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 SeptemberJune 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,August 14, 2023, there were
Table of Contents
| F-1 | |
| F-1 | |
| F-2 | |
| F-3 | |
F-5 – F-36 | |
| 2 |
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 |
| June 30, 2023 | December 31, 2022 | |||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 28,827,961 | $ | 17,827,383 | ||||
| Restricted Cash | 664,174 | 694,520 | ||||||
| Account Receivables, Net | 63,778 | 46,522 | ||||||
| Other Receivables | 7,951,914 | 446,798 | ||||||
| Note Receivables - Related Parties | 2,857,383 | 3,617,176 | ||||||
| Prepaid Expense | 237,772 | 188,070 | ||||||
| Inventory | 38,015 | 35,020 | ||||||
| Investment in Securities at Fair Value | 6,695,823 | 6,288,236 | ||||||
| Investment in Securities at Fair Value - Related Party | 24,804,737 | 13,193,089 | ||||||
| Investment in Securities at Cost | 99,802 | 98,129 | ||||||
| Investment in Securities at Equity Method | 32,202,734 | 52,987,224 | ||||||
| Total Current Assets | 104,444,093 | 95,422,167 | ||||||
| Real Estate | ||||||||
| Rental Properties | 31,388,691 | 31,169,031 | ||||||
| Properties under Development | 8,056,513 | 23,449,698 | ||||||
| Operating Lease Right-Of-Use Assets, net | 1,805,482 | 1,614,159 | ||||||
| Deposits | 422,313 | 536,947 | ||||||
| Cash and Marketable Securities Held in Trust Account | 20,831,983 | - | ||||||
| Goodwill | 274,234 | - | ||||||
| Property and Equipment, Net | 1,218,502 | 1,298,334 | ||||||
| Total Assets | $ | 168,441,811 | $ | 153,490,336 | ||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | 6,131,700 | $ | 2,983,470 | ||||
| Deferred Revenue | 2,100 | 21,198 | ||||||
| Operating Lease Liabilities - current | 186,380 | 45,556 | ||||||
| Notes Payable | 167,898 | 181,846 | ||||||
| Notes Payable - Related Parties | 16,481 | 12,668 | ||||||
| Total Current Liabilities | 6,504,559 | 3,244,738 | ||||||
| Long-Term Liabilities: | ||||||||
| Operating Lease Liabilities - noncurrent | 1,647,909 | 1,582,483 | ||||||
| Total Liabilities | 8,152,468 | 4,827,221 | ||||||
| Temporary Equity | ||||||||
| Class A Common Stock of Alset Capital Acquisition Corp subject to possible redemption; shares at approximately $ per share as of June 30, 2023 | 19,416,835 | - | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, $ par value; shares authorized, issued and outstanding | - | - | ||||||
| Common Stock, $ par value; shares authorized; and shares issued and outstanding on June 30, 2023 and December 31, 2022, respectively* | 9,235 | 7,423 | ||||||
| Additional Paid in Capital | 325,967,000 | 322,534,891 | ||||||
| Accumulated Deficit | (198,390,147 | ) | (188,724,411 | ) | ||||
| Accumulated Other Comprehensive Income | 2,923,279 | 3,836,063 | ||||||
| Total Alset Inc. Stockholders’ Equity | 130,509,367 | 137,653,966 | ||||||
| Non-controlling Interests | 10,363,141 | 11,009,149 | ||||||
| Total Stockholders’ Equity | 140,872,508 | 148,663,115 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 168,441,811 | $ | 153,490,336 | ||||
| * | The numbers of outstanding common stock were adjusted retrospectively to reflect 20-for-1 reverse stock split on December 28, 2022 |
See accompanying notes to condensed consolidated financial statements.
| F-1 |
Alset Inc.
Consolidated Statements of OperationsOperations and Other Comprehensive Loss
For the Three and NineSix Months Ended SeptemberJune 30, 20202023 and 2019
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 |
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three- Months Ended June 30, | Six- Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental | $ | 690,967 | $ | 403,900 | $ | 1,324,778 | $ | 636,482 | ||||||||
| Property | 18,190,950 | 246,910 | 18,190,950 | 1,288,434 | ||||||||||||
| Biohealth | - | 132,222 | 12,786 | 749,693 | ||||||||||||
| Digital Transformation Technology – related party | 14,034 | 7,701 | 28,074 | 7,701 | ||||||||||||
| Other | 257,897 | 135607 | 524,196 | 196,267 | ||||||||||||
| Total Revenue | 19,153,848 | 926,340 | 20,080,784 | 2,878,577 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Cost of Sales | 11,738,493 | 550,677 | 12,427,774 | 1,665,227 | ||||||||||||
| General and Administrative | 2,305,859 | 2,029,925 | 4,633,244 | 4,521,153 | ||||||||||||
| Total Operating Expenses | 14,044,352 | 2,580,602 | 17,061,018 | 6,186,380 | ||||||||||||
| Income (Loss) from Operations | 5,109,496 | (1,654,262 | ) | 3,019,766 | (3,307,803 | ) | ||||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest Income | 92,388 | 196,639 | 131,666 | 369,039 | ||||||||||||
| Foreign Exchange Transaction Gain | 1,150,830 | 2,077,709 | 362,528 | 2,485,804 | ||||||||||||
| Unrealized Gain (Loss) on Securities Investment | 9,027,846 | (407,407 | ) | 6,543,729 | (1,230,648 | ) | ||||||||||
| Unrealized Gain (Loss) on Securities Investment - Related Party | 9,812,880 | (6,459,968 | ) | 11,109,151 | (9,535,742 | ) | ||||||||||
| Realized Loss on Securities Investment | (10,557,229 | ) | (2,918,668 | ) | (10,688,542 | ) | (6,355,451 | ) | ||||||||
| Gain (Loss) on Investment on Security by Equity Method | 219,888 | (79,670 | ) | (48,388 | ) | (216,050 | ) | |||||||||
| Loss on Consolidation of Alset Capital Acquisition Corp. | (21,657,036 | ) | - | (21,657,036 | ) | - | ||||||||||
| Finance Costs | - | (2,879 | ) | - | (450,887 | ) | ||||||||||
| Other Income (Expense) | 987,531 | (734,355 | ) | 1,090,538 | 550,538 | |||||||||||
| Total Other Expense, Net | (10,922,902 | ) | (8,328,599 | ) | (13,156,354 | ) | (14,383,397 | ) | ||||||||
| Net Loss Before Income Taxes | (5,813,406 | ) | (9,982,861 | ) | (10,136,588 | ) | (17,691,200 | ) | ||||||||
| Income Tax Expense | - | - | - | (222,114 | ) | |||||||||||
| Net Loss | (5,813,406 | ) | (9,982,861 | ) | (10,136,588 | ) | (17,913,314 | ) | ||||||||
| Net Loss Attributable to Non-Controlling Interest | (5,556 | ) | (995,502 | ) | (470,852 | ) | (2,458,669 | ) | ||||||||
| Net Loss Attributable to Common Stockholders | $ | (5,807,850 | ) | $ | (8,987,359 | ) | $ | (9,665,736 | ) | $ | (15,454,645 | ) | ||||
| Other Comprehensive Loss, Net | ||||||||||||||||
| Unrealized Loss on Securities Investment | - | (591 | ) | - | (9,714 | ) | ||||||||||
| Foreign Currency Translation Adjustment | (2,183,883 | ) | (3,514,595 | ) | (1,087,940 | ) | (4,163,735 | ) | ||||||||
| Comprehensive Loss | (7,997,289 | ) | (13,498,047 | ) | (11,224,528 | ) | (22,086,763 | ) | ||||||||
| Comprehensive Loss Attributable to Non-controlling Interests | (320,903 | ) | (2,286,174 | ) | (626,520 | ) | (3,371,569 | ) | ||||||||
| Comprehensive Loss Attributable to Common Stockholders | $ | (7,676,386 | ) | $ | (11,211,873 | ) | $ | (10,598,008 | ) | $ | (18,715,194 | ) | ||||
| Net Loss Per Share - Basic and Diluted | $ | (0.63 | ) | $ | (1.46 | ) | $ | (1.09 | ) | $ | (2.77 | ) | ||||
| Net Loss Per Share - Basic | $ | (0.63 | ) | $ | (1.46 | ) | $ | (1.09 | ) | $ | (2.77 | ) | ||||
| Weighted Average Common Shares Outstanding - Basic and Diluted | 9,235,119 | 6,144,550 | * | 8,845,250 | 5,586,433 | * | ||||||||||
| Weighted Average Common Shares Outstanding - Basic | 9,235,119 | 6,144,550 | * | 8,845,250 | 5,586,433 | * | ||||||||||
| * | The numbers of weighted average outstanding common stock - basic and diluted were adjusted retrospectively to reflect 20-for-1 reverse stock split on December 28, 2022 |
See accompanying notes to condensed consolidated financial statements.
| F-2 |
Alset Inc.
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 | ||
Consolidated Statements of Stockholders’ Equity
For the NineSix Months Ended SeptemberJune 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 | ||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total Alset | Non- | Total | |||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Paid in Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Controlling Interests | Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | - | $ | - | - | $ | - | 7,422,846 | $ | 7,423 | $ | 322,534,891 | $ | 3,836,063 | $ | (188,724,411 | ) | $ | 137,653,966 | $ | 11,009,149 | $ | 148,663,115 | ||||||||||||||||||||||||||
| Issuance of Common Stock | 1,812,273 | 1,812 | 3,432,109 | - | - | 3,433,921 | - | 3,433,921 | ||||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | 936,265 | - | 936,265 | 159,678 | 1,095,943 | ||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | (3,857,886 | ) | (3,857,886 | ) | (465,296 | ) | (4,323,182 | ) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | - | $ | - | - | $ | - | 9,235,119 | $ | 9,235 | $ | 325,967,000 | $ | 4,772,328 | $ | (192,582,297 | ) | $ | 138,166,266 | $ | 10,703,531 | $ | 148,869,797 | ||||||||||||||||||||||||||
| Foreign Currency Translations | - | $ | - | $ | - | (1,849,049 | ) | - | (1,849,049 | ) | (334,834 | ) | (2,183,883 | ) | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | $ | - | $ | - | - | (5,807,850 | ) | (5,807,850 | ) | (5,556 | ) | (5,813,406 | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | - | $ | - | - | $ | - | 9,235,119 | 9,235 | 325,967,000 | 2,923,279 | (198,390,147 | ) | 130,509,367 | 10,363,141 | $ | 140,872,508 | ||||||||||||||||||||||||||||||||
Alset Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Six Months Ended June 30, 2022
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total Alset | Non- | Total | |||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Shares | Par Value $0.001 | Paid in Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Controlling Interests | 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 Stock DSS | - | - | 737,572 | - | - | 737,572 | - | 737,572 | ||||||||||||||||||||||||||||||||||||||||
| Beneficial Conversion Feature Intrinsic Value, Net | - | - | 450,000 | - | - | 450,000 | - | 450,000 | ||||||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | - | (316,459 | ) | 459,069 | - | 142,610 | (142,610 | ) | - | ||||||||||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | (7,027 | ) | - | (7,027 | ) | (2,096 | ) | (9,123 | ) | ||||||||||||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | (499,967 | ) | - | (499,967 | ) | (149,173 | ) | (649,140 | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | (6,467,286 | ) | (6,467,286 | ) | (1,463,167 | ) | (7,930,453 | ) | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | - | $ | - | - | $ | - | 113,187,898 | $ | 113,188 | $ | 320,404,965 | $ | 293,721 | $ | (154,700,759 | ) | $ | 166,111,115 | $ | 22,382,966 | $ | 188,494,081 | ||||||||||||||||||||||||||
| Balance | - | $ | - | - | $ | - | 113,187,898 | $ | 113,188 | $ | 320,404,965 | $ | 293,721 | $ | (154,700,759 | ) | $ | 166,111,115 | $ | 22,382,966 | $ | 188,494,081 | ||||||||||||||||||||||||||
| 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 Interest | - | �� | - | 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 | ||||||||||||||||||||||||||
| Balance | - | $ | - | - | $ | - | 148,507,188 | $ | 148,507 | $ | 322,302,515 | $ | 558,045 | $ | (163,688,118 | ) | $ | 159,320,949 | $ | 12,844,123 | $ | 172,165,072 | ||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| F-3 |
Alset Inc. and Subsidiaries
Consolidated Statements of CashCash Flows
For the NineSix Months Ended SeptemberJune 30, 20202023 and 2019
(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 | $- |
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss from Operations | $ | (10,136,588 | ) | $ | (17,913,314 | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: | ||||||||
| Depreciation | 606,434 | 349,403 | ||||||
| Amortization of Right-Of-Use Assets | 523,591 | 180,092 | ||||||
| Amortization of Debt Discount | - | 450,000 | ||||||
| Loss on Consolidation of Alset Capital Acquisition Corp. | 21,657,036 | - | ||||||
| Foreign Exchange Transaction Gain | (362,528 | ) | (2,485,804 | ) | ||||
| Unrealized (Gain) Loss on Securities Investment | (6,543,729 | ) | 1,230,648 | |||||
| Unrealized (Gain) Loss on Securities Investment - Related Party | (11,109,151 | ) | 9,535,742 | |||||
| Realized Loss on Securities Investment | 10,688,542 | 6,355,451 | ||||||
| (Gain) Loss on Exchange of Investment Securities | (502,497 | ) | 852,061 | |||||
| PPP Loan Forgiveness | - | (68,502 | ) | |||||
| Director Compensation Adjustment | - | (1,185,251 | ) | |||||
| Loss on Equity Method Investment | 48,388 | 216,050 | ||||||
| Changes in Operating Assets and Liabilities, net of acquisitions | ||||||||
| Real Estate | 15,393,185 | (2,274,959 | ) | |||||
| Account Receivables | (7,280,286 | ) | (160,327 | ) | ||||
| Prepaid Expense | (11,664 | ) | 515,568 | |||||
| Deposits | 2,935 | - | ||||||
| Trading Securities | (4,593,961 | ) | 1,072,263 | |||||
| Inventory | (3,889 | ) | 7,470 | |||||
| Accounts Payable and Accrued Expenses | (364,372 | ) | (9,398,591 | ) | ||||
| Other Receivables - Related Parties | (55,000 | ) | (2,551,127 | ) | ||||
| Deferred Revenue | (19,098 | ) | (638,463 | ) | ||||
| Operating Lease Liabilities | (527,578 | ) | (182,661 | ) | ||||
| Builder Deposits | - | (31,553 | ) | |||||
| Net Cash Provided by (Used in) Operating Activities | 7,409,770 | (16,125,804 | ) | |||||
| Cash Flows from Investing Activities | ||||||||
| Loan Receivable - Related Party | - | (111,112 | ) | |||||
| Purchase of Fixed Assets | (11,726 | ) | (210,319 | ) | ||||
| Purchase of Real Estate Properties | - | (722,817 | ) | |||||
| Real Estate Improvements | (734,688 | ) | (602,161 | ) | ||||
| Purchase of Investment Securities | (692,219 | ) | (6,662,017 | ) | ||||
| Acquisition of Subsidiary | (214,993 | ) | - | |||||
| Issuing Loan Receivable - Related Party | (1,628,010 | ) | - | |||||
| Proceeds from Loan Receivable - Related Party | 2,674,653 | - | ||||||
| Net Cash Used in Investing Activities | (606,983 | ) | (8,308,426 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Common Stock Issuance | 3,433,921 | 6,213,000 | ||||||
| Repayment to Notes Payable | (16,950 | ) | (171,861 | ) | ||||
| Net Cash Provided by Financing Activities | 3,416,971 | 6,041,139 | ||||||
| Net Increase (Decrease) in Cash and Restricted Cash | 10,219,758 | (18,393,091 | ) | |||||
| Effects of Foreign Exchange Rates on Cash | 750,474 | (412,821 | ) | |||||
| Cash and Restricted Cash - Beginning of Year | 18,521,903 | 60,802,179 | ||||||
| Cash and Restricted Cash- End of Period | $ | 29,492,135 | $ | 41,996,267 | ||||
| Cash | $ | 28,827,961 | $ | 41,326,946 | ||||
| Restricted Cash | $ | 664,174 | $ | 669,321 | ||||
| Total Cash and Restricted Cash | $ | 29,492,135 | $ | 41,996,267 | ||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | 2,007 | $ | 1,524 | ||||
| Cash Paid for Taxes | $ | - | $ | - | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Unrealized Gain on Investment | $ | - | $ | 727,858 | ||||
| Initial Recognition of ROU / Lease Liability | $ | 157,647 | $ | - | ||||
| Deconsolidate Alset Capital Acquisition | $ | - | $ | 16,557,582 | ||||
| Intrinsic Value of BCF | $ | - | $ | (450,000 | ) | |||
| Issuance of Stock by Exercising Warrants | $ | - | $ | 3,895 | ||||
See accompanying notes to condensed consolidated financial statements.
