,500,573 | 2,218,988 | ||||||
| Loss on Exchange of Investment Securities | 446,104 | - | ||||||
| PPP Loan Forgiveness | (68,502 | ) | - | |||||
| Director Compensation Adjustment | (1,185,251 | ) | - | |||||
| Loss (Gain) on Equity Method Investment | 387,435 | (87,390 | ) | |||||
| Changes in Operating Assets and Liabilities | ||||||||
| Real Estate | (5,420,208 | ) | 4,878,334 | |||||
| Account Receivables | (198,375 | ) | (767,987 | ) | ||||
| Prepaid Expense | 830,294 | (8,412 | ) | |||||
| Trading Securities | (7,466,912 | ) | (2,419,797 | ) | ||||
| Inventory | 10,880 | 37,368 | ||||||
| Accounts Payable and Accrued Expenses | (8,845,706 | ) | (1,217,298 | ) | ||||
| Other Receivable - Related Parties | (1,746,279 | ) | - | |||||
| Accrued Interest - Related Parties | - | 306,438 | ||||||
| Deferred Revenue | (663,252 | ) | (1,302,086 | ) | ||||
| Operating Lease Liability | (554,937 | ) | (263,584 | ) | ||||
| Builder Deposits | (31,553 | ) | (1,017,400 | ) | ||||
| Net Cash Used in Operating Activities | (28,331,829 | ) | (6,485,979 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Loan Receivable - Related Party | 694,878 | - | ||||||
| Purchase of Fixed Assets | (210,319 | ) | (220,712 | ) | ||||
| Purchase of Real Estate Properties | (6,057,493 | ) | (11,081,491 | ) | ||||
| Real Estate Improvements | (1,082,225 | ) | - | |||||
| Purchase of Investment Securities | (8,479,968 | ) | (19,308,318 | ) | ||||
| Proceeds from Investment Securities | 103,809 | 110,718 | ||||||
| Sales of Investment Securities to Related Party | - | 2,480,000 | ||||||
| Cash Loss of Deconsolidation of American Pacific Bancorp Inc. | - | (1,235,953 | ) | |||||
| Issuing Loan Receivable - Related Party | - | (327,603 | ) | |||||
| Proceeds from Loan Receivable - Related Party | - | 840,000 | ||||||
| Net Cash Used in Investing Activities | (15,031,318 | ) | (28,743,359 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Common Stock Issuance | 6,213,000 | 73,157,884 | ||||||
| Proceeds from Exercise of Subsidiary Warrants | - | 2,975,194 | ||||||
| Proceeds from Sale of Subsidiary Shares | - | 280,000 | ||||||
| Dividend Paid on Subsidiary Preferred Stock | - | (73,750 | ) | |||||
| Borrowing from PPP Loan | - | 68,502 | ||||||
| Distribution to Non-controlling Interest Shareholders | - | (1,398,250 | ) | |||||
| Repayment to Notes Payable | (216,867 | ) | (695,635 | ) | ||||
| Proceeds from Note Payable - Related Parties | - | 5,545,495 | ||||||
| Repayment to Notes Payable - Related Parties | - | (2,622,400 | ) | |||||
| Net Cash Provided by Financing Activities | 5,996,133 | 77,237,040 | ||||||
| Net (Decrease) Increase in Cash and Restricted Cash | (37,367,014 | ) | 42,007,702 | |||||
| Effects of Foreign Exchange Rates on Cash | (199,339 | ) | (802,048 | ) | ||||
| Cash and Restricted Cash - Beginning of Year | 60,802,179 | 31,735,479 | ||||||
| Cash and Restricted Cash- End of Period | $ | 23,235,826 | $ | 72,941,133 | ||||
| Cash | 22,605,541 | 67,944,590 | ||||||
| Restricted Cash | 630,285 | 4,996,543 | ||||||
| Total Cash and Restricted Cash | 23,235,826 | 72,941,133 | ||||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | 2,420 | $ | 17,659 | ||||
| Cash Paid for Taxes | $ | - | $ | 446,757 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Unrealized Gain (Loss) on Investment | $ | 777,773 | $ | (56,969 | ) | |||
| Initial Recognition of ROU / Lease Liability | $ | 1,134,969 | $ | 256,928 | ||||
| Acquiring True Partner Stock | $ | - | $ | 10,003,689 | ||||
| Sale of Investment in Vivacitas to Related Party | $ | - | $ | 2,279,872 | ||||
| Deconsolidate Alset Capital Acquisition | $ | 16,557,582 | $ | - | ||||
| Intrinsic Value of BCF | $ | 450,000 | $ | (50,770,192 | ) | |||
| Issuance of Stock by Exercising Warrants | $ | 3,895 | $ | - | ||||
| Transactions under Common Control | $ | - | $ | 57,190,499 | ||||
| Convert Related Party Note Payable to Common Stock | $ | 6,213,000 | $ | 64,226,566 | ||||
| American Pacific Bancorp Inc. Deconsolidation | $ | - | $ | 27,904,857 | ||||
| Gain from Exercise of American Premium Water Warrant | $ | - | $ | 605,000 | ||||
| Purchase of Fixed Asset with Promissory Note | $ | - | $ | 95,000 | ||||
See accompanying notes to condensed consolidated unaudited financial statements.
| F-5 |
Preferred Stock | Common Stock | ||||||||
Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-Controlling Interests | Total Stockholders Equity | |
| Balance at January 1, 2020 | 10,001,000 | $10,001 | $54,263,717 | $1,468,269 | $(40,494,115) | $6,975,459 | $22,223,331 | ||
| Subsidiary's Issuance of Stock | 96,042 | 50,811 | 146,853 | ||||||
| Proceeds from Selling Subsidiary Equity | 3,270 | 1,730 | 5,000 | ||||||
| Change in Unrealized Loss on Investment | (8,240) | (4,359) | (12,599) | ||||||
| Foreign Currency Translations | (1,094,810) | (579,211) | (1,674,021) | ||||||
Distribution to Non-Controlling Shareholder | (197,400) | (197,400) | |||||||
| Net Income | 1,447,666 | 567,985 | 2,015,651 | ||||||
| Balance at March 31, 2020 | 10,001,000 | $10,001 | $54,363,029 | $365,219 | $(39,046,449) | $6,815,015 | $22,506,815 | ||
| Cancellation of Outstanding Stock | (3,601,000) | (3,601) | 3,601 | - | |||||
| Subsidiary's Issuance of Stock | 1,262,990 | 770,156 | 2,033,146 | ||||||
| Change in Minority Interest | (445,936) | (18,317) | 464,253 | - | |||||
| Proceeds from Selling Subsidiary Equity | 16,959 | 10,341 | 27,300 | ||||||
| Change in Unrealized Gain on Investment | 8,147 | 4,968 | 13,115 | ||||||
| Foreign Currency Translations | 389,413 | 237,459 | 626,872 | ||||||
| Net Loss | (920,318) | (1,188,418) | (2,108,736) | ||||||
| Balance at June 30, 2020 | 6,400,000 | $6,400 | $55,200,643 | $744,462 | $(39,966,767) | $7,113,774 | $23,098,512 | ||
| Subsidiary's Issuance of Stock | 5,494,373 | 5,270,464 | 10,764,837 | ||||||
| Proceeds from Selling Subsidiary Equity | 74,008 | 70,992 | 145,000 | ||||||
| Change in Minority Interest | (989,342) | 50,420 | (394,507) | (1,333,429) | |||||
| Stock Exchange with Related Party | 34,273,886 | 32,877,145 | 67,151,031 | ||||||
| Change in Unrealized Gain on Investment | 14,865 | 14,258 | 29,123 | ||||||
| Foreign Currency Translations | 235,837 | 226,227 | 462,064 | ||||||
| Net Loss | $(9,836,839) | $(3,505,919) | $(13,342,758) | ||||||
| Balance at September 30, 2020 | 6,400,000 | $6,400 | $94,053,568 | $1,045,584 | $(49,803,606) | $41,672,434 | $86,974,380 | ||
Alset Inc.
Notes to Condensed Consolidated Financial Statements of Stockholders’ Equity
For the Nine Months Ended September 30, 2019
Preferred Stock | Common Stock | ||||||||
Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-Controlling Interests | Total Stockholders Equity | |
| Balance at January 1, 2019 | 10,001,000 | $10,001 | $53,717,424 | $1,582,788 | $(35,263,650) | $9,155,051 | $29,201,614 | ||
| Proceeds from Selling Subsidiary Equity | 127,508 | 56,992 | 184,500 | ||||||
| Change in Unrealized Gain on Investment | 11,681 | 5,221 | 16,902 | ||||||
| Foreign Currency Translations | 74,262 | 33,194 | 107,456 | ||||||
| Net Income | 344,151 | 50,766 | 394,917 | ||||||
| Balance at March 31, 2019 | 10,001,000 | $10,001 | $53,844,932 | $1,668,731 | $(34,919,499) | $9,301,224 | $29,905,389 | ||
| Proceeds from Selling Subsidiary Equity | 10,367 | 4,633 | 15,000 | ||||||
| Change in Unrealized Gain on Investment | 22 | 10 | 32 | ||||||
| Foreign Currency Translations | 104,762 | 46,825 | 151,587 | ||||||
Distribution to Non-Controlling Shareholder | (740,250) | (740,250) | |||||||
| Net Loss | (4,205,007) | (1,524,149) | (5,729,156) | ||||||
| Balance at June 30, 2019 | 10,001,000 | $10,001 | $53,855,299 | $1,773,515 | $(39,124,506) | $7,088,293 | $23,602,602 | ||
| Proceeds from Selling Subsidiary Equity | 20,733 | 9,267 | 30,000 | ||||||
| Change in Unrealized Loss on Investment | (37,099) | (16,582) | (53,681) | ||||||
| Foreign Currency Translations | (403,990) | (180,571) | (584,561) | ||||||
| Net Income | 763,741 | 36,181 | 799,922 | ||||||
�� | |||||||||
| Balance at September 30, 2019 | 10,001,000 | $10,001 | $53,876,032 | $1,332,426 | $(38,360,765) | $6,936,588 | $23,794,282 | ||
(Unaudited)
2020 | 2019 | |
| Cash Flows from Operating Activities | ||
| Net Loss from Continuing Operations | $(13,018,405) | $(4,145,386) |
| Adjustments to Reconcile Net Loss from Continuing Operations to Net Cash Provided (Used in) by Operating Activities: | ||
| Depreciation | 15,225 | 20,697 |
| Amortization of Right -Of - Use Asset | 182,120 | 55,726 |
| Amortization of Debt Discount | 9,217 | - |
| Gain on Disposal of Subsidiary | - | (299,255) |
| Share-based Compensation | 1,584,412 | - |
| Foreign Exchange Transaction Gain | (960,268) | (438,608) |
| Unrealized Loss on Securities Investment | 42,169,116 | 146,470 |
| Loss on Equity Method Investment | 193,132 | - |
| Gain from Deconsolidation | (53,200,752) | |
| Loss from Consolidation | 21,909,596 | |
| Impairment of Real Estate | - | 3,938,769 |
| Changes in Operating Assets and Liabilities | ||
| Real Estate | (544,419) | 12,565,198 |
| Trade Receivables | 454,109 | (125,855) |
| Prepaid Expense | (1,801,795) | 9,542 |
| Deferred Revenue | 2,747,121 | (36,467) |
| Inventory | 55,486 | (21,253) |
| Accounts Payable and Accrued Expenses | 1,534,838 | (1,130,721) |
| Accrued Interest - Related Parties | (788,748) | 275,245 |
| Operating Lease Liability | (221,838) | (62,707) |
| Builder Deposits | (636,522) | (1,340,086) |
| Income Tax Payable | (170,630) | - |
| Net Cash (Used in) Provided by Continuing Operating Activities | (489,005) | 9,411,309 |
| Net Cash Used in Discontinued Operating Activities | (522,435) | (446,409) |
| Net Cash (Used in) Provided by Operating Activities | (1,011,440) | 8,964,900 |
| Cash Flows From Investing Activities | ||
| Purchase of Fixed Assets | (10,133) | - |
| Proceeds from Global Opportunity Fund Liquidation | 301,976 | - |
| Purchase of Investments | (158,667) | - |
| Promissory Note to Related Party | (200,000) | - |
| Net Cash Provided by (Used in) Continuing Investing Activities | (66,824) | - |
| Net Cash from Discontinued Investing Activities | - | (36,000) |
| Net Cash Provided by (Used in) Investing Activities | (66,824) | (36,000) |
| Cash Flows From Financing Activities | ||
| Proceeds from Exercise of Subsidiary Warrants | 10,764,837 | - |
| Proceeds from Sale of Subsidiary Shares | 177,300 | 229,500 |
| Borrowings | 738,783 | - |
| Financing Fee | (82,062) | - |
| Repayments of Note Payable | (250,000) | (13,899) |
| Distribution to Minority Shareholder | (197,400) | (740,250) |
| Repayment to Notes Payable - Related Parties | (4,450,572) | (2,507,840) |
| Net Cash Provided by (Used in) Continuing Financing Activities | 6,700,886 | (3,032,489) |
| Net Cash Provided by Discontinued Financing Activities | - | - |
| Net Cash Provided by (Used in) Financing Activities | 6,700,886 | (3,032,489) |
| Net Increase in Cash and Restricted Cash | 5,622,622 | 5,896,411 |
| Effects of Foreign Exchange Rates on Cash | 35,858 | 9,287 |
| Cash and Restricted Cash - Beginning of Year | 7,330,996 | 5,508,198 |
| Cash and Restricted Cash- End of Period | $12,989,476 | $11,413,896 |
| Supplementary Cash Flow Information | ||
| Cash Paid for Interest | $13,843 | $4,663 |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
| Amortization of Debt Discount Capitalized | $- | $381,823 |
| Stock Acquired by disposal of a Subsidiary | $67,208,173 | $- |
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Alset Inc. (the “Company” or “HFE”“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 stock was issued to Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company. HFEOn October 4, 2022, through a merger transaction, the Company was reincorporated in Texas. AEI is a diversified holding company principally engaged through its subsidiaries in propertythe development of EHome communities and other real estate, financial services, digital transformation technology,technologies, biohealth activities and other related business activitiesconsumer products with operations in the United States, Singapore, Hong Kong, Australia and South Korea. The Company manages its principal businesses primarily through its subsidiary, Alset International Limited (“Alset International”, f.k.a. Singapore eDevelopment Limited), a company publicly traded on the Singapore Stock Exchange.
The Company has four operating segments based on the products and services offered. Thesewe offer, which include three of our three principal businesses – property development,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"(“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company'sCompany’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'sCompany’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 20202022 or any other interim periodperiods or for any other future year.years. These unaudited condensed consolidated financial statements should be read in conjunction with the Company'sCompany’s audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2019, in Form S-1 as2021 filed with the SEC on November 11, 2020.
