Alset Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate, competition within our chosen industry, including competition from much larger competitors, technological advances and failure to successfully develop business relationships. Business Overview We are a diversified holding company principally engaged through our subsidiaries in the development of EHome communities and other real estate, financial services, digital transformation technologies, biohealth activities and consumer products with operations in the United States, Singapore, Hong Kong, Australia and South Korea. We manage a significant portion of our businesses through our 85.4% owned subsidiary, Alset International Limited, a public company traded on the Singapore Stock Exchange. Through this subsidiary (and indirectly, through other public and private U.S. and Asian subsidiaries), we are actively developing real estate projects near Houston, Texas and in Frederick, Maryland, in our real estate segment. In our digital transformation technology segment, we focus on serving business-to-business (B2B) needs in e-commerce, collaboration and social networking functions. Our biohealth segment includes the sale of consumer products. We also have ownership interests outside of Alset International, including a 36.9% equity interest in American Pacific Bancorp Inc., an indirect 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 investment management, alternative trading, secure living, and alternative energy. DSS Inc. is listed on the NYSE American (NYSE: DSS). Value Exchange International, Inc. is a provider of information technology services for businesses, and is traded on the OTCQB (OTCQB: VEII). NECV is a publicly traded consumer products company (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 OTCQB (OTCQB: SHRG). 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 Class 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 agreement was completed on January 13, 2023. Pursuant to this agreement, Alset Inc. has become the direct owner of AHR and its subsidiaries that collectively own these 112 homes, instead of such homes being owned indirectly through Alset International Limited’s subsidiaries. Alset EHome Inc. sold AHR to Alset Inc. for a total consideration of $26,250,933, including the forgiveness of debt in the amount of $13,900,000, a promissory note in the amount of $11,350,933 and a cash payment of $1,000,000. This purchase price represents the book value of AHR as of November 30, 2022. The closing of this transaction was approved by the shareholders of Alset International Limited and the transaction was closed on January 13, 2023. Certain members of Alset Inc.’s Board of Directors and management are also members of the Board of Directors and management of each of Alset International Limited and Alset EHome Inc. Public Offering On February 6, 2023, we entered into an Underwriting Agreement (the “Underwriting Agreement”) in connection with an offering (the “Offering”) of our common stock, par value $0.001 per share (the “Common Stock”), with Aegis Capital Corp. (the “Underwriter”) as the underwriter, relating to an underwritten public offering of 1,727,273 shares of Common Stock at a public offering price of $2.20 per share. The Underwriting Agreement provides the Underwriter a 45-day option to purchase up to an additional 212,863 shares of Common Stock to cover over-allotments, if any. The net proceeds to the Company from the Offering were approximately $3.3 million, after deducting underwriting discounts and the payment of other offering expenses associated with the Offering that are payable by the Company. The Offering closed on February 8, 2023. The Common Stock was being offered pursuant to an effective registration statement on Form S-3 (File No. 333-264234), as well as a prospectus supplement in connection with the Offering filed with the Securities and Exchange Commission. 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 SeD 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, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and is a member of the Securities Investor Protection Corporation (“SIPC”). The Company has significant influence over Sentinel and its CEO holds a director position on Sentinel’s Board of Directors. Sale of Certain Lots Sale of 131 Lots On October 28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and an indirect, majority-owned subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Agreement, the Seller agreed to sell all of the approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” On November 28, 2022, the parties to the Agreement entered into an amendment to the Agreement, pursuant to which the Seller agreed to sell approximately 131 lots instead of 242 lots, and the anticipated purchase price was reduced. On April 13, 2023, the sale of the 131 lots was completed and the Seller received a total consideration of $6,615,500 from the Buyer. The Seller was required to develop and improve the property at the Seller’s cost pursuant to certain development plans and government regulations prior to the closing described above. Agreement to Sell 110 Lots On March 16, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company (“Rausch Coleman”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 110 single-family detached residential lots which comprise a section of the Lakes at Black Oak. The transaction closed on May 15, 2023. 