| F-4 |
| |
Alset Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
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 1,000 shares of common stock2018. On October 4, 2022, through a merger transaction, the Company was issued to Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company. HFEreincorporated 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 principalWe manage a significant portion of our businesses primarily through itsour 85.4% owned subsidiary, Alset International Limited (“Alset International”, f.k.a. Singapore eDevelopment Limited)), a public company publicly traded on the Singapore Stock Exchange.
The Company has four operating segments based on the products and services 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, 20202023 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 as2022 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-5 |
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
| Name of subsidiary | State or other jurisdiction of | Attributable interest as of, | ||||||||
consolidated under AEI | incorporation or organization | June 30, 2023 | December 31, 2022 | |||||||
| % | % | |||||||||
| 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 | 85.4 | |||||||
| Singapore Construction & Development Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Art eStudio Pte. Ltd. | Singapore | 43.6 | * | 43.6 | * | |||||
| Singapore Construction Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Global BioMedical Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Alset Innovation Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Health Wealth Happiness Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| SeD Capital Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| LiquidValue Asset Management Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Alset Solar Limited | Hong Kong | 85.4 | 85.4 | |||||||
| Alset F&B One Pte. Ltd | Singapore | 76.9 | 76.9 | |||||||
| Global TechFund of Fund Pte. Ltd. | Singapore | - | 100 | |||||||
| Singapore eChainLogistic Pte. Ltd. | Singapore | - | 100 | |||||||
| BMI Capital Partners International Limited. | Hong Kong | 85.4 | 85.4 | |||||||
| SeD Perth Pty. Ltd. | Australia | 85.4 | 85.4 | |||||||
| SeD Intelligent Home Inc. | United States of America | 85.4 | 85.4 | |||||||
| LiquidValue Development Inc. | United States of America | 85.4 | 85.4 | |||||||
| Alset EHome Inc. | United States of America | 85.4 | 85.4 | |||||||
| SeD USA, LLC | United States of America | 85.4 | 85.4 | |||||||
| 150 Black Oak GP, Inc. | United States of America | 85.4 | 85.4 | |||||||
| SeD Development USA Inc. | United States of America | 85.4 | 85.4 | |||||||
| 150 CCM Black Oak, Ltd. | United States of America | 85.4 | 85.4 | |||||||
| SeD Texas Home, LLC | United States of America | 100 | 85.4 | |||||||
| SeD Ballenger, LLC | United States of America | 85.4 | 85.4 | |||||||
| SeD Maryland Development, LLC | United States of America | 71.4 | 71.4 | |||||||
| SeD Development Management, LLC | United States of America | 72.6 | 72.6 | |||||||
| SeD Builder, LLC | United States of America | 85.4 | 85.4 | |||||||
| Hapi Metaverse Inc. (f.k.a. GigWorld Inc.) | United States of America | 99.7 | 99.7 | |||||||
| HotApp BlockChain Pte. Ltd. | Singapore | 99.7 | 99.7 | |||||||
| HotApp International Limited | Hong Kong | 99.7 | 99.7 | |||||||
| HWH International, Inc. (Delaware) | United States of America | 85.4 | 85.4 | |||||||
| Health Wealth & Happiness Inc. | United States of America | 85.4 | 85.4 | |||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 85.4 | 85.4 | |||||||
| SeD REIT Inc. | United States of America | 85.4 | 85.4 | |||||||
| Gig Stablecoin Inc. | United States of America | 99.7 | 99.7 | |||||||
| HWH World Inc. (Delaware) | United States of America | 99.7 | 99.7 | |||||||
| HWH World Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| UBeauty Limited | Hong Kong | 85.4 | 85.4 | |||||||
| WeBeauty Korea Inc | Korea | 85.4 | 85.4 | |||||||
| HWH World Limited | Hong Kong | 85.4 | 85.4 | |||||||
| HWH World Inc. | Korea | 85.4 | 85.4 | |||||||
| GDC REIT Inc. | United States of America | 85.4 | 85.4 | |||||||
| F-6 |
| Name of subsidiary | State or other jurisdiction of | Attributable interest as of, | ||||||||
| consolidated under AEI | incorporation or organization | June 30, 2023 | December 31, 2022 | |||||||
| BioHealth Water Inc. | United States of America | 85.4 | 85.4 | |||||||
| Impact BioHealth Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| American Home REIT Inc. | United States of America | 100 | 85.4 | |||||||
| Alset Solar Inc. | United States of America | 68.3 | 68.3 | |||||||
| HWH KOR Inc. | United States of America | 85.4 | 85.4 | |||||||
| Open House Inc. | United States of America | - | 100 | |||||||
| Open Rental Inc. | United States of America | - | 100 | |||||||
| Hapi Cafe Inc. (Nevada) | United States of America | - | 100 | |||||||
| Global Solar REIT Inc. | United States of America | - | 100 | |||||||
| Alset EV Inc. (f.k.a. OpenBiz Inc.) | United States of America | 100 | 100 | |||||||
| Hapi Cafe Inc. (Texas) | United States of America | 85.4 | 85.4 | |||||||
| HWH (S) Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| LiquidValue Development Pte. Ltd. | Singapore | 100 | 100 | |||||||
| LiquidValue Development Limited | Hong Kong | 100 | 100 | |||||||
| EPowerTech Inc. | United States of America | - | 100 | |||||||
| Alset EPower Inc. | United States of America | - | 100 | |||||||
| AHR Asset Management Inc. | United States of America | 85.4 | 85.4 | |||||||
| HWH World Inc. (Nevada) | United States of America | 85.4 | 85.4 | |||||||
| Alset F&B Holdings Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Credas Capital Pte. Ltd. | Singapore | 42.7 | * | 42.7 | * | |||||
| Credas Capital GmbH | Switzerland | 42.7 | * | 42.7 | * | |||||
| Smart Reward Express Limited | Hong Kong | 49.8 | * | 49.8 | * | |||||
| AHR Texas Two LLC | United States of America | 100 | 85.4 | |||||||
| AHR Black Oak One LLC | United States of America | 85.4 | 85.4 | |||||||
| Hapi Air Inc. | United States of America | 92.7 | 92.7 | |||||||
| AHR Texas Three, LLC | United States of America | 100 | 85.4 | |||||||
| Alset Capital Pte. Ltd. | Singapore | - | 100 | |||||||
| Hapi Cafe Korea, Inc. | Korea | 85.4 | 85.4 | |||||||
| Green Energy REIT Inc. | United States of America | - | 100 | |||||||
| Green Energy Management Inc. | United States of America | - | 100 | |||||||
| Alset Metaverse Inc. | United States of America | 97.2 | 97.2 | |||||||
| Alset Management Group Inc. | United States of America | 83.4 | 83.4 | |||||||
| Alset Acquisition Sponsor, LLC | United States of America | 93.4 | 93.4 | |||||||
| Alset Spac Group Inc. | United States of America | 93.4 | 93.4 | |||||||
| Alset Mining Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Hapi Travel Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Hapi WealthBuilder Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| HWH Marketplace Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| HWH International Inc. (Nevada) | United States of America | 85.4 | 85.4 | |||||||
| Hapi Cafe SG Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Alset Reits Inc. | United States of America | 100 | 100 | |||||||
| Robotic gHome Inc. | United States of America | 76.9 | 76.9 | |||||||
| HWH Merger Sub, Inc. | United States of America | 85.4 | 85.4 | |||||||
| Alset Home REIT Inc. | United States of America | 100 | 100 | |||||||
| Hapi Metaverse Inc. (Texas) | United States of America | 99.7 | 99.7 | |||||||
| Hapi Café Limited | Hong Kong | 99.7 | 99.7 | |||||||
| MOC HK Limited | Hong Kong | 99.7 | 99.7 | |||||||
| AHR Texas Four, LLC | United States of America | 100 | 100 | |||||||
| Alset F&B (PLQ) Pte. Ltd. | Singapore | 85.4 | 85.4 | |||||||
| Hapi Café Sdn. Bhd. | Malaysia | 51.3 | - | |||||||
| Shenzhen Leyouyou Catering Management Co., Ltd. | China | 100 | 100 | |||||||
| Dongguan Leyouyou Catering Management Co., Ltd. | China | 100 | - | |||||||
| Guangzho Leyouyou Catering Management Co., Ltd. | China | 100 | - | |||||||
| Hapi Travel Ltd. | Hong Kong | 100 | - | |||||||
| Alset Capital Acquisition Corp. | United States of America | 57.1 | - | |||||||
| * | 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-7 |
| 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.
When the Company purchases properties but does not receive the assessment information from the county, the Company allocates the values between land and building based on the data of similar properties. The Company makes appropriate adjustments once the assessment from the county is received. At the same time, any necessary adjustments to depreciation expense are made in the income statement. On June 30, 2023 and December 31, 2022, the Company adjusted $951,349 and $4,791,997 between building and land, respectively. During the three months ended June 30, 2023 and 2022, the Company adjusted depreciation expenses of $17,525 and $0, respectively. During the six months ended June 30, 2023 and 2022, the Company adjusted depreciation expenses of $17,525 and $0, respectively.
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 SeptemberJune 30, 20202023 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 SeptemberJune 30, 20202023 and December 31, 2019,2022, the total balance of these two accounts was $4,106,497$309,372 and $4,229,149,$309,219, respectively.
As a condition to the loan agreement with National Australian Bank Limited in conjunction with the Perth project, an Australian real estate development project, the Company iswas required to maintain Australian Dollar 50,000, in a non-interest-bearing account. As of 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.
| F-8 |
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 on Septemberequity investment. As of June 30, 20202023 and December 31, 2019,2022, the cash balance in these brokerage accounts was $354,802 and $385,304, respectively.
Investments held in Trust Account
At June 30, 2023 the Company is required to deposit 10% revenue from the direct sales to a non-interest-bearing GPG reserve account with a maximum amount of $200,000. The Company is allowed to temporarily use the moneyhad approximately $20.8 million, in this deposit account upon request and pay back on a short-term basis. As of both, September 30, 2020 and December 31, 2019, the balanceinvestments in treasury securities held in the reserve account was $93,067.Trust Account. The fund will not be fully refundedfunds in the Trust Account are subject to the Company until the service agreement with GPG terminates.
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 June 30, 2023 and December 31, 2022, the balance of account receivables was $63,778 and $46,522, respectively.
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 SeptemberJune 30, 20202023 and December 31, 2019,2022, the allowance was $0.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. As of SeptemberJune 30, 20202023 and December 31, 2019,2022, inventory consisted of finished goods from iGalen IncHWH International Inc. and HWH World Inc.its subsidiaries. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventories to net realizable value.
Investment Securities
Investment Securities at Fair Value
The Company 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.