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-6 |
The Company'sCompany’s condensed consolidated financial statements include the financial position, results of operations and cash flows of the following entities as of
SCHEDULE OF SUBSIDIARIES
| Attributable interest as of, | ||||||||||
| Name of subsidiary consolidated under AEI | State or other jurisdiction of incorporation or organization | September 30, 2022 | December 31, 2021 | |||||||
| % | % | |||||||||
| Alset Global Pte. Ltd. | Singapore | 100 | 100 | |||||||
| Alset Business Development Pte. Ltd. | Singapore | 100 | 100 | |||||||
| Global eHealth Limited | Hong Kong | 100 | 100 | |||||||
| Alset International Limited | Singapore | 85.4 | 76.8 | |||||||
| Singapore Construction & Development Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| Art eStudio Pte. Ltd. | Singapore | 43.6 | * | 39.2 | * | |||||
| Singapore Construction Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| Global BioMedical Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| Alset Innovation Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| Health Wealth Happiness Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| SeD Capital Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| LiquidValue Asset Management Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| Alset Solar Limited | Hong Kong | 85.4 | 76.8 | |||||||
| Alset F&B One Pte. Ltd | Singapore | 76.9 | 69.2 | |||||||
| Global TechFund of Fund Pte. Ltd. | Singapore | 100 | 76.8 | |||||||
| Singapore eChainLogistic Pte. Ltd. | Singapore | 100 | 76.8 | |||||||
| BMI Capital Partners International Limited. | Hong Kong | 85.4 | 76.8 | |||||||
| SeD Perth Pty. Ltd. | Australia | 85.4 | 76.8 | |||||||
| SeD Intelligent Home Inc. | United States of America | 85.4 | 76.8 | |||||||
| LiquidValue Development Inc. | United States of America | 85.4 | 76.8 | |||||||
| Alset EHome Inc. | United States of America | 85.4 | 76.8 | |||||||
| SeD USA, LLC | United States of America | 85.4 | 76.8 | |||||||
| 150 Black Oak GP, Inc. | United States of America | 85.4 | 76.8 | |||||||
| SeD Development USA Inc. | United States of America | 85.4 | 76.8 | |||||||
| 150 CCM Black Oak, Ltd. | United States of America | 85.4 | 76.8 | |||||||
| SeD Texas Home, LLC | United States of America | 85.4 | 76.8 | |||||||
| SeD Ballenger, LLC | United States of America | 85.4 | 76.8 | |||||||
| SeD Maryland Development, LLC | United States of America | 71.4 | 64.2 | |||||||
| SeD Development Management, LLC | United States of America | 72.6 | 65.3 | |||||||
| SeD Builder, LLC | United States of America | 85.4 | 76.8 | |||||||
| GigWorld Inc. | United States of America | 100 | 76.6 | |||||||
| HotApp BlockChain Pte. Ltd. | Singapore | 100 | 76.6 | |||||||
| HotApp International Limited | Hong Kong | 100 | 76.6 | |||||||
| HWH International, Inc. (Delaware) | United States of America | 85.4 | 76.8 | |||||||
| Health Wealth & Happiness Inc. | United States of America | 85.4 | 76.8 | |||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 85.4 | 76.8 | |||||||
| SeD REIT Inc. | United States of America | 85.4 | 76.8 | |||||||
| Gig Stablecoin Inc. | United States of America | 100 | 76.6 | |||||||
| HWH World Inc. (Delaware) | United States of America | 100 | 76.6 | |||||||
| HWH World Pte. Ltd. | Singapore | 85.4 | 76.6 | |||||||
| UBeauty Limited | Hong Kong | 85.4 | 76.8 | |||||||
| WeBeauty Korea Inc | Korea | 85.4 | 76.8 | |||||||
| HWH World Limited | Hong Kong | 85.4 | 76.8 | |||||||
| HWH World Inc. | Korea | 85.4 | 76.8 | |||||||
| Alset BioHealth Pte. Ltd. | Singapore | - | 76.8 | |||||||
| Alset Energy Pte. Ltd. | Singapore | - | 76.8 | |||||||
| GDC REIT Inc. (f.k.a. Alset Payment Inc.) | United States of America | 85.4 | 76.8 | |||||||
| Alset World Pte. Ltd. | Singapore | - | 76.8 | |||||||
| BioHealth Water Inc. | United States of America | 85.4 | 76.8 | |||||||
| F-7 |
| Impact BioHealth Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| American Home REIT Inc. | United States of America | 85.4 | 76.8 | |||||||
| Alset Solar Inc. | United States of America | 68.3 | 61.5 | |||||||
| HWH KOR Inc. | United States of America | 85.4 | 76.8 | |||||||
| Open House Inc. | United States of America | 100 | 76.8 | |||||||
| Open Rental Inc. | United States of America | 100 | 76.8 | |||||||
| Hapi Cafe Inc. (Nevada) | United States of America | 100 | 76.8 | |||||||
| Global Solar REIT Inc. | United States of America | 100 | 76.8 | |||||||
| OpenBiz Inc. | United States of America | 100 | 76.8 | |||||||
| Hapi Cafe Inc. (Texas) | United States of America | 85.4 | 100 | |||||||
| HWH (S) Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| True Partner International Limited | Hong Kong | - | 100 | |||||||
| LiquidValue Development Pte. Ltd. | Singapore | 100 | 100 | |||||||
| LiquidValue Development Limited | Hong Kong | 100 | 100 | |||||||
| EPowerTech Inc. | United States of America | 100 | 100 | |||||||
| Alset EPower Inc. | United States of America | 100 | 100 | |||||||
| AHR Asset Management Inc. | United States of America | 85.4 | 76.8 | |||||||
| HWH World Inc. (Nevada) | United States of America | 85.4 | 76.8 | |||||||
| Alset F&B Holdings Pte. Ltd. | Singapore | 85.4 | 76.8 | |||||||
| Credas Capital Pte. Ltd. | Singapore | 42.7 | * | 38.4 | * | |||||
| Credas Capital GmbH | Switzerland | 42.7 | * | 38.4 | * | |||||
| Smart Reward Express Limited | Hong Kong | 50.0 | 38.3 | * | ||||||
| AHR Texas Two LLC | United States of America | 85.4 | 76.8 | |||||||
| AHR Black Oak One LLC | United States of America | 85.4 | 76.8 | |||||||
| Hapi Air Inc. | United States of America | 92.7 | 88.4 | |||||||
| AHR Texas Three, LLC | United States of America | 85.4 | 76.8 | |||||||
| Alset Capital Pte. Ltd. | Singapore | 100 | 100 | |||||||
| Hapi Cafe Korea, Inc. | Korea | 85.4 | 100 | |||||||
| Green Energy Inc. | United States of America | 100 | 100 | |||||||
| Green Energy Management Inc. | United States of America | 100 | 100 | |||||||
| Alset Metaverse Inc. | United States of America | 97.2 | 95.6 | |||||||
| Alset Management Group Inc. | United States of America | 83.4 | 88.2 | |||||||
| Alset Acquisition Sponsor, LLC | United States of America | 93.4 | 79.6 | |||||||
| Alset Capital Acquisition Corp. | United States of America | 23.4 | 79.6 | |||||||
| Alset Spac Group Inc. | United States of America | 93.4 | 79.6 | |||||||
| Alset Mining Pte. Ltd. | Singapore | 85.4 | - | |||||||
| Alset Inc. | United States of America | 100 | - | |||||||
| Hapi Travel Pte. Ltd. | Singapore | 85.4 | - | |||||||
| Hapi WealthBuilder Pte. Ltd. | Singapore | 85.4 | - | |||||||
| HWH Marketplace Pte. Ltd. | Singapore | 85.4 | - | |||||||
| HWH International Inc. (Nevada) | United States of America | 85.4 | - | |||||||
| Hapi Cafe SG Pte. Ltd. | Singapore | 85.4 | - | |||||||
| Alset Reits Inc. | United States of America | 100 | - | |||||||
| Robotic gHome Inc. | United States of America | 76.9 | - | |||||||
| HWH Merger Sub, Inc. | United States of America | 85.4 | - | |||||||
| Alset Home REIT Inc. | United States of America | 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. |
| F-8 |
| Attributable interest | ||||||||||
| as of, | ||||||||||
| Name of subsidiary consolidated under HFE | State or other jurisdiction of incorporation or organization | September 30, 2020 | December 31, 2019 | |||||||
| % | % | |||||||||
| Hengfai International Pte. Ltd | Singapore | 100 | 100 | |||||||
| Hengfai Business Development Pte. Ltd | Singapore | 100 | 100 | |||||||
| Heng Fai Enterprises Pte. Ltd. | Singapore | 100 | 100 | |||||||
| Global eHealth Limited | Hong Kong | 100 | 100 | |||||||
| Alset International Inc. (f.k.a. Singapore eDevelopment Limited) | Singapore | 51.04 | 65.4 | |||||||
| Singapore Construction & Development Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Art eStudio Pte. Ltd. | Singapore | 26.03 | * | 33.36 | * | |||||
| Singapore Construction Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Global BioMedical Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Alset Innovation Pte. Ltd. (f.k.a. SeD Investment Pte. Ltd.) | Singapore | 51.04 | 65.4 | |||||||
| Health Wealth Happiness Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| iGalen International Inc. | United States of America | 27.05 | * | 34.38 | * | |||||
| iGalen Inc. (f.k.a iGalen USA LLC) | United States of America | 27.05 | * | 34.38 | * | |||||
| SeD Capital Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| LiquidValue Asset Management Pte. Ltd. (f.k.a. HengFai Asset Management Pte. Ltd.) | Singapore | 41.85 | * | 53.6 | ||||||
| SeD Home Limited | Hong Kong | 51.04 | 65.4 | |||||||
| SeD Reits Management Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Global TechFund of Fund Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Singapore eChainLogistic Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| BMI Capital Partners International Limited. | Hong Kong | 51.04 | 65.4 | |||||||
| SeD Perth Pty. Ltd. | Australia | 51.04 | 65.4 | |||||||
| SeD Intelligent Home Inc. (f.k.a SeD Home International, Inc.) | United States of America | 51.04 | 65.4 | |||||||
| LiquidValue Development Inc. (f.k.a. SeD Intelligent Home Inc.) | United States of America | 51.03 | 65.39 | |||||||
| Alset iHome Inc. (f.k.a. SeD Home & REITs Inc. and SeD Home, Inc.) | United States of America | 51.03 | 65.39 | |||||||
| SeD USA, LLC | United States of America | 51.03 | 65.39 | |||||||
| 150 Black Oak GP, Inc. | United States of America | 51.03 | 65.39 | |||||||
| SeD Development USA Inc. | United States of America | 51.03 | 65.39 | |||||||
| 150 CCM Black Oak, Ltd. | United States of America | 51.03 | 65.39 | |||||||
| SeD Texas Home, LLC | United States of America | 51.03 | 65.39 | |||||||
| SeD Ballenger, LLC | United States of America | 51.03 | 65.39 | |||||||
| SeD Maryland Development, LLC | United States of America | 42.64 | * | 54.63 | ||||||
| SeD Development Management, LLC | United States of America | 43.38 | * | 55.58 | ||||||
| SeD Builder, LLC | United States of America | 51.03 | 65.39 | |||||||
| HotApp Blockchain Inc. | United States of America | 50.95 | 65.39 | |||||||
| HotApps International Pte. Ltd. | Singapore | 50.95 | 65.39 | |||||||
| HotApp International Limited | Hong Kong | 50.95 | 65.39 | |||||||
| HWH International, Inc. | United States of America | 51.04 | 65.4 | |||||||
| Health Wealth & Happiness Inc. | United States of America | 51.04 | 65.4 | |||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 51.04 | 65.4 | |||||||
| SeDHome Rental Inc | United States of America | 51.03 | 65.39 | |||||||
| SeD REIT Inc. | United States of America | 51.03 | 65.39 | |||||||
| Crypto Exchange Inc | United States of America | 50.95 | 65.39 | |||||||
| HWH World Inc. | United States of America | 50.95 | 65.39 | |||||||
| HWH World Pte. Ltd. | Singapore | 50.95 | 65.39 | |||||||
| UBeauty Limited | Hong Kong | 51.04 | 65.4 | |||||||
| WeBeauty Korea Inc | Korea | 51.04 | 65.4 | |||||||
| HWH World Limited | Hong Kong | 51.04 | 65.4 | |||||||
| HWH World Inc. | Korea | 51.04 | 65.4 | |||||||
| Alset BioHealth Pte. Ltd. | Singapore | 51.04 | - | |||||||
| Alset Energy Pte. Ltd. | Singapore | 51.04 | - | |||||||
| Alset Payment Inc. | United States of America | 51.04 | - | |||||||
| Alset World Pte. Ltd. | Singapore | 51.04 | - | |||||||
| BioHealth Water Inc. | United States of America | 51.04 | - | |||||||
| Impact BioHealth Pte. Ltd. | Singapore | 51.04 | - | |||||||
| American Home REIT Inc. | United States of America | 41.85 | * | - | ||||||
| Alset Solar Inc. | United States of America | 40.83 | * | - | ||||||
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.
Transactions between Entities under Common Control
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 was $ 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 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:
| ● | The acquisition of the Warrants and True Partner stock were accounted for prospectively as of March 12, 2021 and they did not represent a change in reporting entity. | |
| ● | The acquisition of LVD, APB and HFL was under common control and was consolidated in accordance with ASC 850-50. The consolidated financial statements were retrospectively adjusted for the acquisition of LVD, APB and HFL, and the operating results of LVD, APB and HFL as of January 1, 2020 for comparative purposes. |
| F-9 |
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 the 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 the cost in full immediately. On May 13, 2021 and June 14, 2021 all Alset CPNs of $63,920,128 and accrued interest 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 no cash equivalents as of September 30, 20202022 and December 31, 2019.
Restricted Cash
As a condition to the loan agreement with the Manufacturers and Traders Trust Company (“M&T Bank”), the Company iswas required to maintain a minimum of $2,600,000$2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans.loan. The fund isfunds were required to remain as collateral for the loan until the loan is paid off in full and the loan agreement terminated. On March 15, 2022 approximately $2,300,000 was released from collateral, leaving approximately $300,000 as collateral for outstanding letters of credit. The Company also has an escrow account with M&T Bank to deposit a portion of cash proceeds from lot sales. The fundfunds in the escrow account iswere specifically to be used for the payment of the loan from M&T Bank. The fund isfunds were required to remain in the escrow account for the loan payment until the loan agreement terminates. In May 2022 the funds from this escrow account were released and the account closed. As of September 30, 20202022 and December 31, 2019,2021, the total balance of these two accounts was $4,106,497$309,145 and $4,229,149,$4,399,984, 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 September 30, 2020 and December 31, 2019,2021, the account balance was $35,710 and $35,068, respectively. These funds will remain as collateral for the loans until paid in full.
The Company puts money into brokerage accounts specifically for land development. After releasing funds to the Company, the amount on deposit was $0 and $90,394 onequity investment. As of September 30, 20202022 and December 31, 2019, 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 September 30, 2022 and December 31, 2021, the balance of account receivables was $171,380 and $39,622, respectively. Approximately $0 and $2,500 of account receivables as of September 30, 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.
The Company monitors its accounts receivableaccount 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 accounts receivable.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 September 30, 20202022 and December 31, 2019,2021, 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 September 30, 2020 and December 31, 2019,2021, inventory consisted of finished goods from iGalen IncHWH World Inc. As of September 30, 2022, inventory consisted of finished goods from HWH World Inc. and HWH WorldHapi Cafe Korea Inc. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventories to net realizable value.
| F-10 |
Investment Securities
Investment Securities at Fair Value
The Company holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and investments at cost.
On April 12, 2021 a subsidiary of 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. As of September 30, 2022, the Company, through subsidiaries, owned approximately 18.1% of Value Exchange International. The stock’s fair value was determined by reference to quoted stock prices.