Since 2021, the Company’s subsidiaries have maintained a portfolio of trading securities. The objective is to generate profits on short-term differences in market prices. The Company does not have significant influence over any trading securities in our portfolio and fair value of these trading securities are determined by reference to quoted stock prices.
| F-9 |
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”), AlsetNew Electric CV Corporation (“NECV” formerly known as “American Premium Mining Corporation” (“APM”)), Value Exchange International Inc. (“Value Exchange International” or “VEII”) and American Premium Water CorpSharing Services Global Corp. (“APW”SHRG”) are publicly traded companies and fair value is determined by quoted stock prices. The Company has significant influence but does not have a controlling interest in these investments, and therefore, the Company’s investment could be accounted for under the equity method of accounting or elect fair value accounting.
| ● | The Company has significant influence over DSS. As of June 30, 2023 and December 31, 2022, the Company owned approximately 44.8% 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 NECV as the Company is the beneficial owner of approximately 0.5% of the common shares of NECV and one officer from the Company held a director position on NECV’s Board of Directors until April of 2023. Additionally, our CEO is a significant stockholder of NECV shares. | |
| ● | The Company has significant influence over Value Exchange International as the Company is the beneficial owner of approximately 38.3% of the common shares of VEII. Mr. Chan and another member of the Board of Directors of Hapi Metaverse, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of the Board of Directors of Alset Inc. are also members of the Board of Directors of VEII (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). | |
| ● | The Company has significant influence over SHRG as the Company is the beneficial owner of approximately 33.4% of the common shares of SHRG, our CEO holds a director position on SHRG’s Board of Directors and one of the officers of the Company is the CFO of SHRG. Additionally, our CEO is a significant stockholder of SHRG shares. |
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 SeptemberJune 30, 2020,2023 and December 31, 2022, 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 the common stock of DSS and 46,868 shares of preferred stock, which could covert 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 Directors of DSS. Chan Tung Moe, the son 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 primarily in the U.S. 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 $307,944 from the Global Opportunity Fund. These monies were received on January 23, 2020.
Investment Securities at Cost
Investments in equity holding in Vivacitas Oncology Inc. (“Vivacitas”), a private company that is currently not listed on an exchange. Vivacitas was acquired after the adoption of ASU 2016-01. The Company applied ASC 321, Investments – Equity Securities, and elected the measurement alternative for equity investments that do not havesecurities without readily determinable fair values and do not qualify for the practical expedient in ASC 820 to estimate fair value using the NAV per share. Under the alternative, we measure Vivacitasare measured at cost less anyminus impairment plus or minus changes resulting fromadjusted by observable price changes in orderly transactions for anthe identical or a similar investment of the same issuer.
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.
| F-10 |
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.
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 June 30, 2023, 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 loanDSS, of which we own 44.8% and have significant influence over, owns 80.8% of AMRE. Therefore, the Company has significant influence on AMRE.
American Pacific Bancorp, Inc.
Pursuant to AMRE (For further details on this transaction, refer to Note 8, Related Party Transactions)Securities Purchase Agreement from March 12, 2021 the Company purchased 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 balance sheet,September 8, 2021 APB sold shares Series A Common Stock to DSS, Inc. for $40,000,200 cash. As a result of the prorate loss from AMREnew share issuances, the Company’s ownership percentage of APB fell below 50% to 41.3%, and subsequently to 36.9% and the entity was recorded as a liability, accumulated losses ondeconsolidated in accordance with ASC 810-10. Upon deconsolidation the Company elected to apply the equity method investment.accounting as the Company still retained significant influence. As a result of the deconsolidation, the Company recognized gain of approximately $28.2 million. The gain represents the difference between the fair value of retained equity method investment of $30.8 million and the investment percentage of carrying amount of APB’s net assets of $2.9 million. Considering the transaction was between related parties, the Company recorded the gain as additional paid in capital in its equity. During three and six months ended SeptemberJune 30, 2020 and 2019,2023 the investment losses from AMRE were $52,392gain was $136,751 and $0, respectively. During nine$119,002, respectively, and during three and six months ended SeptemberJune 30, 2020 and 2019,2022 the investment losses from AMRE were $193,132gain was $18,678 and $0,$160,021, respectively. As of SeptemberJune 30, 2020,2023 and December 31, 2019,2022, the accumulated losses on equity method investment were $231,418in APB was $31,787,248 and $0,$31,668,246, respectively.
| F-11 |
Ketomei Pte Ltd
On June 10, 2021 the Company’s indirect subsidiary Hapi Cafe Inc. (“BioLife’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 six months ended June 30, 2023 and 2022 the investment loss was $10,446 and $63,645, aand $29,786 and $33,059, respectively. Investment in Ketomei was $143,757 and $207,402 at June 30, 2023 and December 31, 2022, respectively.
Sentinel Brokers Company Inc.
On May 22, 2023 the Company’s indirect subsidiary, consolidated under Alset InternationalSeD Capital Pte Ltd (“SeD Capital”), entered into a joint venture agreement on April 25, 2018 with Quality Ingredients, LLC (“QI”Stock Purchase Agreement, pursuant to which SeD Capital purchased shares (19.9%). The agreement created an entity called Sweet Sense, of the Common Stock of Sentinel Brokers Company Inc. (“Sweet Sense”Sentinel”) which is 50% owned by BioLife and 50% owned by QI. Management believes its 50% investment represents significant influence over Sweet Sense and accounts for the investment underaggregate purchase price of $279,719. Sentinel is a broker-dealer operating primarily as a fiduciary intermediary, facilitating institutional trading of municipal and corporate bonds as well as preferred stock, and is registered with the equity method of accounting.
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 promoting environmentally friendly, healthy plant-based burgersdebt securities are recognized in the Asiannet 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 (“SHRG Convertible Note”), a company quoted on the US OTC market. VeganBurg InternationalThe value of the convertible note was 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 June 30, 2023 and December 31, 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.
The Company evaluates its interests in VIEs on an ongoing basis and consolidates any VIE in which it has no operations till September 30, 2020a controlling financial interest and $2,194 was recorded as investment in Securities at equity method on balance sheet on September 30, 2020.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.
| F-12 |
Real Estate Assets
Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805 - “Business Combinations”, which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold.
The Company capitalized interestconstruction costs of approximately $6.3 million and finance expenses from third-party borrowings of $0 and $43,020$2.6 million for the three months ended SeptemberJune 30, 20202023 and 2019,2022, respectively. The Company capitalized construction costs of $2,763,068approximately $8.8 million and $1,464,998$3 million for the threesix months ended SeptemberJune 30, 20202023 and 2019,2022, respectively. The Company capitalized interest and finance expenses from third-party borrowings of $0 and $514,985 for the nine months ended September 30, 2020 and 2019, 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.Australia, which was completed during the year 2022. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant and Equipment (“ASC 360”), the Company applies a fair value 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.
| F-13 |
The Company did not record impairment on any of its projects during the three and six months ended on June 30, 2023 and 2022.
Recent Agreements to Sell Lots
On October 12, 2018,28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Agreement, the Seller agreed to sell approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” On November 28, 2022, the parties to the Agreement entered into an Amended and Restatedamendment to the Agreement (the “Amendment”). Pursuant to the Amendment, the parties agreed that the Buyer would purchase approximately 131 single-family detached residential lots, instead of 242 lots. This transaction closed on April 13, 2023.
On March 16, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement for 124 lots.(the “Purchase and Sale Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company (“Rausch Coleman”). Pursuant to the Amended and Restatedterms of the Purchase and Sale Agreement, the purchase price remained $6,175,000,Seller has agreed to sell approximately 110 single-family detached residential lots which comprise a section of the Lakes at Black Oak. The transaction closed on May 15, 2023.
On March 17, 2023, 150 CCM Black Oak Ltd. was required(the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Davidson Homes, LLC, an Alabama limited liability company (“Davidson”). Pursuant to meet certain closing conditionsthe terms of the Purchase and Sale Agreement, the timing for the closing was extended. On January 18, 2019, theSeller has agreed to sell approximately 189 single-family detached residential lots developed within section 2 of Black Oak project. The sale of 124the first 94 lots closed on May 30, 2023. The sale of remaining lots is estimated to close at the Company’s Black Oak project in Magnolia, Texas was completed. After allocating costsend of revenue to this sale, 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. As of June 30, 2022 and equipmentDecember 31, 2022, the Company owned 132 homes. The aggregate purchase cost of all the homes is $30,998,258. These homes are recordedlocated in Montgomery and Harris Counties, Texas. All of these purchased homes are properties of our rental business.
Investments in Single-Family Residential Properties
The Company accounts for its investments in single-family residential properties as asset acquisitions and records these acquisitions at cost, less depreciation. Repairstheir purchase price. The purchase price is allocated between land, building, improvements and maintenanceexisting leases based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, title fees, property inspection and valuation fees, as well as other closing costs.
Building improvements and buildings are 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 disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Depreciation is computed by the straight-line method (after considering their respective estimated residual values)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,six months ended June 30, 2023 and other economic factors.2022.
| F-14 |
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.
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 project and Black Oak projects,project, which represented approximately 99%0% and 94%,42% for Ballenger and 91% and 0% for Black Oak, respectively, of the Company’s revenue in the ninesix months ended on SeptemberJune 30, 20202023 and 2019,2022, is as follows:
| ● | Identify the contract with a customer. |
The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided.
| ● | Identify the performance obligations in the contract. |
Performance obligations of the Company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met.
| ● | Determine the transaction price. |
The transaction price per lot is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.
| ● | Allocate the transaction price to performance obligations in the contract. |
Each lot or a group of lots is considered to be a separate performance obligation, for which the specified price in the contract is allocated to.
| ● | Recognize revenue when (or as) the entity satisfies a performance obligation. |
| F-15 |
The builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue at a point in time when title is transferred. The Company does not have further performance obligations or continuing involvement once title is transferred.
Rental Revenue
The Company leases real estate properties to its tenants under leases that are predominately classified as operating leases, in accordance with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and revenue from the collection of lease termination fees.
Rent from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease. Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally, at the end of the lease term, the Company provides the tenant with a one-year renewal option, including mostly the same terms and conditions provided under the initial lease term, subject to rent increases.
The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within deferred revenues and other payables on the Company’s condensed consolidated balance sheets.
Rental revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the three and six months ended June 30, 2023, 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$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 nine months ended on September 30, 2020 and 2019, we recognized revenue $169,349 and $365,645 from FFB assessment, respectively. During the three months ended on SeptemberJune 30, 20202023 and 2019,2022, we recognized revenue $54,147of $0 and $129,031$37,725 from the FFB assessment,assessments, 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.
| F-16 |
If allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot comparing to the total size of all lots in the project.
| ● | Cost of Rental Revenue |
Cost of rental revenue consists primarily of the costs associated with management and leasing fees to our management company, repairs and maintenance, depreciation and other related administrative costs. Utility expenses are paid directly by tenants.
Biohealth
| ● | Product Direct Sales |
The Company’s net sales consist of product sales. The Company'sCompany’s performance obligation is to transfer ownership of its products to its third-party independent distributors (“Distributors”).members. The Company generally recognizes revenue when product is shippeddelivered to its Distributors.
If a Distributorany member returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for such returned products. In addition,We do not have buyback program. However, when the Company maintainscustomer requests a buyback program pursuant to which it will repurchase products sold toreturn and management decides that the refund is necessary, we initiate the refund after deducting all the benefits that a Distributor whomember has decided to leave the business.earned. The returns are deducted from our sales revenue on our financial statements. Allowances for product and membership returns primarily in connection with the Company’s buyback program, are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale.
| ● | Annual Membership |
The Company collects an annual membership fee from its Distributors.members. The fee is fixed, paid in full at the time upon joining the membership and non-refundable.membership; the fee is not refundable. The membership providesCompany’s performance obligation is to provide its members the memberright to (a) purchase products from the Company, (b) access to purchase products at a discount, use to certain back officeback-office services, (c) receive commissions for signing up new members, and (d) attend corporate events. The Company recognizes revenue associated withperformance obligation is satisfied over time, generally over the term of the membership over the period of the membership.agreement which is for a one-year period. Before the membership fee is recognized as revenue, it is recorded as deferred revenue. Deferred revenue relating to membership was $3,046,687$0 and $258,594$21,198 at SeptemberJune 30, 20202023 and December 31, 2019.
Other Businesses
| ● | Food and Beverage |
The Company, through Alset F&B One Pte. Ltd. (“Alset F&B One”) and Alset F&B (PLQ) Pte. Ltd. (“Alset F&B PLQ”) each acquired a restaurant franchise licenses at the end of 2021 and 2022 respectively, both of which have since commenced operations. These licenses will allow Alset F&B One and Alset F&B PLQ each to operate a Killiney Kopitiam restaurant in Singapore. Killiney Kopitiam, founded in 1919, is a Singapore-based chain of mass-market, traditional kopitiam style service cafes selling traditional coffee and tea, along with a range of local delicacies such as Curry Chicken, Laksa, Mee Siam, and Mee Rebus.
The Company, through Hapi Café Inc. (“HCI-T”), commenced operation of two cafés during 2022 and 2021, which are located in Singapore and South Korea.
| F-17 |
The cafes are operated by subsidiaries of HCI-T, namely Hapi Café SG Pte. Limited (“HCSG”) in Singapore and Handling
In recent months ended September 30, 2020 and 2019, respectively. Shipping and handling expenses were $0 and $56,438 for the three months ended September 30, 2020 and 2019, respectively. Shipping and handling costs paid by the Company are includedincorporated two new subsidiaries Shenzhen Leyouyou Catering Management Co., Ltd. and Dongguan Leyouyou Catering Management Co., Ltd. in generalthe People’s Republic of China. Both companies will be principally engaged in the food and administrative expenses.
Additionally, through its subsidiary MOC HK Limited, the Company performs services to its customersis focusing on operating café business in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those services, which occurs when (or as) the Company satisfies its contractual obligations and performs services to its customers.
| ● | Remaining performance obligations |
As of SeptemberJune 30, 20202023 and December 31, 2019,2022, there were no remaining performance obligations or continuing involvement, as all service obligations within the other business activities segment have been completed.
Stock-Based Compensation
The Company accounts for 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 nineaccounting of share-based payments granted to non-employees for goods and services. During the three and six months ended Septemberon June 30, 20202023 and 2019 were $136,253 and $156,822, respectively. Advertising expenses for2022, 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”) and Chinese Yuan (CN¥), 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 $960,268 gain on foreign exchange during the nine months ended on September 30, 2020gain of $1,150,830 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$2,077,709 during the three months ended on SeptemberJune 30, 20202023 and 2019,2022, respectively. The Company recorded foreign exchange gain of $362,528 and $2,485,804 during the six months ended on June 30, 2023 and 2022, respectively. The foreign currency transactional gains and losses are recorded in operations.
| F-18 |
Translation of consolidated entities’ financial statements
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. The Company’s entities with functional currency of Singapore Dollar, Hong Kong Dollar,S$, HK$, AUD, KRW and KRW,CN¥, 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 loss of $2,183,883from foreign currency translation of $585,085, and a $325,518 loss infor the ninethree months ended SeptemberJune 30, 2019,2023 and $3,514,595 loss for the three months ended June 30, 2022, in accumulated other comprehensive loss. The Company recorded other comprehensive gainloss of $1,087,940 from foreign currency translation of $462,064 and $584,561 loss infor the threesix months ended SeptemberJune 30, 20202023 and 2019, respectively.
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 SeptemberJune 30, 20202023 and December 31, 2019,2022, the aggregate non-controlling interests in the Company were $41,672,434$10,363,141 and $6,975,459$11,009,149, respectively.
Capitalized Financing Costs
Financing costs, such as loan origination fee, administration fee, interests, and other related financing costs should be capitalized and recorded on the balance sheet, if these financing activities are directly associated with the development of real 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 June 30, 2023 and December 31, 2022, the capitalized financing costs were $1,225,739 and $3,247,739, respectively.
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.
| F-19 |
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.
In June 2016, the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Reference Rate Reform on Financial Reporting. The amendments in this Updateupdate provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Updateupdate apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company’s line of credit agreement provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable. The amendments in this Updateupdate are effective for all entities as of March 12, 2020 through December 31, 2022.2024. The Company does not believe that ASU 2020-04 will have significant impact on its future consolidated financial statements.
Accounting pronouncement not yet adopted
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2023 for smaller reporting companies, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-042020-06 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 June 30, 2023 and December 31, 2022, uninsured cash and restricted cash balances were $26,119,471 and $15,723,599, respectively.
For the three months ended June 30, 2023, three customers accounted for approximately 37%, 36% and 27% of the Company’s property development revenue. For the three months ended June 30, 2022, two customers accounted for approximately 85%, and 15% of the Company’s property development revenue. For the six months ended June 30, 2023, three customers accounted for approximately 37%, 36%, and 27% of the Company’s property development revenue. For the six months ended June 30, 2022, three customers accounted for approximately 42%, 49% and 9% of the Company’s property development revenue.
| F-20 |
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.
The following table summarizes the Company’s segment information for the following balance sheet dates presented, and for the ninesix months ended SeptemberJune 30, 20202023 and 2019:
SCHEDULE OF SEGMENT INFORMATION
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Six Months Ended on June 30, 2023 | ||||||||||||||||||||
| Revenue | $ | 19,515,728 | $ | 28,074 | $ | 12,786 | $ | 524,196 | $ | 20,080,784 | ||||||||||
| Cost of Sales | (12,168,470 | ) | (9,139 | ) | (109,657 | ) | (140,508 | ) | (12,427,774 | ) | ||||||||||
| Gross Margin | 7,347,258 | 18,935 | (96,871 | ) | 383,688 | 7,653,010 | ||||||||||||||
| Operating Expenses | (992,201 | ) | (202,430 | ) | (477,917 | ) | (2,960,696 | ) | (4,633,244 | ) | ||||||||||
| Operating Loss | 6,355,057 | (183,495 | ) | (574,788 | ) | (2,577,008 | ) | 3,019,766 | ||||||||||||
| Other Income (Expense) | 215,306 | (1,091,514 | ) | 835,888 | (13,116,034 | ) | (13,156,354 | ) | ||||||||||||
| Net Loss Before Income Tax | $ | 6,570,363 | $ | (1,275,009 | ) | $ | 261,100 | $ | (15,693,042 | ) | $ | (10,136,588 | ) | |||||||
| Real Estate | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Six Months Ended on June 30, 2022 | ||||||||||||||||||||
| Revenue | $ | 1,924,916 | $ | 7,701 | $ | 749,693 | $ | 196,267 | $ | 2,878,577 | ||||||||||
| Cost of Sales | (1,625,942 | ) | (2,792 | ) | (11,985 | ) | (24,508 | ) | (1,665,227 | ) | ||||||||||
| Gross Margin | 298,974 | 4,909 | 737,708 | 171,759 | 1,213,350 | |||||||||||||||
| Operating Expenses | (1,320,957 | ) | (159,976 | ) | (910,246 | ) | (2,129,974 | ) | (4,521,153 | ) | ||||||||||
| Operating (Loss) Income | (1,021,983 | ) | (155,067 | ) | (172,538 | ) | (1,958,215 | ) | (3,307,803 | ) | ||||||||||
| Other Expense | 209 | (764,968 | ) | (3,039,097 | ) | (10,579,541 | ) | (14,383,397 | ) | |||||||||||
| Other Income (Expense) | 209 | (764,968 | ) | (3,039,097 | ) | (10,579,541 | ) | (14,383,397 | ) | |||||||||||
| Net Loss Before Income Tax | $ | (1,021,774 | ) | $ | (920,035 | ) | $ | (3,211,635 | ) | $ | (12,537,756 | ) | $ | (17,691,200 | ) | |||||
| June 30, 2023 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 2,209,538 | $ | 461,704 | $ | 991,986 | $ | 25,828,907 | $ | 29,492,135 | ||||||||||
| Total Assets | 61,091,436 | 3,516,613 | 5,136,085 | 98,697,677 | 168,441,811 | |||||||||||||||
| December 31, 2022 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 2,592,577 | $ | 514,260 | $ | 1,338,404 | $ | 14,076,662 | $ | 18,521,903 | ||||||||||
| Total Assets | 57,951,324 | 3,184,416 | 4,861,615 | 87,492,981 | 153,490,336 | |||||||||||||||
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 |
| F-21 |
5. REAL ESTATE ASSETS
As of SeptemberJune 30, 20202023 and December 31, 2019,2022, 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
| June 30, 2023 | December 31, 2022 | |||||||
| Construction in Progress | $ | 4,660,812 | $ | 15,506,572 | ||||
| Land Held for Development | 3,395,701 | 7,943,126 | ||||||
| Rental Properties, net | 31,388,691 | 31,169,031 | ||||||
| Total Real Estate Assets | $ | 39,445,204 | $ | 54,618,729 | ||||
Single family residential properties
As of SeptemberJune 30, 20202023 and December 31, 2019, property2022, the Company owned 132 Single Family Residential Properties (“SFRs”). The Company’s aggregate investment in those SFRs was $31 million. Depreciation expense was $276,125 and equipment consisted of 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 June 30, 2023:
SUMMARY OF SINGLE FAMILY RESIDENTIAL PROPERTIES
Number of Homes | Aggregate investment | Average Investment per Home | ||||||||||
| SFRs | 132 | $ | 31,388,691 | $ | 237,793 | |||||||
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 479 lots for a price of approximately $64,000,000,$64,000,000, which escalatesescalated 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 June 30, 20202023 and December 31, 2019,2022, there were $1,808,747 and $2,445,269was $0 held on deposit, respectively.
7. NOTES PAYABLE
As of SeptemberJune 30, 20202023 and December 31, 2019,2022, notes payable consisted of the following:
SCHEDULE OF NOTES PAYABLE
June 30, 2023 | December 31, 2022 | |||||||
| Motor Vehicle Loans | $ | 167,898 | $ | 181,846 | ||||
| Total notes payable | $ | 167,898 | $ | 181,846 | ||||
| F-22 |
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 |
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 SeptemberJune 30, 2020,2023, 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.
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
Motor Vehicle Loans
On October 25, 2018, HIP, a wholly-owned subsidiary of HotApp Blockchain, Inc.,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.
Future minimum principal payments under existing motor vehicle loans at June 30, 2023 in each calendar year through the end of their terms are as follows:
SCHEDULE OF FUTURE MINIMUM PAYMENTS
| 2024 | $ | 29,959 | |||
| 2025 | 29,959 | ||||
| 2026 | 29,959 | ||||
| 2027 | 29,959 | ||||
| 2028 | 27,680 | ||||
| Thereafter | 20,382 | ||||
| Total Future Receipts | $ | 167,898 |
| F-23 |
8. RELATED PARTY TRANSACTIONS
Purchase of Shares and Warrants from NECV
On July 17, 2020, the Company purchased shares, approximately 9.99% ownership, and warrants to purchase 1,220,390,000 shares with an exercise price of $0.0001 per share, from NECV, for an aggregate purchase price of $122,039. We value the NECV warrants under level 3 category through a Black Scholes option pricing model and the fair value of the NECV warrants were $860,342 as of July 17, 2020, the purchase date, $47,115 as of June 30, 2023 and $327,565 as of December 31, 2022. The difference of $ of fair value of stock and warrants, total $ and the purchase price $122,039, was recorded as additional paid in capital at December 31, 2021, as it was a related party transaction.
Purchase and Sale of Stock in True Partners Capital Holding Limited
On March 12, 2021, the Company purchased ordinary shares of True Partners Capital Holding Limited for $6,729,629 from a related party. The fair market value of such stock on the acquisition date was $10,003,689. The difference between the purchase price and the fair market value of $3,274,060 was recorded as an equity transaction on Company’s condensed consolidated statement of stockholders’ equity at December 31, 2021. Pursuant to a Stock Purchase Agreement from February 2022, the Company sold shares of True Partner to DSS Inc. (through the transfer of subsidiary and otherwise), for a purchase agreement (the “HotAppsprice of shares of common stock of DSS. DSS shareholders approved the Stock Purchase Agreement”) with DSS Asia, a Hong Kong subsidiaryAgreement on May 17, 2022 (which is deemed to be the effective date of this transaction). The transaction loss of $446,104, which is the difference between the fair value of True Partner stock and fair value of DSS stock at the agreement’s effective date, was recorded as other expense in the Company’s Statement of Operations.
SHRG Shares Dividend Received from DSS
On May 4, 2023, DSS distributed approximately million shares of Sharing Services Global Corporation (“SHRG”) beneficially held by DSS and its subsidiaries in the form of a dividend to the shareholders of DSS common stock. As a result of this distribution, the Company directly received shares of SHRG, and through its majority-owned subsidiary Alset International pursuant to which HIP agreed to sell to DSS Asia allLimited, and certain subsidiaries of Alset International Limited, indirectly received additional shares of SHRG. The Company and its majority-owned subsidiaries now collectively own shares of SHRG, representing 33.4% of the issued and outstanding shares of HotApps Information Technology Co. Ltd., also known as Guangzhou HotApps, a wholly-owned subsidiary of HIP. Guangzhou HotApps is primarily engaged in engineering work for software development, as well as, aSHRG Common Stock (such number of outsourcing projects related to real estateSHRG shares held and lighting.ownership percentage do not include any shares held by affiliates of the Company which we do not hold a majority interest in). Additionally, our founder, Chairman and Chief Executive Officer, Chan Heng Fai, is the CEO of DSS Asiadirectly and DSS International. For further details on this transaction, refer to Note 11 – Discontinued Operations.
Consolidation of Alset Capital Acquisition Corp.
On May 1, 2023, Alset Capital Acquisition Corp. (“Alset Capital”) held a Special Meeting of Stockholders. In connection with the Special Meeting and certain amendments to DSS
Purchase of Hapi Travel Ltd. Stock
On June 14, 2023, one of the following criteria are met:
| F-24 |
Notes Payable
Chan Heng Fai provided an interest-free, due on demand advance to HFESeD Perth Pty. Ltd. for theits general operations. On
Chan Heng Fai in exchangeprovided an interest-free, due on demand advance to Hapi Metaverse Inc. for a two-year non-interest bearing note of $1,333,429. On September 30, 2020 the amount outstanding was $1,333,429.
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$75,000 and $180,000 for$150,000 in the ninethree and six months ended SeptemberJune 30, 20202023, respectively, and 2019,$140,000 and $200,000 in the three and six months ended June 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 expenses of $60,000 and $60,000 for the three months ended SeptemberIn June 2022, MacKenzie Equity Partners was paid $50,000 bonus payment (as described above). On June 30, 2020 and 2019, respectively. As of September 30, 2020,2023 and December 31, 2019 2022, the Company owed $20,000 and $0, respectively, to this entity.
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% and isare 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. 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.
| F-25 |
As of SeptemberJune 30, 2020,2023 and December 31, 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. During 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. On October 17, 2022 the Company purchased common shares of Value Exchange International for an aggregate purchase price of $1,743,734. After the transaction the Company owns approximately 38.3% of Value Exchange International.
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 June 30, 2023 and December 31, 2022, Ketomei owed $260,961 and $198,162 to Hapi Café, respectively.
On October 13, 2021 BMI Capital Partners International Limited (“BMI”) entered into loan agreement with Liquid Value Asset Management Limited (“LVAML”), a subsidiary of DSS, pursuant to which BMI agreed to lend $3,000,000 to LVAML. The loan has variable interest rate and matures on January 12, 2023, with automatic three-month extension. The purpose of the loan is to purchase a portfolio of trading securities by LVAM. BMI participates in the losses and gains from portfolio based on the calculations included in the loan agreement. As of June 30, 2023 and December 31, 2022 LVAML owes the Company $516,165 and $3,042,811, respectively.