During the year ended December 31, 2021, the Company’s subsidiaries established 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. Amarantus BioScience Holdings (“AMBS”), Holista CollTech Limited (“Holista”), Document Securities SystemsDSS, Inc. (“DSS”), Alset International and American Premium Mining Corporation (“APM” formerly known as American Premium Water Corp (“APW”Corp.) are publicly traded companies and the fair value isof such securities are determined by reference to 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 September 30, 2022 and December 31, 2021, the Company owned approximately 45.18% and 24.9% of the common stock of DSS, respectively. Our CEO is a stockholder and the Chairman of the Board of Directors of DSS. Chan Tung Moe, our Co-Chief Executive Officer and the son of Chan Heng Fai, is also a director of DSS. William Wu, Wong Shui Yeung and Joanne Wong Hiu Pan, directors of the Company, are each also directors of DSS. | |
| ● | The Company has significant influence over Holista as the Company and its CEO are the beneficial owner of approximately 15.5% of the outstanding shares of Holista and our CEO held a position on Holista’s Board of Directors until June of 2021. | |
| ● | The Company has significant influence over APM as the Company is the beneficial owner of approximately 0.8% of the common shares of APM and two officers of the Company and one member of our Board also serve on APM’s Board of Directors. |
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 company, in conjunction with the Company lending two $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 September 30, 2020,2022 and December 31, 2021, AMRE was a private company. Based on management’s analysis, the fair value of the AMRE warrants was $0 as of December 31, 2021. In March 2022 both loans, together with warrants were converted into common shares of AMRE. After the conversion, the Company owns 9.7%approximately 15.8% of AMRE.
| F-11 |
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 commonVivacitas stock option was $0 as of DSSDecember 31, 2020. On March 18, 2021 the Company sold the subsidiary holding the ownership and 46,868 shares of preferred stock which could covertoption in Vivacitas to 7,232,716 common shares, subject to a 19.9% beneficial ownership conversion limitation (a so-called “blocker”) based on the total issued outstanding shares of common stock of DSS beneficially owned by Global BioMedical Pte Ltd (“GBM”), one of our subsidiaries. Our CEO is the owner of approximately 14.5% of the outstanding shares of DSS (not including any common or preferred shares we hold) and is a member of the Board of Directorsan indirect subsidiary of DSS. Chan Tung Moe, the sonFor further details on this transaction, refer to Note 8 - Related Party Transactions, Sale of Chan Heng Fai, is also a director of DSS.
The Company accounts for certain of its investments in real estate 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) (“ASC 820”2015-07”). AsIn the first six months of December 31, 20192022 the Company maintained an investmentinvested $100,000 in a real estate fund, TheClass A Shares of Novum Alpha Global Opportunity Fund.Digital Asset Fund I SP, a segregated portfolio of Novum Alpha SPC (“Novum Alpha Fund”). This fund invests primarilyin 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 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 October 12, 2022, with automatic three-month extension. The purpose of the loan is to purchase a portfolio of trading securities by LVAM. BMI participates in the U.S.losses and met the criteria within ASC 820. Chan Heng Fai, the Chairman and CEO of the Company, was also one of the directors of the Global Opportunity Fund. The fair values of the investments in this class have been estimated using the net asset value of the Company’s ownership interest in Global Opportunity Fund. The fund was closed during November 2019 and is being liquidated. As of December 31, 2019, the Company recorded a receivable $307,944gains from the Global Opportunity Fund. These monies were received on January 23, 2020.
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 management’s analysis,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 warrants and the stock option was $0 as of September 30, 2020 and December 31, 2019.
The Company has elected the fair value option for the DSS common stock that would otherwise be accounted for under the equity method of accounting. We value DSS preferred stock under level 3 category through a Monte Carlo simulation model. As of September 30, 2020, the fair market value of the DSS preferred stock was $54,864,632.
On September 8, 2020, the Company acquired shares, approximately 1.45%1.45% ownership, from Nervotec Pte Ltd (“Nervotec”), a private company, at the purchase price of $36,628.$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%, 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% 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.
| F-12 |
Equity Method Accounting
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.
American Medical REIT Inc.
LiquidValue Asset Management Pte. Ltd. (“LiquidValue”), a subsidiary of the Company, owns 36.1%15.8% of American Medical REIT Inc. (“AMRE”), as of 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 detailsDSS, of which we own 45.2% and have significant influence over, owns 80.8% of AMRE. Therefore, the Company has significant influence on this transaction, refer to Note 8, Related Party Transactions). AMRE.
Joint Venture with Novum
On balance sheet, the prorate loss from AMRE was recorded as a liability, accumulated losses on equity method investment. During three months ended September 30, 2020 and 2019, the investment losses from AMRE were $52,392 and $0, respectively. During nine months ended September 30, 2020 and 2019, the investment losses from AMRE were $193,132 and $0, respectively. AsApril 20, 2021, one of September 30, 2020, and December 31, 2019, the accumulated losses on equity method investment were $231,418 and $0, respectively.
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 of Series A Common Stock to DSS, Inc. for $40,000,200 cash. As a result of the new share issuances, the Company’s ownership percentage of APB fell below 50% to 41.3% and the entity was deconsolidated in accordance with ASC 810-10. Upon deconsolidation the Company elected to apply the equity method of accounting.
| F-13 |
Alset Capital Acquisition Corp.
On February 3, 2022, Alset Capital Acquisition Corp. (“Alset Capital”), a special purpose acquisition company (SPAC) sponsored by the Company and certain affiliates, closed its initial public offering of units at cost$ 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 applied ASC 730CEO of the Company, is the CEO and director of Alset Capital. In June 2022, the Company made an adjustment of $2,830,961 to expense in-process researchAdditional Paid in Capital and development cost, the major costfair value of Sweet Sense. Consequently, Sweet Senseinvestment 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. During the nine months ended September 30, 2022, the Company recorded investment loss of $82,582 by equity method. On September 30, 2022 the Company purchased the remaining 10% ownership in the Sponsor for $476,250 and currently owns 100% of it. The Company’s investment in Alset Capital was an 81.8% owned subsidiary of Impact BioMedical Inc. and therefore, was consolidated into the Company’s condensed consolidated financial statements$21,232,707 as of September 30, 20202022.
Ketomei Pte Ltd
On June 10, 2021 the Company’s indirect subsidiary Hapi Cafe Inc. (“Hapi Cafe”) lent $76,723 to Ketomei Pte Ltd (“Ketomei”). On March 21, 2022 Hapi Cafe entered into an agreement pursuant to which the principal 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 in Ketomei. After the conversion and fund investment the Company now holds 28% of Ketomei. Ketomei is in the business of selling cooked food and drinks. During three and nine months ended September 30, 2022 the investment loss was $5,937 and $38,996, respectively. Investment in Ketomei was $217,321 at September 30, 2022.
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 $9,799 on December 31, 2021. The note was redeemed on July 14, 2022 and $50,000 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 September 30, 2022, our 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.
| F-14 |
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 loaned $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 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 September 30, 2022 and December 31, 2019. During2021 variable interest and amount receivable in the threenon-consolidated VIE was $236,699 and nine month ended$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.
American Medical REIT Inc.
In 2021 the Company owned 3.4% of AMRE and made a loan in the amount of $8,350,000 to AMRE, as well as two loans of $200,000 each, 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 80.8% 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. From July 12 to September 30, 2019, the investment losses from Sweet Sense were $8942022, DSS stock was valued under fair market value and $30,166, respectively. As a subsidiaryloss of Impact BioMedical Inc., Sweet Sense$2,157,984 was booked as unrealized loss on security investment. On September 30, 2022 and December 31, 2021 variable interest and amount receivable in the discontinued operationsnon-consolidated VIE was $0 and $8,901,285, respectively, which represents the Company’s maximum risk of Impact BioMedical Inc. For further details on this transaction, refer to Note 11 Discontinued Operations.
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.
| F-15 |
The Company capitalized interestconstruction costs of approximately $2.9 million and finance expenses from third-party borrowings of $0 and $43,020$1.8 million for the three months ended September 30, 20202022 and 2019,2021, respectively. The Company capitalized construction costs of $2,763,068approximately $5.9 million and $1,464,998 for the three months ended September 30, 2020 and 2019, respectively. The Company capitalized interest and finance expenses from third-party borrowings of $0 and $514,985$3.2 million for the nine months ended September 30, 20202022 and 2019,2021, respectively. The Company capitalized construction costs of $8,898,329 and $5,023,396 for the nine months ended September 30, 2020 and 2019, 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. 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 basedvalue-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 incurred a loss of approximately $1.5 million from this sale and recognized a real estate impairment of approximately $1.5 million for the year ended December 31, 2018.
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 nine months ended September 30, 2022 and equipment are recorded at cost, less depreciation. Repairsthe year ended December 31, 2021, the Company signed multiple purchase agreements to acquire 23 and maintenance are expensed as incurred. Expenditures incurred as a consequence of acquiring or using the asset, or that increase the value or productive capacity of assets are capitalized (such as removal, and restoration costs). When property and equipment is retired, sold, or otherwise disposed109 homes, respectively. By September 30, 2022, all of the asset’s carrying amount132 homes were closed with an aggregate purchase cost of $30,998,258. These homes are located in Montgomery and related accumulated depreciationHarris Counties, Texas. All of these purchased homes are removed fromproperties 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 accountsdate 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 any gain or loss is included in operations. Depreciation is computed by the straight-line method (after considering their respective estimated residual values)valuation fees, as well as other closing costs.
Building improvements and buildings are depreciated over the estimated useful lives of approximately 10 to 27.5 years, respectively, using the respective assets as follows:
The Company reviews the carrying value of property and equipmentassesses its investments in single-family residential properties for impairment whenever events andor changes in business circumstances indicate that carrying amounts of the carrying value of an assetassets may not be recoverable fromfully recoverable. When such events occur, management determines whether there has been impairment by comparing the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than theasset’s carrying value anwith its fair value. Should impairment lossexist, the asset is recognized equalwritten down to an amount by which the carrying value exceeds theits estimated fair value of assets.value. The factors considered by management in performing this assessment include current operating results, trends,Company did not recognize any impairment losses during three and prospects, as well as the effects of obsolescence, demand, competition,nine months ended September 30, 2022 and other economic factors.
Revenue Recognition and Cost of Sales
ASC 606 - Revenue from Contracts with Customers (" (“ASC 606"606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity'sentity’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.
| F-16 |
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'sCompany’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 ainto sales contractcontracts with the Company before they take the lots. The prices and timeline are determined and agreed upon in the contract.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 and Black Oak projects,project, which represented approximately 99%18% and 94%70%, respectively, of the Company’s revenue in the nine months ended on September 30, 20202022 and 2019,2021, 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. |
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.
| F-17 |
Rental Revenue
The Company leases real estate properties to its tenants under leases that are predominately classified as operating leases, in accordance with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and revenue from the collection of lease termination fees.
Rent from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease. Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally, at the end of the lease term, the Company provides the tenant with a one-year renewal option, including mostly the same terms and conditions provided under the initial lease term, subject to rent increases.
The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within deferred revenues and other payables on the Company’s condensed consolidated balance sheets.
Rental revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the nine months ended September 30, 2022, the Company did 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. The selling prices range from $3,000$3,000 to $4,500$4,500 per home depending the type of the home. Our total revenue from the front foot benefit assessment is approximately $1 million. To recognize revenue of the FFB assessment, both our and NVR’s performance obligation have 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 September 30, 2022 and 2021, we recognized revenue of $9,968 and $182,813 from the FFB assessments, respectively. During the nine months ended on September 30, 20202022 and 2019,2021, we recognized revenue $169,349of $126,055 and $365,645$431,458 from the FFB assessment,assessments, respectively. During the three months ended on September 30, 2020 and 2019, we recognized revenue $54,147 and $129,031 from FFB assessment, respectively.
Cost of Sales
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.
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.
| F-18 |
Biohealth
| ● | Product Direct Sales |
The Company’s net sales consist of product sales. The Company'sCompany’s performance obligation is to transfer its products to its third-party independent distributors (“Distributors”). The Company generally recognizes revenue when product is shipped to its Distributors.
The Company’s Distributors may receive distributor 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 Incentivesincentives are payable based on achieved sales volume, which are recorded in general and administrative expenses. The Company recognizes revenue when it ships products. The Company receives the net sales price in cash or through credit card payments at the point of sale.
If a Distributor returns a product to the Company on a timely basis, theyhe/she may obtain a replacement product from the Company for such returned products. In addition, the Company maintains a buyback program pursuant to which it will repurchase products sold to a Distributor who has decided to leave the business. Allowances for product 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.
| ● | Annual Membership |
The Company collects an annual membership fee from its Distributors. The fee is fixed, paid in full at the time of joining the membership and non-refundable. The membership provides the member access to purchase products at a discount, useaccess to certain back officeback-office services, receive commissions for signing up new members, and attend corporate events. The Company recognizes revenue associated with the membership over the period of the membership. Before the membership fee is recognized as revenue, it is recorded as deferred revenue. Deferred revenue relating to membership was $3,046,687$65,091 and $258,594$728,343 at September 30, 20202022 and December 31, 2019.
Other Businesses
| ● | Killiney Kopitiam’s Franchise |
The Company, generates revenue from providing management services for mutual fund customers. In respectthrough Alset F&B One Pte. Ltd. (“Alset F&B”), acquired a restaurant franchise license at the end of 2021 and has since commenced operations. This license will allow Alset F&B to the provisionoperate a Killiney Kopitiam restaurant in Singapore. Killiney Kopitiam is a Singapore-based chain of services, the agreements are less than one year with a cancellable clausemass-market, traditional kopitiam style service cafes selling toast products, soft-boiled eggs and customers are typically billed on a monthly basis.
| ● | Remaining performance obligations |
As of September 30, 20202022 and December 31, 2019,2021, there were no remaining performance obligations or continuing involvement, as all service obligations within the other business activities segment have been completed.
| F-19 |
Stock-Based Compensation
The Company accounts for advertisingstock-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 are charged to operations as incurred. Advertising expensesadopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services. During the three and nine months ended on September 30, 20202022 and 2019 were $136,2532021, the Company recorded $ and $156,822, respectively. Advertising expenses for the three months ended September 30, 2020 and 2019 were $74,062 and $28,289, respectively.
Foreign currency
Functional and reporting currency
Items included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements of the Company are presented in U.S. dollars (the “reporting currency”).
The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiaries located in Singapore, Hong Kong, Australia and South Korea are maintained in their local currencies, the Singapore Dollar (S$), 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 yearperiods 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 $960,268foreign exchange gain of $132,092 and $578,903 loss during the three months ended on September 30, 2022 and 2021, respectively. The Company recorded foreign exchange gain of $2,617,896 and $1,842,128 during the nine months ended on September 30, 20202022 and a $438,608 gain during the nine months ended on September 30, 2019. The Company recorded foreign exchange loss of $415,203 and $757,068 gain during the three months ended on September 30, 2020 and 2019,2021, respectively. The foreign currency transactional gains and losses are recorded in operations.
Translation of consolidated entities’ financial statements
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. The Company’s entities with functional currency of Singapore Dollar, Hong Kong Dollar,S$, 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 $520,339 from foreign currency translation of $585,085, and a $325,518 loss infor the ninethree months ended September 30, 2019,2022 and $1,238,356 loss for the three months ended September 30, 2021, in accumulated other comprehensive loss. The Company recorded other comprehensive gainloss of $3,729,724 from foreign currency translation of $462,064 and $584,561 loss infor the threenine months ended September 30, 20202022 and 2019, respectively.
| F-20 |
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 September 30, 20202022 and December 31, 2019,2021, the aggregate non-controlling interests in the Company were $41,672,434$12,015,513 and $6,975,459$21,912,268, 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 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 September 30, 2022 and December 31, 2021, 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 February 2016,October 2021, the FASB issued ASU No. 2016-02, Leases2021-08, “Business Combinations (Topic 842) (“805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2016-02”) which supersedes ASC Topic 840, Leases. ASU 2016-022021-08 requires lesseesthe company acquiring contract assets and contract liabilities obtained in a business combination to recognize a right-of-use asset and a lease liability on their balance sheets for allmeasure them in accordance with ASC 606, “Revenue from Contracts with Customers”. At the leases with terms greater than twelve months. Based on certain criteria, leases will be classifiedacquisition date, the company acquiring the business should record related revenue, as either financing or operating, with classification affectingif it had originated the pattern of expense recognitioncontract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in the income statement. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 isupdate are effective for fiscal years beginning after December 15, 2019 for emerging growth companies, and interim periods within those years, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” that allows entities to apply the provisions of the new standard at the effective date (e.g. January 1, 2019), as opposed to the earliest period presented under the modified retrospective transition approach (January 1, 2017) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The modified retrospective approach includes a number of optional practical expedients primarily focused on leases that commenced before the effective date of Topic 842,2022, including continuing to account for leases that commence before the effective date in accordance with previous guidance, unless the lease is modified. The new leasing standard presents dramatic changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard. The standard had a material impact on the Company’s condensed consolidated balance sheets, but did not have an impact on its condensed consolidated statements of operations. The most significant impact was the recognition of right-of-use assets and lease liabilities for operating leases. As a lessor of one home, this standard does not have material impact on the Company. The balances of operating lease right-of-use assets and operating lease liabilities as of September 30, 2020 were $546,519 and $541,887, respectively. 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 rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease term includes options to extend or terminate when we are reasonably certain the option will be exercised. In general, we are not reasonably certain to exercise such options. We recognize lease expense for minimum lease payments on a straight-line basis over the lease term. 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.