On January 27, 2023, the Company’s subsidiary Hapi Metaverse Inc. and New Electric CV Corp. (“NECV,” and together with Hapi Metaverse Inc., the “Lenders”) entered into a Convertible Credit Agreement (the “Credit Agreement”) with Value Exchange International, Inc. (“Value Exchange”), a Nevada corporation. The Credit Agreement provides Value Exchange with a maximum credit line of $1,500,000 (“Maximum Credit Line”) with simple interest accrued on any advances of the money under the Credit Agreement at 8%. The principal amount of any advance of money under the Credit Agreement (each being referred to as an “Advance”) is due in a lump sum, balloon payment on the third annual anniversary of the date of the Advance (“Advance Maturity Date”). Accrued and unpaid interest on any Advance is due and payable on a semi-annual basis with interest payments due on the last business day of June and last business day of December of each year. A Lender may demand that any portion or all of the unpaid principal amount of any Advance as well as accrued and unpaid interest thereon may be paid by shares of Value Exchange Common Stock in lieu of cash payment. As of June 30, 2023, $1,400,000 of credit was used, and interest income of $27,923 and $38,970 is included in interest income in the three and six months ended June 30, 2023, respectively.
| F-26 |
9. GOODWILL
The Company and its subsidiaries continually evaluate potential acquisitions that align with the Company’s plans. Starting an F&B business in Hong Kong, China, and Taiwan can be an excellent opportunity due to the large consumer market, diverse food culture, high demand for international cuisine, favorable business environment, skilled labor force, and opportunities for growth.
On October 4, 2022, the Company completed its first F&B business acquisition of MOC HK Limited (“MOC”), a F&B business started in Hong Kong. The accompanying consolidated financial statements include the operations of the acquired entity from its acquisition date. The acquisition has been accounted for as a business combination. Accordingly, consideration paid by the Company to complete the acquisition is initially allocated to the acquired assets and liabilities assumed based upon their estimated acquisition date fair values. The recorded amounts for assets acquired and liabilities assumed are provisional and subject to change during the measurement period, which is up to 12 months from the acquisition date.
As a result of the acquisition of MOC, goodwill of $60,363 generated in a business combination represents the purchase price of $70,523 in excess of identifiable tangible and intangible assets. Goodwill and intangible assets that have an indefinite useful life are not amortized. Instead, they are reviewed periodically for impairment.
On June 14, 2023, the Company completed acquisition of Hapi Travel Limited (“HTL”), an online travel business started in Hong Kong. The accompanying consolidated financial statements include the operations of the acquired entity from its acquisition date. The acquisition has been accounted for as a business combination. Accordingly, consideration paid by the Company to complete the acquisition is initially allocated to the acquired assets and liabilities assumed based upon their estimated acquisition date fair values. The recorded amounts for assets acquired and liabilities assumed are provisional and subject to change during the measurement period, which is up to 12 months from the acquisition date.
As a result of the acquisition of HTL, goodwill of $214,174 generated in a business combination represents the purchase price of $214,993 in excess of identifiable tangible and intangible assets. Goodwill and intangible assets that have an indefinite useful life are not amortized. Instead, they are reviewed periodically for impairment.
The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently, if management believes indicators of impairment exist. Such indicators could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair marketvalue of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a quantitative goodwill impairment test. The impairment test involves comparing the fair value of the warrantsapplicable reporting unit with its carrying value. The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company’s evaluation of goodwill completed during the period resulted in no impairment losses.
The table below reflects the Company’s estimates of the acquisition date fair value of the assets acquired and liabilities assumed for the 2022 and 2023 acquisition:
SCHEDULE OF ESTIMATES OF ACQUISITION FAIR VALUE
| MOC | HTL | |||||||
| Acquisition Date | October 4, 2022 | June 14, 2023 | ||||||
| Purchase Price | ||||||||
| Cash | $ | 70,523 | $ | 214,993 | ||||
| Total purchase consideration | 70,523 | 214,993 | ||||||
| Purchase Price Allocation | ||||||||
| Assets acquired | ||||||||
| Current assets | 32,700 | 15,098 | ||||||
| Property and Equipment, net | 11,266 | 1,485 | ||||||
| Operating lease right-of-use assets, net | 114,232 | 16,516 | ||||||
| Total assets acquired | 158,198 | 33,099 | ||||||
| Liabilities assumed: | ||||||||
| Current liabilities | (33,437 | ) | (20,885 | ) | ||||
| Operating lease liability | (114,232 | ) | (11,395 | ) | ||||
| Accrued taxes | (349 | ) | - | |||||
| Total liabilities assumed | (148,018 | ) | (32,280 | ) | ||||
| Net assets acquired | 10,180 | 819 | ||||||
| Goodwill | 60,343 | 214,174 | ||||||
| Total purchase consideration | $ | 70,523 | $ | 214,993 | ||||
The following table summarizes changes in the carrying amount of goodwill at June 30, 2023 and December 31, 2022
SCHEDULE OF GOODWILL
| June 30, 2023 | December 31, 2022 | |||||||
| Balance at beginning of the period/year | $ | 60,343 | $ | - | ||||
| Acquisitions | 214,174 | 60,343 | ||||||
| Foreign currency exchange adjustment | (283 | ) | ||||||
| Balance as of end of the period/year | $ | 274,234 | $ | 60,343 | ||||
| F-27 |
10. EQUITY
On June 14, 2021, the Company filed an amendment (the “Amendment”) to its Third Amended and Restated Certificate of Incorporation, as amended, to increase the Company’s authorized share capital. The Amendment increased the Company’s authorized share capital to common shares and preferred shares, from common shares and preferred shares, respectively.
The Company has designated preferred shares as Series A Preferred Stock and as Series B Preferred Stock.
On December 6, 2022 the Company filed a certificate of Amendment to the Company’s Certificate of Formation with the Texas Secretary of State to effect a 1-for-20 reverse stock split. The reverse stock split was $0.
Holders of the Series A Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of the Company’s common stock, par value $ per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series A Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series A Preferred Stock is convertible. Holders of Series A Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series A Preferred Stock would receive if the Series A Preferred Stock were fully converted into Common Stock.
Holders of the Series B Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of the Company’s common stock par value $ per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series B Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series B Preferred Stock is convertible. Holders of Series B Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series B Preferred Stock would receive if the Series B Preferred Stock were fully converted into Common Stock.
The Company analyzed the Preferred stock and the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity.
On February 6, 2023, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) in connection with an offering (the “Offering”) of its common stock, par value $ per share (the “Common Stock”), with Aegis Capital Corp. (the “Underwriter”) as the underwriter, relating to an underwritten public offering of shares of Common Stock at a public offering price of $ per share. The Underwriting Agreement provides the Underwriter a 45-day option to purchase up to an additional shares of Common Stock to cover over-allotments, if any.
| F-28 |
The net proceeds to the Company from the Offering were approximately $3.4 million, after deducting underwriting discounts and the payment of other offering expenses associated with the Offering that are payable by DSS
The Offering closed on February 8, 2023. The Common Stock was being offered pursuant to an effective registration statement on Form S-3 (File No. 333-264234), as well as a prospectus supplement in connection with the Offering filed with the Securities and Exchange Commission.
On June 30, 2020, we received deposit $1,419,605 from Document Security Systems, Inc. for a warrant exercise to acquire 44,005,182 shares of Alset International at a price approximately $0.03 per share. The transaction was closed in July 2020. After this exercise, DSS holds 127,179,311 shares of Alset International’s common stock, approximately 9.3%. Fai Heng Chan, our CEO, Chairman of our Board and controlling shareholder, is also Chairman of the Board of Document Security Systems, Inc. and a significant shareholder of Document Security Systems, Inc.
The following table summarizes the warrant activity for the six months ended June 30, 2023.
SCHEDULE OF WARRANT ACTIVITY
Warrant for Common Shares | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Warrants Outstanding as of December 31, 2022 | 634,488 | $ | 80.32 | $ | - | |||||||||||
| Warrants Vested and exercisable at December 31, 2022 | 634,488 | $ | 80.32 | $ | - | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Warrants Outstanding as of June 30, 2023 | 634,488 | $ | 80.32 | $ | - | |||||||||||
| Warrants Vested and exercisable at June 30, 2023 | 634,488 | $ | 80.32 | $ | - | |||||||||||
Changes of Ownership of Alset International
In the year ended December 31, 2022 the Company purchased shares of Alset International from the market.
On January 17, 2022 the Company entered into a securities purchase agreement with Chan Heng Fai, pursuant to an agreement on June 24, 2020 with our stockholders HFE Holdings Limitedwhich the Company agreed to purchase from Chan Heng Fai ordinary shares of Alset International for a purchase price of newly issued shares of the Company’s common stock. On February 28, 2022, the Company and Chan Heng Fai HFE Holdings Limited surrendered 3,600,000entered into an amendment to this securities purchase agreement pursuant to which the Company shall purchase these ordinary shares of ourAlset International for a purchase price of newly issued shares of the Company’s common stock to the treasurystock. The closing of our company, andthis transaction with Chan Heng Fai surrendered 1,000was subject to approval of the Nasdaq and the Company’s stockholders. These ordinary shares of our common stock to the treasury of our company, and all such shares were cancelled. No consideration was exchanged in connection with the surrenderAlset International represent approximately of the shares. As a result, the total number ofissued and outstanding shares of our common stock at September 30, 2020 was reduced to 6,400,000 shares from 10,001,000 shares.
Due to these transactions the shareholder meeting approved 35,278,600 shares granted to the directors. The fair value $1,417,523 was based the June 5, 2020, the grant day, market price and was recorded as both compensation expense and equity in the financial statements. 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%76.8% as of December 31, 20192021 to 51.04%85.4% as of
Promissory Note Converted into Shares
On December 13, 2021 the threeCompany entered into a Securities Purchase Agreement with Chan Heng Fai for the issuance and nine months ended
| F-29 |
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 its outstanding shares and did not changetime, sell any combination of the minority interest.
Class A Common Stock of Alset International
The Company accounts for its, and warrant exercises,its subsidiaries’ common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”. Common stock subject to possible redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s ownership percentagecontrol) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30, 2023, the Class A common stock of Alset International fell below 50% andCapital Acquisition Corp. subject to possible redemption in the entityamount of $20,075,127, are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
On May 1, 2023, after the redemptions (for further details on this transaction refer to Note 8. – Related Party Transactions, Consolidation of Alset Capital Acquisition Corp.), the Company consolidated Alset Capital. As of June 30, 2023, non-controlling interest of $(658,292) was deconsolidatedrecorded as temporary equity, since these non-controlling interests are considered redeemable noncontrolling interests in accordance with ASC 810-10-45-5. A gain810-10 and ASC 480-10-S99-3A.
11. LEASE INCOME
The Company generally rents its SFRs under lease agreements with a term of approximately $53 million was recordedone or two years. Future minimum rental revenue under existing leases on our properties at June 30, 2023 in each calendar year through the end of their terms are as a resultfollows:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS
| 2023 | $ | 1,082,873 | ||
| 2024 | 623,105 | |||
| Total Future Receipts | $ | 1,705,978 |
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 deconsolidation.