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Accounting pronouncement not yet adopted
In December 2019, TheJune 2016, the FASB issued ASU 2019-12, Income TaxesNo. 2016-13, “Financial Instruments - Credit Losses (Topic 740)326): SimplifyingMeasurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires financial assets measured at amortized cost to be presented at the Accounting for Income Taxes.net amount expected to be collected. The amendmentsmeasurement 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 this Update simplifydetermining the accounting for income taxes by removing certain exceptions to the general principlesrelevant information and estimation methods that are appropriate in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update areits circumstances. ASU 2016-13 is effective for fiscal years, andannual 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, 2020.2022 for smaller reporting companies. The Company is currently evaluating the impact of ASU 2020-042016-13 on its future consolidated financial statements.
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. The Company is currently evaluating the impact of ASU 2020-04 on its future consolidated financial statements.
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 September 30, 2022 and December 31, 2021, uninsured cash and restricted cash balances were $20,252,709 and $57,905,303, respectively.
For the three months ended September 30, 2021, two customers accounted for approximately 95%, and 5% of the Company’s property development revenue. For the nine months ended September 30, 2022, three customers accounted for approximately 42%, 10%, and 48% of the Company’s property development revenue. For the nine months ended September 30, 2021, two customers accounted for approximately 96%, and 4% 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: property development,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.
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The following table summarizes the Company’s segment information for the following balance sheet dates presented, and for the nine months ended September 30, 20202022 and 2019:
Property Development | Digital Transformation Technology | Biohealth Business | Other | Discontinued Operations | Total | |
| Nine Months Ended September 30, 2020 | ||||||
| Revenue | $7,148,786 | $- | $31,133 | $- | $- | $7,179,919 |
| Cost of Sales | (5,603,164) | - | (6,139) | - | - | (5,609,303) |
| Gross Margin | 1,545,622 | - | 24,994 | - | - | 1,570,616 |
| Operating Expenses | (634,254) | (87,972) | (388,083) | (3,086,630) | (416,950) | (4,613,889) |
| Operating Income (Loss) | 911,368 | (87,972) | (363,089) | (3,086,630) | (416,968) | (3,043,273) |
| Other Income (Expense) | (2,646) | 115 | (10,211,916) | 11,123 | (488) | (10,203,812) |
Net Income (Loss) Before Income Tax | 908,722 | (87,857) | (10,575,005) | (3,075,507) | (417,438) | (13,247,085) |
Property Development | Digital Transformation Technology | Biohealth Business | Other | Discontinued Operations | Total | |
| Nine Months ended September 30, 2019 | ||||||
| Revenue | $21,509,197 | $- | $1,406,951 | $28,350 | $- | $22,944,498 |
| Cost of Sales | (18,819,865) | - | (357,935) | - | - | (19,177,800) |
| Gross Margin | 2,689,332 | - | 1,049,016 | 28,350 | - | 3,766,698 |
| Operating Expenses | (4,598,112) | (193,959) | (1,780,026) | (1,697,423) | (358,534) | (8,628,054) |
| Operating Income (Loss) | (1,908,780) | (193,959) | (731,010) | (1,669,073) | (358,534) | (4,861,356) |
| Other Income (Expense) | 34,433 | 296,726 | 31,151 | (4,874) | (30,397) | 327,039 |
Net Income (Loss) Before Income Tax | (1,874,347) | 102,767 | (699,859) | (1,673,947) | (388,931) | (4,534,317) |
| September 30, 2020 | ||||||
| Cash and Restricted Cash | $5,079,010 | $62,422 | $1,386,513 | $6,461,531 | $- | $12,989,476 |
| Total Assets | 30,540,913 | 162,524 | 61,572,898 | 9,197,695 | - | 101,474,030 |
| December 31, 2019 | ||||||
| Cash and Restricted Cash | $5,439,318 | $55,752 | $388,670 | $1,338,525 | $108,731 | $7,330,996 |
| Total Assets | 29,857,615 | 155,854 | 948,931 | 4,770,949 | 139,431 | 35,872,780 |
SCHEDULE OF SEGMENT INFORMATION
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Nine Months Ended on September 30, 2022 | ||||||||||||||||||||
| Revenue | $ | 2,494,707 | $ | 14,066 | $ | 771,847 | $ | 319,862 | $ | 3,600,482 | ||||||||||
| Cost of Sales | (1,880,914 | ) | (4,574 | ) | (512,931 | ) | (80,177 | ) | (2,478,596 | ) | ||||||||||
| Gross Margin | 613,793 | 9,492 | 258,916 | 239,685 | 1,121,886 | |||||||||||||||
| Operating Expenses | (1,988,323 | ) | (255,764 | ) | (587,051 | ) | (3,669,563 | ) | (6,500,701 | ) | ||||||||||
| Operating Loss | (1,374,530 | ) | (246,272 | ) | (328,135 | ) | (3,429,878 | ) | (5,378,815 | ) | ||||||||||
| Other Income (Expense) | 26,505 | (1,359,913 | ) | (3,535,998 | ) | (20,677,529 | ) | (25,546,935 | ) | |||||||||||
| Net Loss Before Income Tax | (1,348,025 | ) | (1,606,185 | ) | (3,864,133 | ) | (24,107,407 | ) | (30,925,750 | ) | ||||||||||
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Nine Months Ended on September 30, 2021 | ||||||||||||||||||||
| Revenue | $ | 12,026,069 | $ | - | $ | 4,919,844 | $ | - | $ | 16,945,913 | ||||||||||
| Cost of Sales | (8,291,698 | ) | - | (218,507 | ) | - | (8,510,205 | ) | ||||||||||||
| Gross Margin | 3,734,371 | - | 4,701,337 | - | 8,435,708 | |||||||||||||||
| Operating Expenses | (901,236 | ) | (173,594 | ) | (3,451,152 | ) | (8,940,432 | ) | (13,466,414 | ) | ||||||||||
| Operating (Loss) Income | 2,833,135 | (173,594 | ) | 1,250,185 | (8,940,432 | ) | (5,030,706 | ) | ||||||||||||
| Other Expense | (9,063 | ) | 403,000 | (33,960,503 | ) | (53,727,340 | ) | (87,293,906 | ) | |||||||||||
| Net Loss Before Income Tax | 2,824,072 | 229,406 | (32,710,318 | ) | (62,667,772 | ) | (92,324,612 | ) | ||||||||||||
| September 30, 2022 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 2,678,530 | $ | 389,118 | $ | 1,698,868 | $ | 18,469,310 | $ | 23,235,826 | ||||||||||
| Total Assets | 49,820,288 | 1,273,132 | 6,074,039 | 107,497,047 | 164,664,506 | |||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 7,493,921 | $ | 245,780 | $ | 2,629,464 | $ | 50,433,014 | $ | 60,802,179 | ||||||||||
| Total Assets | 55,465,600 | 2,199,466 | 11,056,779 | 115,488,298 | 184,210,143 | |||||||||||||||
5. REAL ESTATE ASSETS
As of September 30, 20202022 and December 31, 2019,2021, real estate assets consisted of the following:
September 30, 2020 | December 31, 2019 | |
| Construction in Progress | $12,298,889 | $9,601,364 |
| Land Held for Development | 12,691,477 | 14,283,340 |
| Total Real Estate Assets | $24,990,366 | $23,884,704 |
SCHEDULE OF REAL ESTATE ASSETS
September 30, 2022 | December 31, 2021 | |||||||
| Construction in Progress | $ | 12,155,652 | $ | 8,597,023 | ||||
| Land Held for Development | 7,943,126 | 7,098,104 | ||||||
| Rental Properties, net | 31,485,036 | 24,820,253 | ||||||
| Total Real Estate Assets | $ | 51,583,814 | $ | 40,515,380 | ||||
Single family residential properties
As of September 30, 20202022 and December 31, 2019, property2021, the Company owned 132 and equipment consisted of109 Single Family Residential Properties (“SFRs”), respectively. The Company’s aggregate investment in those SFRs was $31 million. Depreciation expense was $161,182 and $38,533 in the following:
September 30, 2020 | December 31, 2019 | |
| Computer Equipment | $181,559 | $175,992 |
| Furniture and Fixtures | 62,328 | 52,798 |
| Vehicles | 90,929 | 90,929 |
| Subtotal | 334,816 | 319,719 |
| Accumulated Depreciation | (257,153) | (239,434) |
| Total | $77,663 | $80,285 |
The following table presents the summary of our SRFs as of September 30, 2022:
SUMMARY OF SINGLE FAMILY RESIDENTIAL PROPERTIES
Number of Homes | Aggregate investment | Average Investment per Home | ||||||||||
| SFRs | 132 | $ | 30,998,258 | $ | 234,835 | |||||||
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,$64,000,000, which escalates 3%escalated 3% annually after June 1, 2018.
As part of the agreements, NVR was required to give a deposit in the amount of $5,600,000.$5,600,000. Upon the sale of lots to NVR, 9.9%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$100,000 and $220,000,$220,000, respectively, based on the 3rd Amendment to the Lot Purchase Agreement. On September 30, 20202022 and December 31, 2019,2021, there were $1,808,747was $0 and $2,445,269$31,553 held on deposit, respectively.
7. NOTES PAYABLE
As of September 30, 20202022 and December 31, 2019,2021, notes payable consisted of the following:
September 30, 2020 | December 31, 2019 | |
| Union Bank Loan | - | - |
| M&T Bank Loan, Net of Debt Discount | 619,329 | - |
| PPP Loan | 68,502 | - |
| Australia Loan | 159,966 | 157,105 |
Total notes payable | $847,797 | $157,105 |
SCHEDULE OF NOTES PAYABLE
September 30, 2022 | December 31, 2021 | |||||||
| PPP Loan | - | 68,502 | ||||||
| Australia Loan | - | 162,696 | ||||||
| Hire Purchase 1 | 71,595 | 86,473 | ||||||
| Hire Purchase 2 | 122,050 | - | ||||||
| Total notes payable | $ | 193,645 | $ | 317,671 | ||||
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,$8,000,000, with a cumulative loan advance amount of $18,500,000.$18,500,000. The line of credit bears interest rate onof 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.$900,000. The L/C commission will be 1.5%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$2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. As of September 30, 2020,2022, the outstanding balance of the revolving loan was $0. $0. As part of the transaction, the Company incurred loan origination fees and closing fees in the amount of $381,823$381,823 and capitalized it into construction in process.
On June 18, 2020, Alset iHomeEHome Inc. (“Alset iHome”EHome”), a wholly-ownedwholly owned subsidiary of LiquidValue Development Inc., entered into a Loan Agreement with Manufacturers and Traders Trust Company (the “Lender”).
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Pursuant to the Loan Agreement, the Lender provided a non-revolving loan to Alset iHomeEHome in an aggregate amount of up to $2,990,000$2,990,000 (the “Loan”).
During the transaction,year ended December 31, 2020, Alset EHome borrowed $664,810 from M&T Bank, incurring at the Company incurredsame time a loan origination fees and closing fees in the amount of $61,679$61,679 which was recorded as loan discount and iswere amortized over the term of the loan. As of
Paycheck Protection Program Loan
On April 6, 2020,February 11, 2021, the Company entered into a termfive year note with M&T Bank with a principal amount of $68,502$68,502 pursuant 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%1.00%, with the first tensixteen months of principal and interest deferred.deferred until we applied for loan forgiveness. The PPP Term Note was subject to acceleration upon the occurrence of an event of default.
The PPP Term Note was unsecured and guaranteed by the United States Small Business Administration. The Company applied to M&T Bank for forgiveness of the PPP loan.
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$460,000 and matures on December 31, 2018.2018. The Australia Loan is secured by both the land under development and a pledged deposit of $35,276.$36,059. This loan is denominated in AUD. Personal guarantees amounting to approximately $500,000$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
Singapore Car Loans
On May 17, 2021, Alset International Limited entered into an 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.
8. RELATED PARTY TRANSACTIONS
Personal Guarantees by Directors
As of both September 30, 20202022 and December 31, 2019,2021, a director of the Company had provided personal guarantees amounting to approximately $5,500,000$0 and $500,000, respectively, to secure external loans from financial institutions for HFEAEI and the consolidated entities.
Purchase of HotApp BlockchainShares and Warrants from APM
On July 17, 2020, the Company purchased shares, approximately 9.99% ownership, and warrants to DSS Asia
Sale of Investment in Vivacitas to DSS
On March 18, 2021, the Company sold its equity investment in Vivacitas, a U.S.-based biopharmaceutical company, consisting of shares of common stock and an 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, our Chairman, CEO and founder, serves as a director of Vivacitas and as the Executive Chairman of 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 fromin this transactiontransaction. The difference of $2,279,872 between the selling price and our original investment cost was recorded as additional paid capital, reflecting that it was a related party transaction.
Purchase and Sale of Stock in True Partners Capital Holding Limited
On October 16, 2020, GBM converted 4,293March 12, 2021, the Company purchased ordinary shares of DSS Series A Preferred Stock havingTrue Partners Capital Holding Limited for $6,729,629 from a parrelated party. The fair market value of $0.02 per share in exchange for 662,500 restrictedsuch 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 based upon a liquidationof 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 $1,000True Partner stock and a conversion pricefair value of $6.48 per share. Our ownership with DSS stock at the agreement’s effective date, was 8.6% before conversion and 19.9% afterrecorded as other expense in the conversion.
Notes Payable
Chan Heng Fai provided an interest-free, due on demand advance to HFELiquidValue Development Pte. Ltd. and its subsidiary LiquidValue Development Limited for the general operations. On
Chan Heng Fai provided an interest-free, due on demand advance to Alset Inc. for the Company’s general operations. The advance was paid back during the year ended December 31, 2021 and as of September 30, 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 September 30, 2022 and December 31, 2021, the outstanding balance was $12,088 and $13,546, respectively.
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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. On$1,333,429. During the year ended December 31, 2021, the Company paid back all $1,333,429 and as of September 30, 20202022 and December 31, 2021 the amount outstanding was $1,333,429.
On March 8, March 27 and April 23, 2019, iGalen borrowed additional monies of $150,000, $30,000 and $50,000, respectively, from Rajen Manicka, total $230,000 (the “2019 Rajen Manicka Loan”). The 2019 Rajen Manicka Loan is interest free, not tradable, unsecured, and repayable on demand. As of September 30, 2020 and December 31, 2019, the total outstanding principal balance of the loans was $531,030 and $546,397, respectively, and was included in the Notes Payable – Related Parties balance on the Company’s Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2020 and 2019,12, 2021, the Company incurred $13,185 and $8,084 of interest expense, respectively. During the three months ended September 30, 2020 and 2019, the Company incurred $4,411 and $0 of interest expense, respectively. The Company accrued interest of $0 and $0 at September 30, 2020 and December 31, 2019, respectively
On May 14, 2021, the Company incurred $0borrowed S$7,395,472 Singapore Dollars (equal to approximately $5,545,495 U.S. Dollars) from Chan Heng Fai. The unpaid principal amount of interest expensethe Loan is due and $0 frompayable on May 14, 2022 and the right to receive 3% of revenue. DuringLoan has no interest. The loan was paid back in full during 2021 and the three months ended September 30, 2019 the Company incurred $0 of interest expense and $0 from the right to receive 3% of revenue. The amount outstanding on the loanbalance was $0 as of September 30, 20202022 and December 31, 2019 was $0 and $250,000, respectively. The accrued interest was $19,318 and $9,589 as of September 30, 2020 and December 31, 2019. The principal of $250,000 was paid off in June 2020.