12. 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, 2023 | $ | (54,921 | ) | $ | 121,272 | $ | 3,769,712 | $ | 3,836,063 | |||||||
| Other Comprehensive Income | - | 936,265 | - | 936,265 | ||||||||||||
| Balance at March 31, 2023 | $ | (54,921 | ) | $ | 1,057,537 | $ | 3,769,712 | $ | 4,772,328 | |||||||
| Other Comprehensive Loss | - | (1,849,049 | ) | - | (1,849,049 | ) | ||||||||||
| Balance at June 30, 2023 | $ | (54,921 | ) | $ | (791,512 | ) | $ | 3,769,712 | $ | 2,923,279 | ||||||
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2022 | $ | (90,031 | ) | $ | (367,895 | ) | $ | 799,572 | $ | 341,646 | ||||||
| Balance | $ | (90,031 | ) | $ | (367,895 | ) | $ | 799,572 | $ | 341,646 | ||||||
| Other Comprehensive Income | (7,027 | ) | (499,967 | ) | 459,069 | (47,925 | ) | |||||||||
| Balance at March 31, 2022 | $ | (97,058 | ) | $ | (867,862 | ) | $ | 1,258,641 | $ | 293,721 | ||||||
| Balance | $ | (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 | ||||||
| Balance | $ | (97,563 | ) | $ | (3,870,029 | ) | $ | 4,525,637 | $ | 558,045 | ||||||
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) |
13. 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 SeptemberJune 30, 20202023 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
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| June 30, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment Securities- Fair Value | $ | 287,818 | $ | - | $ | - | $ | 287,818 | ||||||||
| Investment Securities- Fair Value - Related Party | 24,757,622 | - | - | 24,757,622 | ||||||||||||
| Investment Securities- Trading | 6,319,406 | - | - | 6,319,406 | ||||||||||||
| Convertible Note Receivable | - | - | 88,599 | 88,599 | ||||||||||||
| Warrants - New Electric CV Corp. | - | - | 47,115 | 47,115 | ||||||||||||
| Total Investment in securities at Fair Value | $ | 31,364,846 | $ | - | $ | 135,714 | $ | 31,500,560 | ||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2022 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investment Securities- Fair Value | $ | 884,432 | $ | - | $ | - | $ | 884,432 | ||||||||
| Investment Securities- Fair Value - Related Party | 12,865,525 | - | - | 12,865,525 | ||||||||||||
| Investment Securities- Trading | 5,315,204 | - | - | 5,315,204 | ||||||||||||
| Convertible Note Receivable | - | - | 88,599 | 88,599 | ||||||||||||
| Warrants - New Electric CV Corp. | - | - | 327,565 | 327,565 | ||||||||||||
| Total Investment in securities at Fair Value | $ | 19,065,161 | $ | - | $ | 416,164 | $ | 19,481,325 | ||||||||
Realized loss on investment securities for the ninesix months ended
| F-31 |
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
SCHEDULE OF FAIR VALUE OF EQUITY SECURITY INVESTMENT
| Share price | Market Value | |||||||||||||
| 6/30/2023 | Shares | 6/30/2023 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.359 | 62,812,264 | $ | 22,549,603 | Investment in Securities at Fair Value | ||||||||
| AMBS (Related Party) | $ | 0.001 | 20,000,000 | $ | 16,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.007 | 40,927,621 | $ | 271,818 | Investment in Securities at Fair Value | ||||||||
| New Electric CV (Related Party) | $ | 0.001 | 354,039,000 | $ | 70,808 | Investment in Securities at Fair Value | ||||||||
| Value Exchange (Related Party) | $ | 0.100 | 13,834,643 | $ | 1,383,464 | Investment in Securities at Fair Value | ||||||||
| Sharing Services (Related Party) | $ | 0.006 | 125,624,528 | $ | 753,747 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 6,319,406 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 31,364,846 | ||||||||||||
| Nervotec | N/A | 1,666 | $ | 37,631 | Investment in Securities at Cost | |||||||||
| HWH World Co. | N/A | 3,800 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| UBeauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 31,464,648 | ||||||||||||
| Share price | Market Value | |||||||||||||
| 12/31/2022 | Shares | 12/31/2022 | Valuation | |||||||||||
| DSS (Related Party) | $ | 0.164 | 62,812,264 | $ | 10,301,211 | Investment in Securities at Fair Value | ||||||||
| AMBS (Related Party) | $ | 0.002 | 20,000,000 | $ | 34,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.020 | 42,999,621 | $ | 850,432 | Investment in Securities at Fair Value | ||||||||
| New Electric CV (Related Party) | $ | 0.001 | 354,039,000 | $ | 212,423 | Investment in Securities at Fair Value | ||||||||
| Value Exchange (Related Party) | $ | 0.170 | 13,834,643 | $ | 2,351,889 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 5,315,204 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 19,065,161 | ||||||||||||
| Nervotec | N/A | 1,666 | $ | 35,958 | Investment in Securities at Cost | |||||||||
| HWH World Co. | N/A | 3,800 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| UBeauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 19,163,290 | ||||||||||||
| F-32 |
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 | |||
Sharing Services Convertible Note
The fair value of 1-for-30 (the “Reverse Split”) was effective at 5:01 p.m. Eastern Time on May 7, 2020 (the “Effective Time”)
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 | |||
We assumed dividend yield rate of September 30, 2020, the Company held 46,848 shares of DSS convertible preferred stock, which could convert to 7,232,716 common shares, with fair market value $54,864,632.0.00% in Sharing Services. 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% |
The volatility is based on the historical volatility of the DSS common stock. We assumed a three-year life for the preferred stock and assumed that after three-years the Company would desire to begin receiving a return on this investment – either through a conversion or liquidation. The Company has the right to call the preferred stock at any point. We believed that this is not a probable scenario but did apply a 10% annual probability of a call occurring.
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 |
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 ninethree and six months ended SeptemberJune 30, 20202023 and 2019:
SCHEDULE OF CHANGE IN FAIR VALUE
| Total | ||||
| Balance at January 1, 2023 | $ | 327,565 | ||
| Total gains | 62,348 | |||
| Balance at March 31, 2023 | $ | 389,913 | ||
| Total losses | (342,798 | ) | ||
| Balance at June 30, 2023 | $ | 47,115 | ||
| 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 | ||
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 June 30, 2023, the management estimated that the fair value of this note remained unchanged from its initial purchase price.
Warrants
On March 2, 2020 and October 29, 2021, the Company received warrants to purchase shares of AMRE, a related party private startup company, in conjunction with the Company lending 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.
| F-33 |
On July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99% ownership, and 122,039,0001,220,390,000 warrants with an exercise price of $0.0001$ per share, from APW,NECV, 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 NECV for the total consideration of $232,000, leaving the balance of outstanding warrants of at December 31, 2021 and 2022. The Company did not exercise any warrants during six months ended June 30, 2023. We value NECV warrants under level 3 category through a Black Scholes option pricing model and the fair value of the warrants from APWNECV was $0$47,115 as of SeptemberJune 30, 2020.
The fair value of the NECV warrants under level 3 category as of June 30, 2023 and December 31, 2022 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
June 30, 2023 | December 31, 2022 | |||||||
| Stock Price | $ | 0.0002 | $ | 0.0006 | ||||
| Exercise price | 0.001 | 0.001 | ||||||
| Risk free interest rate | 3.96 | % | 3.95 | % | ||||
| Annualized volatility | 250.4 | % | 186.1 | % | ||||
| Dividend Yield | 0.00 | 0.00 | ||||||
| Year to maturity | 7.07 | 7.56 | ||||||
14. 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 June 30, 2023 and 2022, NVR purchased 0 lots. During the six months ended on June 30, 2023 and 2022, NVR purchased 0 and 3 lots, respectively. Through June 30, 2023 and December 31, 2022, NVR had purchased a total of 479 lots.
Certain arrangements for the sale of buildable lots to NVR require the Company 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 distinct good or service and accordingly, the amount of the credit was recognized as the reduction of revenue. As of June 30, 2023 and December 31, 2022, the accrued balance due to NVR was $189,475.
Leases
The Company leases offices in Bethesda, Maryland, Magnolia, Texas, Singapore, Hong Kong, South Korea and China through leased spaces aggregating approximately 30,000 square feet, under leases expiring on various dates from November 2023 to March 2027. The leases have rental rates ranging from $1,401 to $23,020 per month. Our total rent expense under these office leases was $266,103 and $156,575 in the three months ended June 30, 2023 and 2022, respectively. Our total rent expense under these office leases was $525,781 and $313,150 in the six months ended June 30, 2023 and 2022, respectively. The following table outlines the details of lease terms:
SCHEDULE OF OPERATING AND RENEWED LEASE TERMS RENTAL
| Office Location | Lease Term as of December 31, 2021 | |
| Singapore - AI | June 2023 to May 2026 | |
| Singapore – F&B | October 2021 to October 2024 | |
| Singapore – Four Seasons Park | July 2022 to July 2024 | |
| Singapore – Hapi Cafe | July 2022 to June 2024 | |
| Singapore - PLQ | December 2022 to July 2024 | |
| Hong Kong - Office | October 2022 to October 2024 | |
| Hong Kong - Warehouse | November 2022 to October 2024 | |
| Hong Kong - Shop | October 2022 to September 2024 | |
| South Korea – Hapi Cafe | August 2022 to August 2025 | |
| South Korea – HWH World | August 2022 to July 2025 | |
| Magnolia, Texas | May 2022 – January 2023 | |
| Bethesda, Maryland | January 2021 to March 2024 | |
| China - Cafe | December 2022 - November 2023 | |
| China - Office | March 2023 – March 2027 |
| F-34 |
The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) to recognize a right-of-use asset and a lease liability for all the leases with terms greater than twelve months. We elected the practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities for lease agreements with terms less than 12 months. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our leases do not provide a readily determinable implicit rates, we estimate our incremental borrowing rates to discount the lease payments based on information available at lease commencement. Our incremental borrowings rates are at a range from 0.35% to 3.9% in 2023 and 2022, which were used as the discount rates. The balances of operating lease right-of-use assets and operating lease liabilities as of June 30, 2023 were $1,805,482 and $1,834,289 respectively. The balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 2022 were $1,614,159 and $1,628,039, respectively.
The table below summarizes future payments due under these leases as of June 30, 2023.
For the Years Ended June 30:
SCHEDULE OF LEASE PAYMENTS
| 2024 | $ | 1,064,127 | ||
| 2025 | 589,037 | |||
| 2026 | 220,887 | |||
| 2027 | 29,433 | |||
| Total Minimum Lease Payments | $ | 1,903,485 | ||
| Less: Effect of Discounting | (69,196 | ) | ||
| Present Value of Future Minimum Lease Payments | 1,834,289 | |||
| Less: Current Obligations under Leases | (186,380 | ) | ||
| Long-term Lease Obligations | $ | 1,647,909 |
Agreement to Sell 189 Lots
On July 3, 2018,March 17, 2023, 150 CCM Black Oak (the “Seller”) entered into a Purchase andContract of Sale Agreement(the “Contract of Sale”) with Houston LD,Davidson Homes, LLC, for the sale of 124 lots located at its Black Oak project.an Alabama limited liability company (“Davidson Homes”). Pursuant to the Purchase andterms of the Contract of Sale, Agreement, it was agreed that 124 lots would be sold for a range of prices based on the lot type. In addition, Houston LD, LLCSeller has agreed to contribute a “communitysell approximately 189 single-family detached residential lots comprising an additional section of the Lakes at Black Oak. The price of the lots and certain community enhancement fee” for each lot, collectively totaling $310,000, which is currently held in escrow. 150 CCM Black Oakfees the Seller will apply these funds exclusively towardsbe entitled to receive are anticipated to equal an amenity package on the property. aggregate of $10,022,500.
The closing of the transactions contemplated bydescribed in the PurchaseContract of Sale depends on the satisfaction of certain conditions set forth therein. There can be no assurance that such closings will be completed on the terms outlined herein or at all. Davidson Homes has agreed to purchase the lots in stages, comprising an initial closing of 94 lots, the remaining lots to be purchased on or before December 29, 2023. Commencing on March 17, 2023, Davidson Homes had a thirty (30) day inspection period in which to inspect the properties and Sale Agreementdetermine their suitability; during such inspection period, Davidson Homes was subjectentitled to Houston LD, LLC completing due diligencedecline to proceed with the closing of these transactions. Davidson Homes did not exercise its satisfaction. On October 12, 2018, 150 CCM Black Oak Ltd entered into an Amendedright to decline, and Restated Purchase and Sale Agreement (the “Amended and Restated Purchase and Sale Agreement”) for these 124 lots. Pursuantpursuant to the Amended and Restated Purchase andContract of Sale, Agreement,has made an additional deposit in escrow. Through 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 Seller shall be required to complete certain improvements at the property at the Seller’s cost prior to the closing of the remaining lots.
Security Deposits
Our rental-home lease agreements require tenants to provide a one-month security deposits. The property management company collects all security deposits and maintains them in Magnolia, Texas was completed.
| F-35 |
AEI Stock Option plans HFE
Under our 2018 Incentive Compensation Plan (the “Plan”), adopted by our board of directors and holders of a majority of our outstanding shares of common stock in September 2018, shares of common stock (subject to certain adjustments) were reserved for issuance upon exercise of stock options and grants of other equity awards. No options or other equity awards have been granted under the Plan. The reservation of shares 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 interestwas cancelled 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, 2020 and December 31, 2019, 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.
SCHEDULE OF OPTION ACTIVITY
| Options for Common Shares | Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of January 1, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
| Vested and exercisable at January 1, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Outstanding as of December 31, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
| Vested and exercisable at December 31, 2022 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Outstanding as of June 30, 2023 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
| Vested and exercisable at June 30, 2023 | 1,061,333 | $ | 0.09 | $ | - | |||||||||||
16. SUBSEQUENT EVENTS
On August 1, 2023, Alset Capital held a Special Meeting of Stockholders. In connection with this Special Meeting, Alset Capital’s business combination with HWH International Inc. was approved by its stockholders and certain amendments to Alset Capital’s Amended and Restated Certification of Incorporation were also approved. The business combination is planned to close during the third quarter of 2023, subject to the completion of certain closing conditions.
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 | $- |
| F-36 |
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 a significant portion of 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. We have designed applications for enterprise messaging and e-commerce software platforms in the United States and Asia inIn our digital transformation technology business unit.segment, we focus on serving business-to-business (B2B) needs in e-commerce, collaboration and social networking functions. Our recent foray into the biohealth segment includes research to treat neurological and immune-related diseases, nutritional chemistry to create a natural sugar alternative, research regarding innovative products to slow the spreadsale of disease, and natural foods and supplements.
We also have ownership interests outside of Alset International, including a 36.9% equity interest in American Pacific Bancorp Inc., an indirect 16.8%14.7% equity interest in Holista CollTech Limited, a 44.8% equity interest in DSS Inc. (“DSS”), a 38.3% equity interest in Value Exchange International, Inc., a 0.5% equity interest in New Electric CV Corporation (“NECV” formerly known as “American Premium Mining Corporation” or “APM,” and earlier known as “American Premium Water Corp.”), and 33.4% equity interest in Sharing Services Global Corp. (“SHRG”). American Pacific Bancorp Inc. is a financial network holding company. Holista CollTech Limited is a public Australian company that produces natural food ingredients (ASX: HCT). DSS is a multinational company operating businesses within nine divisions: product packaging, biotechnology, consumer marketing, commercial lending, securities and an indirect 13.1% equity interest in Vivacitas Oncologyinvestment management, alternative trading, secure living, and alternative energy. DSS Inc., is listed on the NYSE American (NYSE: DSS). Value Exchange International, Inc. is a U.S.-based biopharmaceuticalprovider of information technology services for businesses, and is traded on the OTCQB (OTCQB: VEII). NECV is a publicly traded consumer products company but neither of which company has material asset value relative to our principal businesses. Under(OTCPK: HIPH). SHRG markets and distributes health and wellness products, as well as member-based travel services, using a direct selling business model. SHRG is traded on the guidance 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 series 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 accelerate the expansion of our organic businesses.