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 pays a monthly fee of $15,000 with an additional $5,000 per month due upon the close of the sale to Houston LD, LLC. Since January of 2019, the Company hasCompany’s subsidiary paid a monthly fee of $20,000$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 $180,000$60,000 and $180,000 for$240,000 in the three and nine months ended September 30, 20202021, respectively, and 2019,$75,000 and $275,000 in the three and nine months ended September 30, 2022, respectively, which were capitalized as part of Real Estate on the Company’s Consolidated Balance Sheetbalance sheet as the services relate to property and project management. The Company incurred expensesIn 2021, MacKenzie Equity Partners was paid a bonus payment of $60,000 and $60,000 for the three months ended$120,000. In June 2022, MacKenzie Equity Partners was paid an additional $50,000 bonus payment (as described above). On September 30, 2020 and 2019, respectively. As of September 30, 2020,2022 and December 31, 2019 2021, the Company owed $20,000 and $0, respectively, to this entity.
| F-27 |
Notes Receivable from a related party company
On March 2, 2020 and on October 29, 2021, LiquidValue Asset Management Pte. Ltd. (“LiquidValue”) received a $200,000two $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 36.1%15.8% owned by LiquidValue.LiquidValue as of September 30, 2022. Chan Heng Fai and Chan Tung Moe and Alan Lui from Alset International are directors of American Medical REIT Inc. The note carries interestsnotes carry interest rates of 8%8% and is are payable in two years., three years and 25 months, respectively. LiquidValue also received warrants to purchase AMRE shares at the Exercise Price $5.00exercise price of $5.00 per share. The amount of the warrants equals to the note principleprincipal divided by the Exercise Price.exercise price. If AMRE goes to IPO in the future and IPO price is less than $10.00 per share, the Exerciseexercise price shall be adjusted downward to fifty percent (50%) of the IPO price. price. In March 2022 the Company converted two $200,000 loans, together with associated warrants into common shares of AMRE, and increased its ownership in AMRE from 3.4% to 15.8%. 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. From July 12 to September 30, 2022, DSS stock was valued under fair market value and a loss of $2,157,984 was booked as unrealized loss on security investment. As of September 30, 2020,December 31, 2021, the fair market value of the warrants was $0.
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 principal 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 interest total of $412,754 was recorded as bad debt expense.
As of September 30, 2022, the Company provided advances for operation of $236,699 to HWH World Co., a direct sales company in Thailand of which the Company holds approximately 19% ownership.
In the first quarter of 2022, a subsidiary of the Company made a non-interest bearing advance in the amount of $476,250 on behalf of Alset Investment Pte. Ltd., a company 100% owned by one of our directors. Such advance was made in connection with a private placement into Alset Capital Acquisition Corp. by its sponsor, Alset Acquisition Sponsor, LLC. On September 30, 2022 Alset Investment repaid all balance due of $476,250.
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. The director agreed to fully refund the amount of $1,746,279 or to work on a new stock sale deal with the Company in the fourth quarter of 2022.
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. As of September 30, 2022 and December 31, 2021, the balance of these advances was $0.
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 September 30, 2022, Ketomei owed $71,672 to Hapi Cafe.
Loan to Employees
On November 24, 2020, American Pacific Bancorp. Inc. lent $560,000 to Chan Tung Moe, an officer of one of the subsidiaries of the Company and son of Chan Heng Fai, Chairman and Chief Executive Officer of the Company, bearing interest at 6%, with a maturity date of November 23, 2023. This loan was secured by an irrevocable letter of instruction on 80,000 shares of Alset Inc. On November 24, 2020, American Pacific Bancorp. Inc. lent $280,000 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 loan was secured by an irrevocable letter of instruction on 40,000 shares of Alset Inc. 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 principal and interest, $840,000 and $28,031, of both loans to Chan Tung Moe and Lim Sheng Hong, were fully paid off.
| F-28 |
9. EQUITY
On June 30, 2020, we received deposit $1,419,60514, 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 Document Security Systems, Inc. for a warrant exercise common shares and preferred shares, respectively.
The Company has designated preferred shares as Series A Preferred Stock and as Series B Preferred Stock.
Holders of the Series A Preferred Stock shall be entitled to acquire 44,005,182receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of Alset Internationalthe Company’s common stock, par value $ per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series A Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series A Preferred Stock is convertible. Holders of Series A Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series A Preferred Stock would receive if the Series A Preferred Stock were fully converted into Common Stock.
Holders of the Series B Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of the Company’s common stock par value $ per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series B Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series B Preferred Stock is convertible. Holders of Series B Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series B Preferred Stock would receive if the Series B Preferred Stock were fully converted into Common Stock.
The Company analyzed the Preferred stock and the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.
On January 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, the Company entered into an Exchange Agreement with Chan Heng Fai, pursuant to which he converted a note in the amount of $13,000,000 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.
| F-29 |
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”) 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 of 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 an 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 808,363 additional Series A Warrants to purchase 808,363 shares of Common Stock, and/or up to 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 September 30, 2022 still holds 808,363 Series B Warrants. Through September 30, 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 $0.03$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 September 30, 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., as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”), 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 9,770,200 shares of Common Stock, at a price to the public of $ per Pre-funded Warrant. The Offering closed on July 30, 2021. As a result of the July Offering and subsequent exercise notice received for the pre-funded warrants, 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 of the Offering and a non-accountable expense fee equal to 1.5% 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 in the Offering, or warrants to purchase up to an aggregate of 520,754 shares, assuming 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.
| F-30 |
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 transaction was closedPre-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.
The Company incurred approximately $49,553 in expenses related to the July 2020. After this exercise, DSS holds 127,179,311Offering 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 September 30, 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 Alset International’s common stock, approximately 9.3%. Fai Heng Chan, our CEO, Chairmanpar value $ per share (the “Common Stock”), at a price to the public of our Board$ per share of Common Stock and controlling shareholder, is also Chairman(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 December 8, 2021. As a result of the BoardDecember Offering and subsequent exercise notice received for the pre-funded warrants, the net proceeds to the Company were $27,231,875.
The Company granted the Underwriters a 45-day over-allotment option to purchase up to 7,500,000 additional shares of Document Security Systems, Inc.Common Stock. The Company also paid the Underwriters an underwriting discount equal to 7% of the gross proceeds of the Offering and a significant shareholdernon-accountable expense fee equal to 1% of Document Security Systems, Inc.
The Company is authorizedgranted the Underwriters a 45-day over-allotment option to issue 20,000,000purchase 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 and 5,000,000 preferred shares, bothunderlying the Pre-funded Warrants sold in the offering, that were subject to the underwriters’ over-allotment option at a par valueprice 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 September 30, 2022, 31,076,666 warrants were exercised, some in cashless exercise transactions.
| F-31 |
The Company incurred approximately $40,621 in expenses related to the December 31, 2019,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 September 30, 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 September 30, 2022, there were 10,001,000 common shares issued and outstanding.
The following table summarizes the treasury of our company, and Chan Heng Fai surrendered 1,000 shares of our common stock towarrant activity for the treasury of our company, and all such shares were cancelled. No consideration was exchanged in connection with the surrender of the shares. As a result, the total number of outstanding shares of our common stock atnine months ended September 30, 2020 was reduced to 6,400,000 shares from 10,001,000 shares.
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 September 30, 2022 | 12,689,769 | $ | 4.02 | $ | - | |||||||||||
| Warrants Vested and exercisable at September 30, 2022 | 12,689,769 | $ | 4.02 | $ | - | |||||||||||
GigWorld Inc. Sale of Shares
During the nine months ended September 2020,30, 2021, the Company sold 207,300 shares of HotApp BlockchainGigWorld to international investors withfor the amount of $177,300,$280,000, which was booked as addition paid-in capital. The Company held 505,976,376 shares of the total outstanding shares before the sale. After the sale, the Company still owns approximately 99%99% of HotApp Blockchain’sGigWorld’s total outstanding shares.
During the three and nine months ended September 30, 2020, the stock-based compensation expense was $0 and $1,573,623, respectively. On August 20, 2020, the Company acquired 30,000,000 common shares from Chan Heng Fai in exchange for a two-year non-interest bearing note of $1,333,429. The Company’s ownership of Alset International changed from 65.4% as of December 31, 2019 to 51.04% as of
Distribution to Minority Shareholder
During the nine months ended September 30, 2021, SeD Maryland Development LLC Board approved the payment distribution plan to members and paid $1,398,250 in distribution to the minority shareholder.
| F-32 |
Changes of Ownership Percentage 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 Inc. to share grantsexercise its warrants to purchase Alset International common shares. The warrant exercise transactions between Alset Inc. and warrant exercises,Alset International were intercompany transactions and only affected change in non-controlling interest on the Company’s ownership percentagecondensed consolidated statements of stockholders’ equity. During the year ended December 31, 2021, the stock-based compensation expense of Alset International fell below 50% andwas $ with the entity was deconsolidated in accordance with ASC 810-10-45-5. A gainissuance of approximately $53 million was recorded as a result of the deconsolidation.
On January 17, 2022 the Company still retained significant influence of the subsidiary.
Due to these transactions the Company’s ownership of Alset International is 51.04%.
Promissory Note Converted into Shares
On December 13, 2021 the warrants outstanding, HF Enterprises Inc. holds warrants to purchase 359,834,471 shares,Company entered into a Securities Purchase Agreement with Chan Heng Fai our founderfor the issuance and CEO, holds warrants to purchase 1,590,925,000 shares,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 warrants to purchase 31,526,735 shares are held by third parties. Allwas due on the earlier of the outstanding options to purchase 1,061,333 shares are ownedDecember 31, 2024 or when declared due and payable by Chan Heng Fai. Due to this,The note could be converted in part or whole into common shares of the Company does not expectat 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 own less than 50%convert all of Alset International moving forward.
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 or two years. Future minimum rental revenue under existing leases on our properties at September 30, 2022 in each calendar year through the end of their terms are as follows:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS
| 2022 | $ | 552,644 | ||
| 2023 | 856,590 | |||
| 2024 | 7,450 | |||
| Total Future Receipts | $ | 1,416,684 |
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 September 30, 2022 and 2021, property management fees incurred by the property managers were $28,890 and $6,390, respectively. For the nine months ended September 30, 2022 and 2021, property management fees incurred by the property managers were $60,390 and $7,380, respectively. For the three months ended September 30, 2022 and 2021, leasing fees incurred by the property managers were $36,420 and $31,580, respectively. For the nine months ended September 30, 2022 and 2021, leasing fees incurred by the property managers were $149,625 and $47,805, respectively.
11. ACCUMULATED OTHER COMPREHENSIVE INCOME
Following is a summary of the changes in the balances of 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, 2020 | $(59,888) | $1,613,125 | $(84,968) | $1,468,269 |
| Other Comprehensive Income | (8,240) | (1,094,810) | - | (1,103,050) |
| Balance at March 31, 2020 | $(68,128) | $518,315 | $(84,968) | $365,219 |
| Other Comprehensive Income | 8,147 | 389,413 | (18,317) | 379,243 |
| Balance at June 30, 2020 | $(59,981) | $907,728 | $(103,285) | $744,462 |
| Other Comprehensive Income | 14,865 | 235,837 | 50,420 | 301,122 |
| Balance at September 30, 2020 | $(45,116) | $1,143,565 | $(52,865) | $1,045,584 |
Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Total | |
| Balance at January 1, 2019 | $(23,779) | $1,606,567 | $1,582,788 |
| Other Comprehensive Income | 11,681 | 74,262 | 85,943 |
| Balance at June 30, 2019 | $(12,098) | $1,680,829 | $1,668,731 |
| Other Comprehensive Income | 22 | 104,762 | 104,784 |
| Balance at June 30, 2019 | $(12,076) | $1,785,591 | $1,773,515 |
| Other Comprehensive Income | (37,099) | (403,990) | (441,089) |
| Balance at September 30, 2019 | $(49,175) | $1,381,601 | $1,332,426 |
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 | ||||||
| Other Comprehensive Income | (505 | ) | (3,002,167 | ) | 3,266,996 | 264,324 | ||||||||||
| Balance at June 30, 2022 | $ | (97,563 | ) | $ | (3,870,029 | ) | $ | 4,525,637 | $ | 558,045 | ||||||
| Other Comprehensive Income | 42,642 | 370,778 | (486,134 | ) | (72,714 | ) | ||||||||||
| Balance at September 30, 2022 | $ | (54,921 | ) | $ | (3,499,251 | ) | $ | 4,039,503 | $ | 485,331 | ||||||
| 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 | ||||||
| Other Comprehensive Income | (25,663 | ) | (764,544 | ) | (343,225 | ) | (1,133,432 | ) | ||||||||
| Balance at June 30, 2021 | $ | (75,556 | ) | $ | 482,946 | $ | (448,213 | ) | $ | (40,823 | ) | |||||
| Balance at beginning | $ | (75,556 | ) | $ | 482,946 | $ | (448,213 | ) | $ | (40,823 | ) | |||||
| Other Comprehensive Income | (14,314 | ) | (930,005 | ) | (17,070 | ) | (961,389 | ) | ||||||||
| Balance at September 30, 2021 | $ | (89,870 | ) | $ | (447,059 | ) | $ | (465,283 | ) | $ | (1,002,212 | ) | ||||
| Balance at end | $ | (89,870 | ) | $ | (447,059 | ) | $ | (465,283 | ) | $ | (1,002,212 | ) | ||||
September 30, | December 31, | |
2020 | 2019 | |
Assets Cash | ||
Assets Cash | $- | $108,731 |
| Prepaid Expense | - | 30,700 |
| Total Asset | $- | $139,431 |
| Liabilities | ||
| Accounts Payable | $- | $7,021 |
Total Liabilities | $- | $7,021 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
| Revenue | $- | $- | $- | $- |
| Operating Expense | ||||
| Research & Development | 45,617 | 79,457 | 246,915 | 260,671 |
| General & Administration | 10,280 | 31,648 | 170,035 | 94,153 |
| Total Operating Expense | 55,897 | 111,105 | 416,950 | 354,824 |
| Other Expense | 138 | 17,449 | 488 | 30,395 |
Loss from Discontinued Operations | $(56,053) | $(128,554) | $(417,438) | $(385,219) |
Nine Months Ended on September 30, 2020 | Nine Months Ended on September 30, 2019 | |
| Operating | $(522,435) | $(470,902) |
| Investing | - | (36,000) |
| Financing | - | - |
| Net Change in Cash | $(522,435) | $(506,902) |
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 September 30, 20202022 and December 31, 2019:
Fair Value Measurement Using | |||||
Amount at Cost | Level 1 | Level 2 | Level 3 | Amount at Fair Value | |
| September 30, 2020 | |||||
| Assets | |||||
| Investment securities- Fair Value Option | $3,457,056 | $4,787,454 | $- | $- | $4,787,454 |
| Investment securities- Trading | 16,016 | 15,758 | - | - | 15,758 |
| Convertible preferred stock | 63,849,002 | - | - | 54,864,632 | 54,864,632 |
| Convertible note receivable | 50,000 | - | - | 77,477 | 77,477 |
| Warrants - American Premium Water | - | - | - | - | - |
| Warrants - AMRE | - | - | - | - | - |
| Stock Options - Vivacitas | - | - | - | - | - |
| Total Investment in securities at Fair Value | $67,372,074 | $4,803,212 | $- | $54,942,109 | $59,745,321 |
Fair Value Measurement Using | |||||
Amount at Cost | Level 1 | Level 2 | Level 3 | Amount at Fair Value | |
| December 31, 2019 | |||||
| Assets | |||||
| Investment securities- Fair Value Option | $3,457,056 | $2,973,582 | $- | $- | $2,973,582 |
| Investment securities- Trading | 16,016 | 15,907 | - | - | 15,907 |
| Convertible note receivable | 50,000 | - | - | 26,209 | 26,209 |
| Stock Option - Vivacitas | - | - | - | - | - |
| Total Investment in securities at Fair Value | $3,523,072 | $2,989,489 | $- | $26,209 | $3,015,698 |
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 | ||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investment Securities- Fair Value | $ | 76,264,051 | $ | 18,184,407 | $ | - | $ | - | $ | 18,184,407 | ||||||||||
| Investment Securities- Trading | 2,387,149 | 11,894,002 | - | - | 11,894,002 | |||||||||||||||
| Convertible Note Receivable | 138,599 | - | - | 88,599 | 88,599 | |||||||||||||||
| Warrants - American Premium Mining | 696,791 | - | - | 517,965 | 517,965 | |||||||||||||||
| Total | $ | 79,486,590 | $ | 30,078,409 | $ | - | $ | 606,564 | $ | 30,684,973 | ||||||||||
| Total Investment in securities at Fair Value | 30,684,973 | |||||||||||||||||||
| Amount at | Fair Value Measurement Using | Amount at | ||||||||||||||||||
| Cost | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investment Securities- Fair Value | $ | 72,000,301 | $ | 25,320,694 | $ | - | $ | - | $ | 25,320,694 | ||||||||||
| Investment Securities- Trading | 9,809,778 | 9,908,077 | - | - | 9,908,077 | |||||||||||||||
| Convertible Note Receivable | 138,599 | - | - | 98,398 | 98,398 | |||||||||||||||
| Warrants - American Premium Mining | 696,791 | - | - | 1,009,854 | 1,009,854 | |||||||||||||||
| Warrants - AMRE | - | - | - | - | - | |||||||||||||||
| Total | $ | 82,645,469 | $ | 35,228,771 | $ | - | $ | 1,108,252 | $ | 36,337,023 | ||||||||||
| Total Investment in securities at Fair Value | 36,337,023 | |||||||||||||||||||
Realized loss on investment securities for the nine months ended
September 30,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
September 30,SCHEDULE OF FAIR VALUE OF EQUITY SECURITY INVESTMENT
| Share price | Market Value | |||||||||||||
| 9/30/2022 | Shares | 9/30/2022 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.256 | 62,812,264 | $ | 16,079,940 | Investment in Securities at Fair Value | ||||||||
| AMBS (Related Party) | $ | 0.004 | 20,000,000 | $ | 74,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.021 | 43,326,621 | $ | 923,988 | Investment in Securities at Fair Value | ||||||||
| American Premium Mining (Related Party) | $ | 0.001 | 354,039,000 | $ | 389,443 | Investment in Securities at Fair Value | ||||||||
| Value Exchange | $ | 0.110 | 6,518,512 | $ | 717,036 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 11,894,002 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 30,078,409 | ||||||||||||
| Nervotech | N/A | 1,666 | $ | 35,958 | 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 | $ | 30,176,538 | ||||||||||||
| F-35 |
Share price | Market Value | |||
9/30/2020 | Shares | 9/30/2020 | Valuation | |
| DSS (Related Party) | $4.560 | 500,001* | $2,280,005 | Investment in Securities at Fair Value |
| AMBS (Related Party) | $0.011 | 20,000,000 | $222,000 | Investment in Securities at Fair Value |
| Holista (Related Party) | $0.043 | 46,226,673 | $1,980,350 | Investment in Securities at Fair Value |
| American Premium Water (Related Party) | $0.003 | 122,039,000 | $305,100 | Investment in Securities at Fair Value |
| Others | $15,758 | Investment in Securities at Fair Value | ||
| Total Level 1 Equity Securities | $4,803,213 | |||
| Vivacitas (Related Party) | N/A | 2,480,000 | $200,128 | Investment in Securities at Cost |
| Nervotech | N/A | 1,666 | $36,628 | Investment in Securities at Cost |
| Total Equity Securities | $5,039,969 | |||
Share price | Market Value | |||
12/31/2019 | Shares | 12/31/2019 | Valuation | |
| DSS (Related Party) | $0.301 | 500,000 | $150,500 | Investment in Securities at Fair Value |
| AMBS (Related Party) | $0.013 | 20,000,000 | $262,000 | Investment in Securities at Fair Value |
| Holista (Related Party) | $0.055 | 46,226,673 | $2,561,082 | Investment in Securities at Fair Value |
| Others | $15,907 | Investment in Securities at Fair Value | ||
| Total Level 1 Equity Securities | $2,989,489 | |||
| Vivacitas (Related Party) | N/A | 2,480,000 | $200,128 | Investment in Securities at Cost |
| Total Equity Securities | $3,189,617 | |||
| Share price | Market Value | |||||||||||||||
| 12/31/2021 | Shares | 12/31/2021 | Valuation | |||||||||||||
| DSS (Related Party) | $ | 0.672 | 19,888,262 | $ | 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 Mining (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 | ||||||||||||||
DSS convertible preferred stock under level 3 category was valued through a Monte Carlo simulation model. As of
During the nine months ended September 30, 2020, the Company held 46,8482021, Global BioMedical Pte Ltd. converted preferred stock of DSS into common shares of DSS convertible preferred stock, which could convert to 7,232,716 common shares, with fair market value $54,864,632. The Monte Carlo model uses certain assumptions. The significant inputs and assumptions utilized are as follows:
As of September 30, | As of August 21, | |
2020 | 2020 | |
| Stock price | $4.52 | $6.88 |
| Risk-free rate | 0.16% | 0.16% |
| Annualized volatility | 60.00% | 60.00% |
| Forecast horizon in years | 3.00 | 3.00 |
| Trading steps per year | 52.00 | 52.00 |
| Probability of call (annual) | 10.00% | 10.00% |
Sharing Services Convertible Note
The fair value of the Sharing Services Convertible Note under level 3 category as of September 30, 2020 and December 31, 20192021 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
September 30, 2022 | December 31, 2021 | |||||||
| Dividend yield | - | % | 0.00 | % | ||||
| Expected volatility | - | % | 138.85 | % | ||||
| Risk free interest rate | - | % | 3.25 | % | ||||
| Contractual term (in years) | - | 0.76 | ||||||
| Exercise price | $ | $ | ||||||
| F-36 |
September 30, 2020 | December 31, 2019 | |
| Dividend yield | 0.00% | 0.00% |
| Expected volatility | 221.69% | 159.88% |
| Risk free interest rate | 0.13% | 1.61% |
| Contractual term (in years) | 2.01 | 2.76 |
| Exercise price | $0.15 | $0.15 |
We assumed dividend yield rate is 0.00%0.00% in Sharing Services. The volatility is based on the historical volatility of the Sharing Services’ common stock. Risk -freeRisk-free interest rates were obtained from U.S. Treasury rates for the applicable periods.
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 and nine months ended September 30, 20202022 and 2019:
SCHEDULE OF CHANGE IN FAIR VALUE
| Total | ||||
| Balance at January 1, 2022 | $ | 1,108,252 | ||
| Total losses | (203,463 | ) | ||
| Balance at March 31, 2022 | $ | 904,789 | ||
| Total losses | (591 | ) | ||
| Balance at June 30, 2022 | $ | 904,198 | ||
| Total gain | 49,915 | |||
| Balance at September 30, 2022 | $ | 954,113 | ||
| Total | ||||
| Balance at January 1, 2021 | $ | 66,978 | ||
| Total losses | (1,987 | ) | ||
| Balance at March 31, 2021 | $ | 64,991 | ||
| Total losses | (35,922 | ) | ||
| Balance at June 30, 2021 | $ | 29,069 | ||
| Total losses | (19,060 | ) | ||
| Balance at September 30, 2021 | $ | 10,009 | ||
The Note was redeemed in July 2022.
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% per annum and maturity is two years. The conversion price is approximately $21.26, per common share of Vector Com. As of September 30, 2022, 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 a $200,000two $200,000 promissory note.notes. For further details on this transaction, refer to Note 8 - Related Party Transactions, Note Receivable from a Related Party Company. The Company holds a stock option to purchase 250,000 shares of Vivacitas common stock at $1 per share at any time prior to the date of public offering.. As of September 30, 20202022 and December 31, 2019, both2021, AMRE and Vivacitas werewas a private companies.company. Based the management’s analysis, the fair value of the warrants and the stock option were $0was $0 as of September 30, 2020 and December 31, 2019.
On July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99%9.99% ownership, and 122,039,000 warrants with an exercise price of $0.0001$0.0001 per share, from APW,APM, for an aggregated purchase price of $122,039. Based on$122,039. During 2021, the management’s analysis,Company exercised of the warrants to purchase 232,000,000 shares of APM for the total consideration of $232,000, leaving the balance of outstanding warrants of at December 31, 2021. The Company did not exercise any warrants during nine months ended September 30, 2022. We value APB warrants under level 3 category through a Black Scholes option pricing model and the fair value of the warrants from APWAPM was $0$517,965 as of September 30, 2020.
The fair value of the APM warrants under level 3 category as of September 30, 2022 and December 31, 2021 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
September 30, 2022 | December 31, 2021 | |||||||
| Stock Price | $ | 0.0011 | $ | 0.0022 | ||||
| Exercise price | 0.001 | 0.001 | ||||||
| Risk free interest rate | 3.94 | % | 1.48 | % | ||||
| Measurement input | 167.9 | % | 186.5 | % | ||||
| Annualized volatility | 167.9 | % | 186.5 | % | ||||
| Year to maturity | 7.81 | 8.58 | ||||||
13. COMMITMENTS AND CONTINGENCIES
Lots Sales Agreement
On November 23, 2015, SeD Maryland Development LLC completed the $15,700,000$15,700,000 acquisition of Ballenger Run, a 197-acre197-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$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. Through December 31, 2019, NVR has purchased 123 lots. In the nine months ended on September 30, 2020, NVR purchased 72 additional lots.
During the three months ended on September 30, 2022 and 2021, NVR purchased 0 and 18 lots, respectively. During the nine months ended on September 30, 2022 and 2021, NVR purchased 3 2018, 150 CCM Black Oak entered into and 76 lots, respectively. Through September 30, 2022 and December 31, 2021, NVR had purchased a Purchasetotal of 3 and Sale Agreement with Houston LD, LLC476 lots, respectively.
Certain arrangements for the sale of 124buildable lots located at its Black Oak project. Pursuant to NVR require the Purchase and Sale Agreement, it was agreed that 124 lots would be soldCompany to credit NVR with an amount equal to one year of the FFB assessment. Under ASC 606, the credits to NVR are not in exchange for a rangedistinct good or service and accordingly, the amount of pricesthe credit was recognized as the reduction of revenue. As of September 30, 2022 and December 31, 2021, the accrued balance due to NVR was $189,475and $188,125, respectively.
Leases
The Company leases offices in Bethesda, Maryland, Magnolia, Texas, Singapore, Hong Kong and South Korea through leased spaces aggregating approximately 15,811 square feet, under leases expiring on various dates from October 2022 to August 2025. The leases have rental rates ranging from $2,300 to $23,020 per month. Our total rent expense under these office leases was $179,094 and $140,685 in the three months ended September 30, 2022 and 2021, respectively. Our total rent expense under these office leases was $492,034 and $405,677 in the nine months ended September 30, 2022 and 2021, 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 2022 to May 2023 | |
| Singapore – F&B | October 2021 to October 2024 | |
| Singapore – Four Seasons Park | July 2022 to July 2024 | |
| Hong Kong | October 2020 to October 2022 | |
| South Korea | August 2022 to August 2025 | |
| Magnolia, Texas | May 2022 - on month to month basis | |
| Bethesda, Maryland | January 2021 to March 2024 |
| F-38 |
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 lot type. In addition, Houston LD, LLC agreed to contribute a “community enhancement fee” for each lot, collectively totaling $310,000, which is currently held in escrow. 150 CCM Black Oak will apply these funds exclusively towards an amenity package on the property. The closingpresent value of the transactions contemplated byfuture minimum lease payments over the Purchaselease 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 3.9% in 2022 and Sale Agreement was subject to Houston LD, LLC completing due diligence to its satisfaction. On October 12, 2018, 150 CCM Black Oak Ltd entered into an Amended and Restated Purchase and Sale Agreement (the “Amended and Restated Purchase and Sale Agreement”) for these 124 lots. Pursuant to the Amended and Restated Purchase and Sale Agreement, the purchase price remained $6,175,000, 150 CCM Black Oak Ltd was required to meet certain closing conditions and the timing for the closing was extended.
The table below summarizes future payments due to 150 CCM Black Oak Ltd, respectively.
For the Years Ended September 30:
SCHEDULE OF LEASE PAYMENTS
| 2023 | 645,572 | |||
| 2024 | 516,273 | |||
| 2025 | 234,807 | |||
| Total Minimum Lease Payments | 1,396,652 | |||
| Less: Effect of Discounting | (118,495 | ) | ||
| Present Value of Future Minimum Lease Payments | 1,278,157 | |||
| Less: Current Obligations under Leases | (619,355 | ) | ||
| Long-term Lease Obligations | $ | 658,802 |
Stock Option plans HFE
The Company reserves previously reserved shares of common stock 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 September 30, 20202022 and December 31, 2019,2021, there have been no options granted.
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.
| F-39 |
Options for | Remaining Contractual | Aggregate | ||
Common Shares | Exercise Price | Term (Years) | Intrinsic Value | |
| Outstanding as of December 31, 2019 | 1,061,333 | $0.09 | 4.00 | $- |
| Granted | - | - | ||
| Exercised | - | - | ||
| Forfeited, cancelled, expired | - | - | ||
| Outstanding as of September 30, 2020 | 1,061,333 | $0.09 | 3.25 | $- |
| Vested and exercisable at September 30, 2020 | 1,061,333 | $0.09 | 3.25 | $- |
SCHEDULE OF OPTION ACTIVITY
| 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 | $ | - | |||||||||||
| 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 | $ | - | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Outstanding as of September 30, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
| Vested and exercisable at September 30, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
15. SUBSEQUENT EVENTS
Contract for Sale of Black Oak Lots
On October 28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and transactions subsequent to September 30, 2020, the balance sheet date, through October 15, 2020, the date the consolidated financial statements were available to be issued.
The closing of the transactions described in the Agreement 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. The Buyer has agreed to purchase the lots in stages, with an estimated closing date of December of 2022 for the first 132 lots to be acquired, with the remainder to be acquired through 2023. Prior to such closing dates, the Buyer shall have a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, the Buyer may decline to proceed with the closing of these transactions.
The Seller shall be required to develop and improve the property at the Seller’s cost pursuant to certain development plans and government regulations prior to the closings described above.
Purchase of Value Exchange International, Inc. Shares
On October 17, 2022, the Company’s subsidiary GigWorld Inc. entered into a Stock Purchase Agreement (the “Agreement”) with Chan Heng Fai, who is the Chairman of GigWorld’s Board of Directors and our Chairman, Chief Executive Officer and largest stockholder. Pursuant to the Agreement, GigWorld bought an aggregate of shares of Value Exchange International, Inc. (“VEII”), a Nevada corporation, for the following purchase prices: (i) $1,733,079.12 for shares, representing a price of $ per share; (ii) $2,314 for shares, representing a price of $ per share; (iii) $5,015 for shares, representing a price of $ per share; and (iv) $3,326 for shares, representing a price of $ per share. Collectively, these purchases represent an aggregate purchase price of $1,743,734.12 for shares of VEII. Such purchase prices were negotiated between the parties to the Agreement.