We generally acquire majority and/or control stakes in innovative and promising businesses that are expected to appreciate in value over time. Our emphasis is on building businesses in industries where our management team has in-depth knowledge and experience, or where our management can provide value by advising on new markets and expansion. We have at times provided a range of global capital and management services to these companies in order to gain access to Asian markets. We have historically favored businesses that improve an individual’s quality of life or that improve the efficiency of businesses through technology in various industries. We believe our capital and management services provide us with a competitive advantage in the selection of strategic acquisitions, which creates and adds value for our company and our stockholders.
| 3 |
Recent Developments
Alset Capital Acquisition Corp.
On February 3, 2022 Alset Capital Acquisition Corp. (“Alset Capital”), a special purpose acquisition company sponsored by the Company and certain affiliates, closed its initial public offering of 7,500,000 units at $10 per unit. Each unit consisted of one of Alset Capital’s shares of Class A common stock, one-half of one redeemable warrant and one right to receive one-tenth of one share of Class A common stock upon the consummation of an initial business combination. Each whole warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share. Only whole warrants are exercisable. The underwriters exercised their over-allotment option in full for an additional 1,125,000 units on February 1, 2022, which closed at the time of the closing of the Offering. As a result, the aggregate gross proceeds of this offering, including the over-allotment, were $86,250,000, prior to deducting underwriting discounts, commissions, and other offering expenses.
On February 3, 2022, simultaneously with the consummation of Alset Capital’s initial public offering, Alset Capital consummated the private placement of 473,750 units (the “Private Placement Units”) to the Sponsor, which amount includes 33,750 Private Placement Units purchased by the Sponsor in connection with the underwriters’ exercise of the over-allotment option in full, at a price of $10.00 per Private Placement Unit, generating gross proceeds of approximately $4.7 million (the “Private Placement”) the proceeds of which were placed in the trust account. No underwriting discounts or commissions were paid with respect to the Private Placement. The Private Placement Units are identical to the units sold in the initial public offering, except that (a) the Private Placement Units and their component securities will not be transferable, assignable or saleable until 30 days after the consummation of Alset Capital’s initial business combination except to permitted transferees and (b) the warrants and rights included as a component of the Private Placement Units, so long as they are held by the Sponsor or its permitted transferees, will be entitled to registration rights, respectively.
The Company and its majority-owned subsidiary Alset International together own the sole member of Alset Acquisition Sponsor, LLC, the sponsor of Alset Capital.
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 as of the date of this Report and is subject to the receipt of the required approval by the stockholders of Alset Capital, the shareholder of HWH and the satisfaction of certain other customary closing conditions.
On May 1, 2023, Alset Capital amended its Investment Management Trust Agreement with Wilmington Trust, National Association, a national banking association, which was entered into on January 31, 2022. The Trust Agreement is now amended, in part, so that Alset Capital’s ability to complete a business combination may be extended in additional increments of one month up to a total of twenty-one (21) additional months from the closing date of its initial public offering, subject to the payment into the trust account by Alset Capital of one-third of 1% of the funds remaining in the trust account following any redemptions in connection with the approval of the amendment to Alset Capital’s Amended and Restated Certificate of Incorporation.
As approved by its stockholders at the Special Meeting of Stockholders held on May 1, 2023 (the “Alset Capital Special Meeting”), Alset Capital filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State on May 2, 2023, to (i) give Alset Capital the right to extend the date by which it has to consummate a business combination from May 3, 2023, to November 3, 2023, on a month-to-month basis; and (ii) expand the methods that it may employ to not become subject to the “penny stock” rules of the Securities and Exchange Commission.
| 4 |
In connection with the Alset Capital Special Meeting, 6,648,964 shares of the Class A Common Stock of Alset Capital were tendered for redemption. Following this redemption, 2,449,786 shares of the period coveredClass A Common Stock of Alset Capital remained issued and outstanding, including 473,750 shares held by Alset Acquisition Sponsor, LLC and 1,976,036 public shares. Alset Acquisition Sponsor, LLC owns 2,156,250 shares of Class B Common Stock.
Name Change
During a Special Meeting of Stockholders on June 6, 2022, the stockholders approved the reincorporation of the Company in Texas and the change of the Company’s name to “Alset Inc.” The management believes that such new name will more fully reflect its current business model.
Purchase of Rental Business from Majority-Owned Subsidiary
On December 9, 2022, Alset Inc. entered into an agreement with Alset EHome Inc. and Alset International Limited pursuant to which Alset Inc. agreed to reorganize the ownership of its home rental business. Previously, Alset Inc. and certain majority-owned subsidiaries collectively owned 132 single-family rental homes in Texas. 112 of these rental homes are owned by subsidiaries of American Home REIT Inc. (“AHR”). Alset Inc. owns 85.4% of Alset International Limited, and Alset International Limited indirectly owns approximately 99.9% of Alset EHome Inc.
The closing of the transaction contemplated by this report,agreement was completed on January 13, 2023. Pursuant to this agreement, Alset Inc. has become the direct owner of AHR and its subsidiaries that collectively own these 112 homes, instead of such homes being owned indirectly through Alset International Limited’s subsidiaries.
Alset EHome Inc. sold AHR to Alset Inc. for a total consideration of $26,250,933, including the forgiveness of debt in the amount of $13,900,000, a promissory note in the amount of $11,350,933 and a cash payment of $1,000,000. This purchase price represents the book value of AHR as of November 23, 2020,30, 2022.
The closing of this transaction was approved by the shareholders of Alset International Limited and the transaction was closed on January 13, 2023. Certain members of Alset Inc.’s Board of Directors and management are also members of the Board of Directors and management of each of Alset International Limited and Alset EHome Inc.
Public Offering
On February 6, 2023, we entered into an underwriting agreementUnderwriting Agreement (the “Underwriting Agreement”) in connection with Aegis Capital Corp., as representative of the underwriters (“Aegis”), pursuant to which we agreed to sell to the underwriters in a firm commitment underwritten publican offering (the “Offering”) of an aggregate of 2,160,000 shares of our common stock, par value $0.001 per share (the “Common Stock”), with Aegis Capital Corp. (the “Underwriter”) as the underwriter, relating to an underwritten public offering of 1,727,273 shares of Common Stock at an initiala public offering price of $7.00$2.20 per share. Aegis hasThe Underwriting Agreement provides the Underwriter a 60 day over-allotment45-day option to purchase up to an additional 324,000212,863 shares of Common Stock atto cover over-allotments, if any.
The net proceeds to the initial publicCompany from the Offering were approximately $3.3 million, after deducting underwriting discounts and the payment of other offering price. expenses associated with the Offering that are payable by the Company.
The Offering closed on November 27, 2020.
| 5 |
Purchase of Travel Business
On June 14, 2023, Hotapp Blockchain Pte. Ltd., (“Hotapp”) a wholly owned subsidiary of Hapi Metaverse Inc., a majority owned subsidiary of the Company, entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) in connection with its purchase of all of the outstanding shares of Hapi Travel Limited, a Hong Kong corporation, from Business Mobile Intelligence Inc. (“BMI”) for a total consideration of $214,993 (the “Purchase Price”). In order to facilitate the Stock Purchase Agreement, Hapi Metaverse made a loan (the “Loan”) in an amount equal to the Purchase Price to Hotapp. Chan Heng Fai, the chairman of the Company, is also Chairman of Hotapp and the sole stockholder of BMI, and therefore recused himself from any deliberation or voting regarding the Stock Purchase Agreement and the Loan.
Purchase of Sentinel Brokers Company Inc. Shares
On May 22, 2023 the Company’s indirect subsidiary, SeD Capital Pte Ltd (“SeD Capital”), entered into a Stock Purchase Agreement, pursuant to which was declared effective bySeD Capital purchased 39.8 shares (19.9%) of the Common Stock of Sentinel Brokers Company Inc. (“Sentinel”) for the aggregate purchase price of $279,719. Sentinel is a broker-dealer operating primarily as a fiduciary intermediary, facilitating institutional trading of municipal and corporate bonds as well as preferred stock, and is registered with the Securities and Exchange Commission, on November 12, 2020. Aegis acted as lead book-running manager for the Offering and Westpark Capital, Inc. acted as co-manager.
Sale of Certain Lots
Sale of 131 Lots
On October 28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and an indirect, majority-owned subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Agreement, the Seller agreed to sell all of the approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.”
On November 28, 2022, the parties to the Agreement entered into an amendment to the Agreement, pursuant to which the COVID-19 pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted. 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 through September 2020, we continuedSeller agreed to sell approximately 131 lots instead of 242 lots, and the anticipated purchase price was reduced.
On April 13, 2023, the sale of the 131 lots was completed and the Seller received a total consideration of $6,615,500 from the Buyer.
The Seller was required to develop and improve the property at our Ballenger Run project (in Maryland) for the construction of town homesSeller’s cost pursuant to NVR. To date, sales of such town homes by NVR are up in 2020 comparedcertain development plans and government regulations prior to the first nine months of 2019. Such town homes are often soldclosing described above.
Agreement to first-time home buyers, who do not have to worry about selling their existing homes. We believe low interest rates have encouraged home sales. Many buyers opted to see home models at the project virtually. This technology allowed them to ask questions to sales staff and see the town homes.
On March 16, 2023, 150 CCM Black Oak project in Texas, we have strategically redesigned the lots over the past year for smaller “starter home” products that we believe will be more resilient in fluctuating real estate markets. Should we initiate sales at Black Oak, we believe the same implications described above, regarding our Ballenger Run project, may apply to our Black Oak project in the near future (including the general trend of customers’ interest shifting from urban to suburban areas). In addition, Houston and its surrounding areas have been economically impacted by the decline in energy prices in 2020. Unlike our Ballenger Run project, our Black Oak project may include our involvement in single family rental home development.
Agreement to Sell 189 Lots
On March 17, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Davidson Homes, LLC, an Alabama limited liability company (“Davidson”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 189 single-family detached residential lots developed within section 2 of Black Oak project. The sale of the first 94 lots closed on May 30, 2023. The sale of remaining lots is estimated to close at the end of the year 2023.
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Purchase of Value Exchange International, Inc. Shares
On October 17, 2022, our majority-owned subsidiary Hapi Metaverse entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Chan Heng Fai, who is the Chairman of Hapi Metaverse’s Board of Directors and the Chairman, Chief Executive Officer and largest stockholder of Alset EHome Inc. inPursuant to the Stock Purchase Agreement, Hapi Metaverse bought an aggregate amount of up to $2,990,000, as described in “Liquidity and Capital Resources” below. It is intended that this loan will be utilized to commence our residential initiatives.
Mr. Chan and another member of the project. Management continuesBoard of Directors of Hapi Metaverse, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to regularly superviseMr. Chan, two other members of the Ballenger Run project. Limitations onBoard of Directors of Alset Inc. are also members of the mobilityBoard of our managementDirectors of VEII (Mr. Wong Shui Yeung and staff may slow down our ability to enter into new transactions and expand existing projects.
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 NineSix Months Ended SeptemberJune 30, 20202023 and 20192022
| Three- Months Ended | Six-months Ended | |||||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Revenue | $ | 19,153,848 | $ | 926,340 | $ | 20,080,784 | $ | 2,878,577 | ||||||||
| Operating Expenses | $ | 14,044,352 | $ | 2,580,602 | $ | 17,061,018 | $ | 6,186,380 | ||||||||
| Other Expenses | $ | 10,922,902 | $ | 8,328,599 | $ | 13,156,354 | $ | 14,383,397 | ||||||||
| Net Loss | $ | 5,813,406 | $ | 9,982,861 | $ | 10,136,588 | $ | 17,913,314 | ||||||||
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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 | Change | |||||||||||||||
| June 30, 2023 | June 30, 2022 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 18,881,917 | $ | 650,810 | $ | 18,231,107 | 2,801 | % | ||||||||
| Biohealth | - | 132,222 | (132,222 | ) | -100 | % | ||||||||||
| Digital Transformation Technology | 14,034 | 7,701 | 6,333 | 82 | % | |||||||||||
| Other | 257,897 | 135,607 | 122,290 | 90 | % | |||||||||||
| Total Revenue | $ | 19,153,848 | $ | 926,340 | $ | 18,227,508 | 1,968 | % | ||||||||
| Six-months Ended | Change | |||||||||||||||
| June 30, 2023 | June 30, 2022 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 19,515,728 | $ | 1,924,916 | $ | 17,590,812 | 914 | % | ||||||||
| Biohealth | 12,786 | 749,693 | (736,907 | ) | -98 | % | ||||||||||
| Digital Transformation Technology | 28,074 | 7,701 | 20,373 | 265 | % | |||||||||||
| Other | 524,196 | 196,267 | 327,929 | 167 | % | |||||||||||
| Total Revenue | $ | 20,080,784 | $ | 2,878,577 | $ | 17,202,207 | 598 | % | ||||||||
Revenue was $2,148,923$19,153,848 and $5,306,863$926,340 for the three months ended SeptemberJune 30, 20202023 and 2019, respectively, reflecting a decrease of $3,157,940 or 60%.2022, respectively. Revenue was $7,179,919$20,080,784 and $2,878,577 for the ninesix months ended SeptemberJune 30, 2020, compared to $22,944,498 for the nine months ended September 30, 2019, reflecting a decrease of $15,764,579 or 69%. An2023 and 2022, respectively. The increase in property sales from the Ballenger Project and first sale of a section of Black Oak Project in the firstsecond quarter of 20192023 contributed to higher revenue in thatthis period. Pursuant
In late 2022 and early 2023, the Company entered into three contracts with builders to a lot purchase agreement dated July 3, 2018, 150 CCMsell multiple lots from its Black Oak Ltd sold 124project. The sales contemplated by these contracts are contingent on certain conditions which the parties to such contracts will need to meet and are expected to generate approximately $22 million of funds from operations, not including certain expenses that the Company will be required to pay. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.1 million revenue.
The Company plans to continue its near-term focus on lot sales to regional and national builders. Funds from such lot sales will substantially improve the Company’s liquidity, strengthen its financial position and meet is working capital requirements.