Mr. Chan and another member of GigWorld’s Board of Directors, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of our Board of Directors are also members of the Board of Directors of VEII (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). Following the acquisitions of shares pursuant to the Agreement, the Company upon closingnow owns a total of the Offering, issued to Aegis a warrant (the “Representative’s Warrant”) to purchase an aggregate of 108,000 shares of common stock (5%VEII, representing 38.3% of the total shares issued in the Offering). The Representative’s Warrant is exercisable at a per share price of $9.80 (equal to 140% of the initial public offering price of the Common Stock) and is exercisable at any time and from time to time, in whole or in part, during the four-year period commencing from the date of issuance.VEII.
| F-40 |
Item 2. Management’sManagement’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 propertythe development of EHome communities and other real estate, financial services, digital transformation technologytechnologies, biohealth activities and biohealth activitiesconsumer products with operations in the United States, Singapore, Hong Kong, Australia and South Korea. We manage our three principal businesses primarily through our 85.4% owned subsidiary, Alset International Limited, (“Alset International”), which is a public company traded on the Singapore Stock Exchange and in which we own a 51.04% equity interest.Exchange. Through this subsidiary (and indirectly, through other public and private U.S. and Asian subsidiaries), we are actively developing two significant real estate projects near Houston, Texas and in Frederick, Maryland in our property developmentreal estate segment. Recently, the Company expanded its real estate portfolio to single family rental homes, and we currently own 132 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 in our digital transformation technology business unit. Our recent foray into the biohealth segment includes research to treat neurologicalthe sale of consumer products.
As of September 30, 2022, additional interests we held, both directly and immune-related diseases, nutritional chemistry to createindirectly, included a natural sugar alternative, research regarding innovative products to slow the spread of disease, and natural foods and supplements.
Recent Developments
Sale of Chan Heng Fai, our founder, Chairman and Chief Executive Officer, who is also our largest stockholder, we have positioned ourselves as a participant in these key markets through a seriesSecurities of strategic transactions. Our growth strategy is both to pursue acquisition opportunities that we can leverage on our global network using our capital and management resources and to accelerateTrue Partner Limited
On January 18, 2022, the expansion of our organic businesses.
| 3 |
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 firm commitment underwritten public offering (the “Offering”)purchase price of $0.3810 per share, for an aggregate purchase price of 2,160,000$17,000,000. On February 28, 2022, the Company and DSS agreed to amend this stock purchase agreement. The number of shares of ourthe common stock par value $0.001of 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 (the “Assumption Agreement”) pursuant to which DSS agreed to purchase a convertible promissory note from Alset International. The note has a principal amount of $8,350,000 and had accrued but unpaid interest of $367,400 through May 15, 2022. The note was issued by American Medical REIT, Inc. The consideration paid for the note was 21,366,177 shares of DSS’s common stock. The number of DSS shares 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 “Common Stock”share. The closing of the Assumption Agreement and the issuance of the DSS shares described above was subject to the approval of the NYSE American and DSS’s shareholders. The shareholders of DSS approved this transaction on May 17, 2022. On July 12, 2022, Alset International entered into Amendment No. 1 to the Assumption Agreement. Amendment No. 1 revised the Assumption Agreement to remove an adjustment provision. On July 12, 2022, the transactions contemplated by the Assumption Agreement and Amendment No. 1 were consummated, Alset International assigned the Note to DSS, and DSS issued to Alset International 21,366,177 shares of DSS’s common stock.
Purchase of Alset International shares
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 293,428,200 ordinary shares of Alset International for a purchase price of 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 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 had a Special Meeting of Stockholders to vote on the approval of this transaction on June 6, 2022.
Initial Public Offering of Alset Capital Acquisition Corp.
On February 3, 2022 Alset Capital Acquisition Corp. (“Alset Capital”), at ana 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 $7.00$11.50 per share. Aegis has a 60 dayOnly whole warrants are exercisable. The underwriters exercised their over-allotment option to purchase up toin full for an additional 324,000 shares1,125,000 units on February 1, 2022, which closed at the time of Common Stockthe 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.
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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, price. 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 OfferingCompany and its majority-owned subsidiary Alset International together own the sole member of Alset Acquisition Sponsor, LLC, the sponsor of Alset Capital.
Alset Capital Acquisition Corp. Merger Agreement with HWH International Inc.
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 merger as a wholly owned subsidiary of Alset Capital (the “Merger”). HWH is an indirect subsidiary of the Company through its subsidiary Alset International Limited. The Merger has not closed on November 27, 2020.
Name Change
During a Special Meeting of Stockholders on The Nasdaq Capital Market on November 24, 2020 underJune 6, 2022, the symbol “HFEN.stockholders approved the reincorporation of the Company in Texas and the change of the Company’s name to “Alset Inc.” The sharesmanagement believes that such new name will more fully reflect its current business model.
Recent Business Developments in our Home Rental Business
Recently, the Company expanded its real estate portfolio to single family rental houses. During 2021 and early 2022, the Company, through its subsidiaries, acquired 132 homes in Montgomery and Harris Counties, Texas.
In approximately fifty of the 132 rental homes that were offeredacquired, as part of our commitment to advancing smart and healthy sustainable living, we have installed Tesla PV solar panels and Powerwalls. We are reviewing plans to add solar panels and related technologies to the balance of the single-family rental homes, where feasible. In addition, we have added technologies at many of the single-family rental homes such as (i) smart solar, thermostat, and energy usage controls; (ii) smart lighting controls; (iii) smart locks and security; and (iv) smart home automation devices. We believe these and other technologies will be attractive to renters and we continue to build and pursue strategic, technological partnerships that will assist us as we expand our real estate business to include building homes for rent and building homes for sale in the future.
The Company has entered into a 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 per property unit and a leasing fee.
Sale of Certain 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 has 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.” The lots will be sold at a range of prices, and the Seller will also be entitled to receive a community enhancement fee for each lot sold. The aggregate purchase price and community enhancement fees are anticipated to be $12,881,000, however, such purchase price will be adjusted accordingly, if the total number of lots increases or decreases prior to the closing of the transactions contemplated by the CompanyAgreement.
The closing of the transactions described in the Agreement 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. The Buyer has agreed to purchase the lots in stages, with an estimated closing date of December of 2022 for the first 132 lots to be acquired, with the remainder to be acquired through 2023. Prior to such closing dates, the Buyer shall have a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, the Buyer may decline to proceed with the closing of these transactions.
The Seller shall be required to develop and improve the property at the Seller’s cost pursuant to certain development plans and government regulations prior to the closings described above.
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Purchase of Value Exchange International, Inc. Shares
On October 17, 2022, the Company’s subsidiary GigWorld Inc. entered into a registration statement on Form S-1, as amended (File No. 333-235693)Stock Purchase Agreement (the “Agreement”) with Chan Heng Fai, who is the Chairman of GigWorld’s Board of Directors and our Chairman, Chief Executive Officer and largest stockholder. Pursuant to the Agreement, GigWorld bought an aggregate of 7,276,163 shares of Value Exchange International, Inc. (“VEII”), which was declared effective by the Securities and Exchange Commission on November 12, 2020. Aegis acted as lead book-running managera Nevada corporation, for the Offeringfollowing purchase prices: (i) $1,733,079.12 for 7,221,163 shares, representing a price of $.24 per share; (ii) $2,314 for 10,000 shares, representing a price of $.2314 per share; (iii) $5,015 for 25,000 shares, representing a price of $.2006 per share; and Westpark Capital, Inc. acted as co-manager.
Mr. Chan and another member of GigWorld’s Board of Directors, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of our Board of Directors are also members of the Board of Directors of VEII (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). Following the acquisitions of shares pursuant to the Agreement, the Company now owns a total of 13,834,643 shares of VEII, representing 38.3% of VEII.
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 September 2020,the second quarter of 2022, we continued to sell lots at our Ballenger Run project (in Maryland) to NVR for the construction of town homes to NVR. To date, salessingle-family homes. At this time, all of such town homes by NVR are up in 2020 compared to the first nine months of 2019. Such town homes are oftenlots at Ballenger Run have been sold to first-time home buyers, whoNVR, however we continue to complete our development requirements under our agreements with NVR. We do not anticipate that the COVID-19 pandemic will have to worry about selling their existing homes. We believe low interest rates have encouraged home sales. Many buyers opted to see home modelsa material impact on the timing of the completion of our remaining tasks at the project virtually. This technology allowed them to ask questions to sales staff and see the town homes.
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 thatthis trend, should it continue, will encourage interest in some of our Ballenger Run project is well suited and positioned to accommodate those buyers. Our latest phase for sale at Ballenger Run, involving single-family homes, has seen a high number of interested potential buyers signing up for additional information and updates on home availability.
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. To date,In 2020, we experienced a slowdown in the construction of a clubhouse at the Ballenger Run project, which had beenwas completed behind the original schedule. ThisWe believe this delay was caused in part by policies requiring lower numbers of contractors working indoors.
The COVID-19 pandemic may adversely impact the timeliness of local government in granting real estate permits and licenses required for various development projects.approvals. Accordingly, the COVID-19 pandemic may cause the completion of important stages in our real estate projects to be delayed.
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.
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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. At our office in Texas, we received a 50% rent abatement for the month of May 2020.
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 been significantly limited, and our staff’s travel between the U.S. and non-U.S. offices has been suspended since March 2020.was significantly limited until earlier this year. The COVID-19 pandemic has also impacted the frequency with which our management would otherwise travel to the Black Oaks project;Oak project in 2020 and 2021; however, we have a contractor in Texas providing supervision of the project. Management continues to regularly supervise the Ballenger Run project. Limitations on the mobility of our management and staff may 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 and Nine Months Ended September 30, 20202022 and 20192021
| Three- Months Ended | Nine-months Ended | |||||||||||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Revenue | $ | 721,905 | $ | 4,795,567 | $ | 3,600,482 | $ | 16,945,913 | ||||||||
| Operating Expenses | $ | 2,792,917 | $ | 4,743,985 | $ | 8,979,297 | $ | 21,976,619 | ||||||||
| Other Expenses | $ | 11,163,538 | $ | 8,126,066 | $ | 25,546,935 | $ | 87,293,906 | ||||||||
| Net Loss | $ | 13,081,391 | $ | 8,074,484 | $ | 30,994,705 | $ | 92,771,369 | ||||||||
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Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
| Revenue | $2,148,923 | $5,306,863 | $7,179,919 | $22,944,498 |
| Operating Expenses | 2,414,563 | 5,576,162 | 9,806,242 | 27,447,320 |
| Other Income (Expense) | (12,946,960) | 1,197,775 | (10,203,324) | 357,436 |
| Loss from Discontinued Operations | (56,053) | (128,554) | (417,438) | (388,931) |
Net Loss | $(13,342,758) | $799,922 | $(13,435,844) | $(4,534,317) |
Revenue
The following tables setsset forth period-over-period changes in revenue for each of our reporting segments:
Three Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $2,146,992 | $4,938,017 | $(2,791,025) | (57%) |
| Biohealth | 1,931 | 360,351 | (358,420) | (99%) |
| Digital transformation technology | - | - | - | - |
| Other | - | 8,495 | (8,495) | (100%) |
Total revenue | $2,148,923 | $5,306,863 | $(3,157,940) | (60%) |
Nine Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $7,148,786 | $21,509,197 | $(14,360,411) | (67%) |
| Biohealth | 31,133 | 1,406,951 | (1,375,818) | (98%) |
| Digital transformation technology | - | - | - | - |
| Other | - | 28,350 | (28,350) | (100%) |
Total revenue | $7,179,919 | $22,944,498 | $(15,764,579) | (69%) |
Three Months Ended September 30, | Change | |||||||||||||||
| 2022 | 2021 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 569,791 | $ | 3,547,396 | $ | (2,977,605 | ) | -84 | % | |||||||
| Biohealth | 22,154 | 1,248,171 | (1,226,017 | ) | -98 | % | ||||||||||
| Digital Transformation Technology | 6,365 | - | 6,365 | 100 | % | |||||||||||
| Other | 123,595 | - | 123,595 | 100 | % | |||||||||||
| Total revenue | $ | 721,905 | $ | 4,795,567 | $ | (4,073,662 | ) | -85 | % | |||||||
Nine Months Ended September 30, | Change | |||||||||||||||
| 2022 | 2021 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 2,494,707 | $ | 12,026,069 | $ | (9,531,362 | ) | -79 | % | |||||||
| Biohealth | 771,847 | 4,919,844 | (4,147,997 | ) | -84 | % | ||||||||||
| Digital Transformation Technology | 14,066 | - | 14,066 | 100 | % | |||||||||||
| Other | 319,862 | - | 319,862 | 100 | % | |||||||||||
| Total revenue | $ | 3,600,482 | $ | 16,945,913 | $ | (13,345,431 | ) | -79 | % | |||||||
Revenue was $2,148,923$721,905 and $5,306,863$4,795,567 for the three months ended September 30, 20202022 and 2019, respectively, reflecting a decrease of $3,157,940 or 60%.2021, respectively. Revenue was $7,179,919$3,600,482 and $16,945,913 for the nine months ended September 30, 2020, compared to $22,944,498 for the nine months ended September 30, 2019, reflecting a2022 and 2021, respectively. The decrease of $15,764,579 or 69%. An increase in property sales from the Ballenger Project and first sale of a section of Black Oak Projectdirect sales from our indirect subsidiary HWH World in the first quarternine months of 20192022 contributed to higherlower revenue in that period. Pursuant to a lot purchase agreement dated July 3, 2018, 150 CCM Black Oak Ltd sold 124 lots locatedthose periods. In the first nine months of 2022 the last three homes in the Company’s Black Oak project to Houston LD, LLC for a total purchase price of $6,175,000 in January 2019. For our Ballenger Project were sold. In this project, builders are required to purchase a minimum number of lots based on their applicable sale agreements. We collect revenue only from the sale of lots to builders. We are not involved in the construction of homes at the present time.
Income from our biohealth segment comes primarilythe sale of Front Foot Benefits (“FFBs”), assessed on Ballenger project lots, decreased from direct sales by iGalen Inc. (formerly known as iGalen USA, LLC), which is 100% owned by iGalen International Inc., 53% of which is owned by Alset International. During$182,813 in the three months ended on September 30, 2020 and 2019,2021 to $9,968 in the revenuethree months ended September 30, 2022. Income from iGalen was $1,331 and $360,351, respectively, reflecting a decreasethe sale of $359,020 or almost 100%. DuringFFBs, decreased from $431,458 in the nine months ended September 30, 20202021 to $126,055 in the nine months ended September 30, 2022. The decrease is a result of the decreased sale of properties to homebuyers in 2022.
In the second quarter of 2021, the Company started renting homes to tenants. Revenue from this rental business was $569,792 and 2019,$133,302 in the three months ended September 30, 2022 and 2021, respectively. Revenue from rental business was $1,206,273 and $155,249 in the nine months ended September 30, 2022 and 2021, respectively. The Company expects that the revenue from iGalen Inc. was $30,533this business will continue to increase as we acquire more rental houses and $1,406,951, respectively, reflecting a decrease of $1,376,418 or 98%. The decrease was mainly due to slow sales of current products and delay of the new product’s promotion.
In October 2019,recent years, the Company expanded its biohealth segment to the Korean market through one of the subsidiaries of Health Wealth Happiness Pte. Ltd., HWH World Inc (“HWH World”). HWH World similarly to iGalen Inc., operates based on a direct sale model of health supplements. HWH World is at the beginning stage of operations recognized only approximately $600$22,154 and $1,248,171 in revenue in three months ended September 30, 2022 and 2021, respectively. HWH World recognized $771,847 and $4,919,844 in revenue in nine months ended September 30, 2020.2022 and 2021, respectively. The decrease in revenue from HWH World is caused mainly by decreased sales of annual memberships, as management is in the process of reorganizing its business model in South Korea.
In June 2022 the Company’s subsidiary GigWorld Inc., operating under our Digital Transformation Technology segment, started providing services to its customer in Hong Kong, who is a related party to the Company, generating revenue of $6,365 and $14,066 in the three and nine months ended September 30, 2022, respectively.
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The category described as “Other” includes corporate and financial services and new venture businesses. "Other"“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 and new venture businesses are small and diversified, and accordingly they are not separately addressed as one independent category. In the ninethree months ended September 30, 20202022 and 2019,2021, the revenue from other businesses was $0$123,595 and $28,350,$0, respectively, generated by fund management services.a Singaporean café shop operated by a subsidiary of the Company. In the threenine months ended September 30, 20202022 and 2019,2021, the revenue from other businesses was $319,862 and $0, and $8,495, respectively.
Operating Expenses
The following tables sets forth period-over-period changes in cost of salesrevenues for each of our reporting segments:
Three Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $1,610,238 | $4,090,759 | $(2,480,521) | (61%) |
| Biohealth | 6,139 | 39,725 | (33,586) | �� (85%) |
| Digital transformation technology | - | - | - | - |
| Other | - | - | - | - |
Total Cost of Sales | $1,616,377 | $4,130,484 | $(2,514,107) | (61%) |
Nine Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $5,603,164 | $18,819,865 | $(13,216,701) | (70%) |
| Biohealth | 6,139 | 357,935 | (351,796) | (98%) |
| Digital transformation technology | - | - | - | - |
| Other | - | - | - | - |
Total cost of sales | $5,609,303 | $19,177,800 | $(13,568,497) | (71%) |
Three Months Ended September 30, | Change | |||||||||||||||
| 2022 | 2021 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 254,972 | $ | 2,166,497 | $ | (1,911,525 | ) | -88 | % | |||||||
| Biohealth | 500,946 | 37,904 | 463,042 | 1,222 | % | |||||||||||
| Digital Transformation Technology | 1,782 | - | 1,782 | 100 | % | |||||||||||
| Other | 55,669 | - | 55,669 | 100 | % | |||||||||||
| Total Cost of Revenues | $ | 813,369 | $ | 2,204,401 | $ | (1,391,032 | ) | -63 | % | |||||||
Nine Months Ended September 30, | Change | |||||||||||||||
| 2022 | 2021 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 1,880,914 | $ | 8,291,698 | $ | (6,410,784 | ) | -77 | % | |||||||
| Biohealth | 512,931 | 218,507 | 294,424 | 135 | % | |||||||||||
| Digital Transformation Technology | 4,574 | - | 4,574 | 100 | % | |||||||||||
| Other | 80,177 | - | 80,177 | 100 | % | |||||||||||
| Total Cost of Revenues | $ | 2,478,596 | $ | 8,510,205 | $ | (6,031,609 | ) | -71 | % | |||||||
Cost of salesrevenues decreased from $4,130,848$2,204,401 in the three months ended September 30, 20192021 to $1,616,377$813,369 in the three months ended September 30, 2020, reflecting a2022. Cost of revenues decreased from 8,510,205 in the nine months ended September 30, 2021 to $2,478,596 in the nine months ended September 30, 2022. The decrease of $2,514,107 or 61%, asis a result of the decrease in sales in the Ballenger Run project. Cost of sales decreased from $19,177,800 in the nine months ended September 30, 2019 to $5,609,303 in the nine months ended September 30, 2020, reflecting a decrease of $13,568,497 or 71%, as a result of the decrease in sales in the Ballenger Runproject and Black Oak projects.HWH World sales. Capitalized construction expenses, finance costs and land costs are allocated to sales. We anticipate the total cost of salesrevenues to increase as revenue increases.
The gross margin decreased from $1,176,379$2,591,166 to $532,546negative $99,165 in the three months ended September 30, 20192021 and 2020, respectively, reflecting a decrease of $643,833 or 55%.2022, respectively. The gross margin decreased from $3,766,698$8,435,708 to $1,570,616$1,121,886 in the nine months ended September 30, 20192021 and 2020, respectively, reflecting a decrease of $2,196,082 or 58%.2022, respectively. The decrease of gross margin was caused by the decrease of gross margin ofin sales in the Ballenger Run project mostly due to the decrease in theand HWH World sales. The gross margin from sale of Black Oak section one lots was approximately $0 after real estate impairment of $1.5 million was recorded in 2018.
The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments.
Three Months Ended September 30, | Change | |||||||||||||||
| 2022 | 2021 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 667,366 | $ | 275,681 | $ | 391,685 | 142 | % | ||||||||
| Biohealth | 311,416 | 1,540,570 | (1,229,154 | ) | -80 | % | ||||||||||
| Digital transformation technology | 95,788 | 104,219 | (8,431 | ) | -8 | % | ||||||||||
| Other | 904,978 | 619,114 | 285,864 | 46 | % | |||||||||||
| Total operating expenses | $ | 1,979,548 | $ | 2,539,584 | $ | (560,036 | ) | -22 | % | |||||||
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Three Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $131,326 | $170,831 | $(39,505) | (23%) |
| Biohealth | 174,283 | 571,591 | (397,308) | (70%) |
| Digital transformation technology | (7,289) | 34,969 | (42,258) | (121%) |
| Other | 499,866 | 672,133 | (172,267) | (26%) |
| Discontinued Operations | 55,897 | 111,105 | (55,208) | (50%) |
| Total operating expenses | $854,083 | $1,560,629 | $(706,860) | (45%) |
Nine Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $634,254 | $4,598,112 | $(3,963,858) | (86%) |
| Biohealth | 388,083 | 1,780,026 | (1,391,943) | (78%) |
| Digital transformation technology | 87,972 | 193,959 | (105,987) | (55%) |
| Other | 3,086,630 | 1,697,423 | 1,389,207 | 82% |
| Discontinued Operations | 416,950 | 358,534 | 58,416 | 16% |
| Total operating expenses | $4,613,889 | $8,628,054 | $(4,014,165) | (47%) |
Nine Months Ended September 30, | Change | |||||||||||||||
| 2022 | 2021 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 1,988,323 | $ | 901,236 | $ | 1,087,087 | 121 | % | ||||||||
| Biohealth | 587,051 | 3,451,152 | (2,864,101 | ) | -83 | % | ||||||||||
| Digital transformation technology | 255,764 | 173,594 | 82,170 | 47 | % | |||||||||||
| Other | 3,669,563 | 8,940,432 | (5,270,869 | ) | -59 | % | ||||||||||
| Total operating expenses | $ | 6,500,701 | $ | 13,466,414 | $ | (6,965,713 | ) | -52 | % | |||||||
The decreaseincrease of operating expenses of property developmentreal estate in 20202022 compared with 20192021 was mostly caused by the recognition of $3.9 million impairmentincrease in the first half of 2019. The decrease of researchsales and development expenserental related expenses. Decrease in biohealth segment because of the discontinued operations was the main reason of decrease of operating expenses in our biohealth segment in 2020 compared with 2019. The increase expense in other segment was mostly duebusiness is caused by the decreased commission payments to the issuance of Alset International’s stock for performance award program at the expense of $1,564,376 in second quarter of 2020.
Other Income (Expense)
In the three months ended September 30, 2020,2022, the Company had other expense of $12,946,960$11,163,538 compared to other incomeexpenses of $1,197,775$8,126,066 in the three months ended September 30, 2019, reflecting an increase in other expense of $14,144,735 or 1,181%.2021. In the nine months ended September 30, 2020,2022, the Company had other expense of $10,203,323$25,546,935 compared to other incomeexpenses of $357,436$87,293,906 in the nine months ended September 30, 2019, reflecting an increase in other expense of $10,560,759 or 2,955%.2021. The change in realized and unrealized gain (loss)loss on securities investmentinvestments and on foreign exchange transactionsfinance costs are the primary reasons for the volatility in these two periods. Unrealized loss on securities investment was $42,169,116 and $43,761,763 during nine and three months ended on September 30, 2020, respectively. Unrealized loss on security investment was $146,470 during the nine months ended on September 30, 2019; unrealized gain on security investment was $507,727 during the three months ended on September 30, 2019. Foreign exchange transaction loss was $415,203$11,006,833 in the three months ended September 30, 2020,2022, compared to $757,068 gain$5,268,531 loss in the three months ended September 30, 2019. Foreign exchange transaction gain2021. Unrealized loss on securities investment was $960,268$21,773,223 in the nine months ended September 30, 2020,2022, compared to $438,608 gain$35,972,445 loss in the nine months ended September 30, 2019.
Net Loss
In the three months ended September 30, 2022 the Company had net loss from Impact BioMedical Inc was $417,438 and $385,219, respectively.
Liquidity and Capital Resources
Our real estate assets have increased to $24,990,366$51,583,814 as of September 30, 20202022 from $23,884,704$40,515,380 as of December 31, 2019.2021. This increase primarily reflects a higher increasethe additional rental properties we purchased in the capitalized costs related to the construction in progress and impairment recorded on the Black Oak project than in the cost of sales. Our cash has increased from $2,774,587 as of December 31, 2019 to $8,754,202 as of September 30, 2020. Our liabilities increased from $13,649,449 at December 31, 2019 to $14,499,650 at September 30, 2020. Our total assets have increased to $101,474,030 as of September 30, 2020 from $35,872,780 as of December 31, 2019 mainly due to the increase in cash and investments in securities.
Our cash has decreased from $56,061,309 as of December 31, 2019 was $0 and $250,000, respectively. The accrued interest was $19,318 and $9,5892021 to $22,605,541 as of September 30, 2020 and2022. Our liabilities decreased from $13,920,357 at December 31, 2019. The principal of $250,000 was paid off in June 2020.
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The management believes that the available cash in bank accounts and $160,000, respectively. The accrued interest was $14,510 and $2,542 as of September 30, 2020 and December 31, 2019, respectively. The expiration date offavorable cash revenue from real estate projects are sufficient to fund our operations for at least the iGalen Loan was extended to November 3, 2021 after 6next 12 months.
Summary of Cash Flows for the Nine Months Ended September 30, 20202022 and 2019
Nine Months Ended September 30, | ||
2020 | 2019 | |
| Net cash provided by (used in) operating activities | $(1,011,440) | $8,964,900 |
| Net cash used in investing activities | $(66,824) | $(36,000) |
Net cash provided by (used in) financing activities | $6,700,886 | $(3,032,489) |
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (28,331,829 | ) | $ | (6,485,979 | ) | ||
| Net cash used in investing activities | $ | (15,031,318 | ) | $ | (28,743,359 | ) | ||
| Net cash provided by financing activities | $ | 5,996,133 | $ | 77,237,040 | ||||
Cash Flows from Operating Activities
Net cash used in operating activities was $1,011,440$28,331,829 in the first nine months of 2020,2022, as compared to net cash provided byused in operating activities of $8,964,900$6,485,979 in the same period of 2019, reflecting an increase2021. The payment of accrued bonus due to director of $3,614,749 contributed to the decrease of cash in operating activities in the cash used of $9,976,340 or 111%. The lower sales and more property development expenses explained the increased cash flow used in operating activities. We received approximately $9.2 million from sales in the Ballenger Run project and invested approximately $2.4 million in land development projects of both Ballenger Run and Black Oak during thefirst nine months ended September 30, 2020.
Cash Flows from Investing Activities
Net cash used in investing activities was $66,824$15,031,318 in the first nine months of 2020,2022, as compared to net cash used in investing activities of $36,000$28,743,359 in the same period of 2019, reflecting an increase of $30,824 or 86%.2021. In the nine months ended September 30, 2020,2022 we invested $8,479,968 in marketable securities, $6,057,493 to purchase real estate properties and $1,082,225 in real estate property improvements. In the nine months ended September 30, 2021 we invested $19,308,318 in marketable securities, $11,081,491 to purchase real estate properties and $327,603 in promissory notes of a related party. At the same time, we received $301,976approximately $2.5 million from the liquidationsale of Global Opportunity Fund. We also invested $200,000 in a promissory note ofVivacitas Oncology to a related party and spent $158,667 on purchase$840,000 from the repayment of investments.
Cash Flows from Financing Activities
Net cash provided by financing activities was $6,700,886$5,996,133 in the nine months ended September 30, 2020, comparing2022, compared to $3,032,489 net cash usedprovided of $77,237,040 in the nine months ended September 30, 2019, reflecting an increase in cash provided of $9,733,375 or 321%. Such2021. The increase in cash provided by financing activities in the first nine months of 2022 is primarily caused by the increase in cash receivedproceeds from stock issuance of $6,213,000. Additionally, the exercise of subsidiary warrants.Company repaid $216,867 to loan payable. During the nine months ended September 30, 2020,2021, we received cash proceeds of $10,764,837$73,157,884 from thestock issuance, $2,975,194 from exercise of subsidiary warrants, $177,300$280,000 from the sale of our HotAppGigWorld shares to individual investors and $738,783$68,502 from a loan. The Company also distributed $197,400$1,398,250 to one minority interest investor and repaid $4,450,572 of promissory note held byborrowed $5,545,195 from related parties and $250,000 held by third party. During the nine months ended September 30, 2019, we received cash proceeds of $229,500 from the sale of our HotApp sharesparties.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to individual investors, distributed $740,250 to one minority interest investor, repaid the remaining $13,899 back to the Union Bank loan and repaid approximately $2.5 million of related party loans.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the nine months ended September 30, 20202022 or the year ended December 31, 2019.2021. 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. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
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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 our corporate entities in Singapore to the ones in the United States and which were approximately $36.2$43 million and $41.1$43 million on September 30, 20202022 and December 31, 2019,2021, 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 Income.Loss. Because the intercompany loan balances between our companies in Singapore and United States will remain at approximately $40$43 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2020,2022, 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.
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. QuantitativeQuantitative 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. ControlsControls 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 OfficerOfficers 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 OfficerOfficers and Chief Financial Officers, concluded that our disclosure controls and procedures are not effective as of September 30, 20202022 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 OfficerOfficers 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 September 30, 20202022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Not Applicable for the period covered by this report.
Not applicable to smaller reporting companies.
On January 17, 2022 the Company entered into a securities purchase agreement with Chan Heng Fai, the Company’s Chairman, Chief Executive Officer and largest stockholder, pursuant to which the Company agreed to purchase from Chan Heng Fai 293,428,200 ordinary shares of Alset International for a purchase price of 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 agreed to 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 was subject to the approval of the Nasdaq and the Company’s stockholders. These 293,428,200 ordinary shares of Alset International represent approximately 8.4% of the total issued and outstanding shares of Alset International.
On June 6, 2022, the Company held a Special Meeting of Stockholders (the “Special Meeting”). At the Special Meeting, the stockholders approved the issuance of 35,319,290 newly issued shares of the Company’s common stock in connection with the purchase of 293,428,200 ordinary shares of Alset International Limited in accordance with NASDAQ Listing Rule 5635(a). The transaction was completed on July 18, 2022. In connection with the issuance of these securities, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.
Item 3.
None.
Not Applicable.
Item 5.
Effective as of February 15, 2022, the Company appointed Anthony S. Chan as the Chief Operating Officer of the Company. Mr. Chan has served as a consultant to the Company since April of 2021. Mr. Chan has continued to be compensated pursuant to the terms of a consulting agreement entered into between the Company and CA Global Consulting Inc., pursuant to which the Company initially paid Anthony S. Chan’s consulting company $12,000 per month. This monthly payment was increased to $15,000 per month in May of 2022 pursuant to an addendum to the consulting agreement between the Company and CA Global Consulting Inc., dated as of May 6, 2022.
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The following documents are filed as a part of this report:
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| November 14, 2022 | By: | ||
| /s/ Chan Heng Fai | |||
Chan Heng Fai Chairman of the Board and Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| By: | /s/ Chan Tung Moe | ||
| Chan Tung Moe | |||
| Co-Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| November 14, 2022 | By: | /s/ Rongguo Wei | |
Rongguo Wei Co-Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) | |||
| By: | /s/ Lui Wai Leung Alan | ||
Lui Wai Leung Alan Co-Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) |
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