In May 2023, the Company entered into lease agreement for its model house located in the Company’sMontgomery County, Texas (AHR Black Oak project to Houston LD, LLC for a total purchase price of $6,175,000Lease Agreement”). The revenue from the lease was $4,200 in January 2019. For ourthe three and six months ending June 30, 2023.
In 2022 the last three homes in the Ballenger Project were sold. In this project, builders arewere required to purchase a minimum number of lots based on their applicable sale agreements. We collectcollected revenue 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 Run 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$37,725 in the three months ended on SeptemberJune 30, 20202022 to $0 in the three months ended June 30, 2023. Income from the sale of FFBs decreased from $116,088 in the six months ended June 30, 2022 to $0 in the six months ended June 30, 2023. The decrease is a result of the decreased sale of properties to homebuyers in 2023.
Revenue from rental business was $690,967 and 2019,$403,900 in the three months ended June 30, 2023 and 2022, respectively. Revenue from rental business was $1,324,778 and $636,482 in the six months ended June 30, 2023 and 2022, respectively. The Company expects that the revenue from iGalen was $1,331this business will continue to increase as we acquire more rental houses and $360,351, respectively, reflecting a decrease of $359,020 or almost 100%. During the nine months ended September 30, 2020 and 2019, the revenue from iGalen Inc. was $30,533 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.successfully rent them.
| 8 |
In October 2019,recent years, the Company expanded its biohealth segment to the South Korean market through one of the subsidiaries of Health Wealth Happiness Pte. Ltd.HWH International Inc., HWH World Inc (“HWH World”). HWH World 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$0 and $132,222 in revenue in ninethe three months ended SeptemberJune 30, 2020.
The category described as “Other” includes corporate and financial services, food and beverage business 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, food and beverage businesses and new venture businesses are small and diversified, and accordingly they are not separately addressed as one independent category. In the ninethree months ended SeptemberJune 30, 20202023 and 2019,2022, the revenue from other businesses was $0$258,096 and $28,350, respectively, generated by fund management services.$135,607, respectively. In the threesix months ended SeptemberJune 30, 20202023 and 2019,2022, the revenue from other businesses was $0$524,395 and $8,495, respectively.
Cost of our subdivision development properties, the sale of our biohealth productsRevenues and the rendering of digital transformation technology services through consulting fees. Sales of real properties accounted for approximately 99% of our total revenue in the first nine months of 2020 and sales of biohealth products accounted for approximately 1%. Sales of properties accounted for approximately 94% of our total revenue in first nine months of 2019 and sales of biohealth products accounted for approximately 6%.
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 | Change | |||||||||||||||
| June 30, 2023 | June 30, 2022 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 11,566,130 | $ | 532,233 | $ | 11,033,897 | 2,073 | % | ||||||||
| Biohealth | 95,290 | (53 | ) | 95,343 | -179,892 | % | ||||||||||
| Digital Transformation Technology | 4,571 | 2,792 | 1,779 | 64 | % | |||||||||||
| Other | 72,502 | 15,705 | 56,797 | 362 | % | |||||||||||
| Total Cost of Revenues | $ | 11,738,493 | $ | 550,677 | $ | 11,187,816 | 2,032 | % | ||||||||
| Six-months Ended | Change | |||||||||||||||
| June 30, 2023 | June 30, 2022 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 12,168,470 | $ | 1,625,942 | $ | 10,542,528 | 648 | % | ||||||||
| Biohealth | 109,657 | 11,985 | 97,672 | 815 | % | |||||||||||
| Digital Transformation Technology | 9,139 | 2,792 | 6,347 | 227 | % | |||||||||||
| Other | 140,508 | 24,508 | 116,000 | 473 | % | |||||||||||
| Total Cost of Revenues | $ | 12,427,774 | $ | 1,665,227 | $ | 10,762,547 | 646 | % | ||||||||
Cost of sales decreasedrevenues increased from $4,130,848$550,677 in the three months ended SeptemberJune 30, 20192022 to $1,616,377$11,738,493 in the three months ended SeptemberJune 30, 2020, reflecting a decrease2023. Cost of $2,514,107 or 61%, asrevenues increased from $1,665,227 in the six months ended June 30, 2022 to $12,427,774 in the three months ended June 30, 2023. The increase is a result of the decreaseincrease 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 Run and Black Oak projects.Project. 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 decreasedincreased from $1,176,379$375,663 to $532,546$7,415,355 in the three months ended SeptemberJune 30, 20192022 and 2020, respectively, reflecting a decrease of $643,833 or 55%.2023, respectively. The gross margin decreasedincreased from $3,766,698$1,213,350 to $1,570,616$7,653,010 in the ninesix months ended SeptemberJune 30, 20192022 and 2020, respectively, reflecting a decrease of $2,196,082 or 58%.2023, respectively. The decreaseincrease of gross margin was caused by the decrease of gross margin of Ballenger Run project, mostly due to the decreaseincrease in sales in the 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.Project.
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The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments.
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%) |
| Three-months Ended | Change | |||||||||||||||
| June 30, 2023 | June 30, 2022 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 552,184 | $ | 784,192 | $ | (232,008 | ) | -30 | % | |||||||
| Biohealth | 336,627 | 289,904 | 46,723 | 16 | % | |||||||||||
| Digital Transformation Technology | 62,527 | 45,713 | 16,814 | 37 | % | |||||||||||
| Other | 1,354,521 | 910,116 | 444,405 | 49 | % | |||||||||||
| Total Operating Expenses | $ | 2,305,859 | $ | 2,029,925 | $ | 275,934 | 14 | % | ||||||||
| Six-months Ended | Change | |||||||||||||||
| June 30, 2023 | June 30, 2022 | Dollars | Percentage | |||||||||||||
| Real Estate | $ | 992,201 | $ | 1,320,957 | $ | (328,756 | ) | -25 | % | |||||||
| Biohealth | 477,917 | 910,246 | (432,329 | ) | -47 | % | ||||||||||
| Digital Transformation Technology | 202,430 | 159,976 | 42,454 | 27 | % | |||||||||||
| Other | 2,960,696 | 2,129,974 | 830,722 | 39 | % | |||||||||||
| Total Operating Expenses | $ | 4,633,244 | $ | 4,521,153 | $ | 112,091 | 2 | % | ||||||||
The decrease of operating expenses of property developmentreal estate in 2020the first three and six months of 2023 compared with 2019to the same period of 2022 was mostly caused by the recognition of $3.9 million impairmentdecrease rental related expenses. Increase in the first half of 2019. The decrease of research and development expense in biohealth segment because of the discontinued operations was the main reason of decrease of operating expenses in biohealth segmentour other businesses is mainly caused by the increase in 2020 compared with 2019. The increase expense in other segment was mostly due 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 SeptemberJune 30, 2020,2023, the Company had other expense of $12,946,960$10,922,902 compared to other incomeexpenses of $1,197,775$8,328,599 in the three months ended SeptemberJune 30, 2019, reflecting an increase in other expense of $14,144,735 or 1,181%.2022. In the ninesix months ended SeptemberJune 30, 2020,2023, the Company had other expense of $10,203,323$13,156,354 compared to other incomeexpenses of $357,436$14,383,397 in the ninesix months ended SeptemberJune 30, 2019, reflecting an increase in other expense of $10,560,759 or 2,955%.2022. The change in realized and unrealized gain (loss) on securities investmentinvestments and loss on foreign exchange transactionsconsolidation of Alset Capital Acquisition Corp. are the primary reasons for the volatility in these two periods. Unrealized lossgain on securities investment was $42,169,116 and $43,761,763 during nine and$18,840,726 in the three months ended June 30, 2023, compared to $6,867,375 loss in the three months ended June 30, 2022. Unrealized gain on Septembersecurities investment was $17,652,880 in the six months ended June 30, 2020, respectively. Unrealized2023, compared to $10,766,390 loss in the six months ended June 30, 2022. Realized 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$10,557,229 the three months ended on SeptemberJune 30, 2019. Foreign exchange transaction2023, compared to a loss was $415,203of $2,918,668 in the three months ended SeptemberJune 30, 2020,2022. Realized loss on security investment was $10,688,542 the six months ended June 30, 2023, compared to $757,068 gaina loss of $6,355,451 in the six months ended June 30, 2022. Loss on consolidation was $21,657,036 in the three and six months ended June 30, 2023, compared to loss on consolidation of $0 in the three and six months ended June 30, 2022.
Net Loss
In the three months ended SeptemberJune 30, 2019. Foreign exchange transaction gain was $960,268 in the nine months ended September 30, 2020, compared to $438,608 gain in the nine months ended September 30, 2019.
Liquidity and Capital Resources
Our real estate assets have increaseddecreased to $24,990,366$39,445,204 as of SeptemberJune 30, 20202023 from $23,884,704$54,618,729 as of December 31, 2019.2022. This increasedecrease primarily reflects a higher increasethe sale of properties in the capitalized costs related to the construction in progress and impairment recorded on the Black Oak project than in the cost of sales. project.
Our cash has increased from $2,774,587$17,827,383 as of December 31, 20192022 to $8,754,202$28,827,961 as of SeptemberJune 30, 2020.2023. Our liabilities increased from $13,649,449$4,827,221 at December 31, 20192022 to $14,499,650$8,152,468 at SeptemberJune 30, 2020.2023. Our total assets have increased to $101,474,030$168,441,811 as of SeptemberJune 30, 20202023 from $35,872,780$153,490,336 as of December 31, 20192022 mainly due to the increase in cash and investmentsheld in securities.
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The maturity date of this loan is May 1, 2022. Certain subsidiaries ofmanagement believes that the available cash in bank accounts and favorable cash revenue from real estate projects are sufficient to fund our company areoperations for at least the guarantors of this loan.
Summary of Cash Flows for the NineThree Months Ended SeptemberJune 30, 20202023 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) |
| Six-months Ended | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | 7,409,770 | $ | (16,125,804 | ) | |||
| Net cash used in investing activities | $ | (606,983 | ) | $ | (8,308,426 | ) | ||
| Net cash provided by financing activities | $ | 3,416,971 | $ | 6,041,139 | ||||
Cash Flows from Operating Activities
Net cash provided by operating activities was $7,409,770 in the first six months of 2023, as compared to net cash used in operating activities was $1,011,440of $16,125,804 in the first nine monthssame period of 2020, as compared to net2022. Property sales from the Black Oak project in 2023 were the main reason for the cash provided by operating activities of $8,964,900 in the same period of 2019, reflecting an increase 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 the nine months ended September 30, 2020.
Cash Flows from Investing Activities
Net cash used in investing activities was $66,824$606,983 in the first ninesix months of 2020,2023, as compared to net cash used in investing activities of $36,000$8,308,426 in the same period of 2019, reflecting an increase of $30,824 or 86%.2022. In the ninesix months ended SeptemberJune 30, 2020,2023 we invested $907,212 in marketable securities, issued $1,628,010 in loans to related parties and received $301,976$2,674,653 from the liquidationrepayment of Global Opportunity Fund. We also invested $200,000 in a promissory note of a related party notes receivable. In the six months ended June 30, 2022 we invested $6,662,017 in marketable securities, invested $722,817 to purchase real estate properties and spent $158,667 on purchase of investments.
Cash Flows from Financing Activities
Net cash provided by financing activities was $6,700,886$3,416,971 in the ninesix months ended SeptemberJune 30, 2020, comparing2023, compared to $3,032,489 net cash used in the nine months ended September 30, 2019, reflecting an increase in cash provided of $9,733,375 or 321%. Such increase$6,041,139 in the six months ended June 30, 2022. The cash provided by financing activities in the first six months of 2023 is primarily caused by the increase in cash receivedproceeds from the exercisestock issuance of subsidiary warrants.$3,433,921. During the ninesix months ended SeptemberJune 30, 2020,2022, we received cash proceeds of $10,764,837$6,213,000 from the exercise of subsidiary warrants, $177,300 from the sale of our HotApp shares to individual investors and $738,783 from a loan. The Company also distributed $197,400 to one minority interest investor and repaid $4,450,572 of promissory note held by 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 shares 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 millionconversion of related party loans.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the ninethree months ended SeptemberJune 30, 20202023 or the year ended December 31, 2019.2022. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
Impact of Foreign Exchange Rates
The effect of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from our corporate entities in Singapore to the ones in the United States and which were approximately $36.2$37 million and $41.1$51 million on SeptemberJune 30, 20202023 and December 31, 2019,2022, respectively, are the reason for the significant fluctuation of foreign currency transaction Gain or Loss on the Condensed Consolidated Statements of Operations and Other Comprehensive Income.Loss. Because the intercompany loan balances between our companies in Singapore and United States will remain at approximately $40$37 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2020,2023, especially given that the foreign exchange rate may and is expected to be volatile. If the amount of intercompany loan is lowered in the future, the effect will also be reduced. However, at this moment, we do not expect to repay the intercompany loans in the short term.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption.
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Seasonality
The real estate business is subject to seasonal shifts in costs as certain work is more likely to be performed at certain times of the year. This may impact the expenses of our subsidiary Alset EHome Inc. from time to time. In addition, should we commence building homes, we are likely to experience periodic spikes in sales as we commence the sales process at a particular location.
Item 3. 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 SeptemberJune 30, 20202023 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 SeptemberJune 30, 20202023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Not Applicable for the period covered by this report.
Not applicable to smaller reporting companies.
Not Applicable.
None.
Not Applicable.
| 12 |
The following documents are filed as a part of this report:
| * | Filed herewith. |
| ** | Furnished herewith. |
(1) Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
(2) Portions of this exhibit (indicated by asterisks) have been omitted under rules of the SEC permitting the confidential treatment of select information. The Registrant agrees to furnish a copy of all omitted information to the SEC upon its request.
| 13 |
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.
| August 14, 2023 | 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) | |||
| August 14, 2023 | 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) |
| 14 |