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. 6 Purchase of Value Exchange International, Inc. Shares On October 17, 2022, our majority-owned subsidiary Hapi Metaverse entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Chan Heng Fai, who is the Chairman of Hapi Metaverse’s Board of Directors and the Chairman, Chief Executive Officer and largest stockholder of Alset Inc. Pursuant to the Stock Purchase Agreement, Hapi Metaverse bought an aggregate of 7,276,163 shares of Value Exchange International Inc. (“VEII”) for the following purchase prices: (i) $1,733,079 for 7,221,163 shares, representing a price of $0.24 per share; (ii) $2,314 for 10,000 shares, representing a price of $0.2314 per share; (iii) $5,015 for 25,000 shares, representing a price of $0.2006 per share; and (iv) $3,326 for 20,000 shares, representing a price of $0.1663 per share. Collectively, these purchases represent an aggregate purchase price of $1,743,734 for 7,276,163 shares of VEII. Such purchase prices were negotiated between the parties to the Stock Purchase Agreement. Mr. Chan and another member of the Board of Directors of Hapi Metaverse, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of the Board of Directors of Alset Inc. are also members of the Board of Directors of VEII (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). 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 Six Months Ended June 30, 2023 and 2022 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 7 Revenue The following tables set forth period-over-period changes in revenue for each of our reporting segments: 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 $19,153,848 and $926,340 for the three months ended June 30, 2023 and 2022, respectively. Revenue was $20,080,784 and $2,878,577 for the six months ended June 30, 2023 and 2022, respectively. The increase in property sales from the Black Oak Project in the second quarter of 2023 contributed to higher revenue in this period. In late 2022 and early 2023, the Company entered into three contracts with builders to sell multiple lots from its Black Oak project. 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 Montgomery County, Texas (AHR Black Oak Lease Agreement”). The revenue from the lease was $4,200 in the three and six months ending June 30, 2023. In 2022 the last three homes in the Ballenger Project were sold. In this project, builders were required to purchase a minimum number of lots based on their applicable sale agreements. We collected revenue only from the sale of lots to builders. We are not involved in the construction of homes at the present time. Income from the sale of Front Foot Benefits (“FFBs”), assessed on Ballenger Run project lots, decreased from $37,725 in the three months ended June 30, 2022 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 $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 this business will continue to increase as we acquire more rental houses and successfully rent them. 8 In recent years, the Company expanded its biohealth segment to the South Korean market through one of the subsidiaries of HWH International Inc., HWH World Inc (“HWH World”). HWH World operates based on a direct sale model of health supplements. HWH World recognized $0 and $132,222 in revenue in the three months ended June 30, 2023 and 2022, respectively. HWH World recognized $12,587 and $749,693 in revenue in the six months ended June 30, 2023 and 2022, respectively. The category described as “Other” includes corporate and financial services, food and beverage business and new venture businesses. “Other” includes certain costs that are not allocated to the reportable segments, primarily consisting of unallocated corporate overhead costs, including administrative functions not allocated to the reportable segments from global functional expenses. The financial services, food and beverage businesses and new venture businesses are small and diversified, and accordingly they are not separately addressed as one independent category. In the three months ended June 30, 2023 and 2022, the revenue from other businesses was $258,096 and $135,607, respectively. In the six months ended June 30, 2023 and 2022, the revenue from other businesses was $524,395 and $196,267, respectively, generated by Korean and Singaporean café shops and restaurants. Cost of Revenues and Operating Expenses The following tables sets forth period-over-period changes in cost of revenues for each of our reporting segments: Three-months Ended Change 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 revenues increased from $550,677 in the three months ended June 30, 2022 to $11,738,493 in the three months ended June 30, 2023. Cost of revenues 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 increase in sales in the Black Oak Project. Capitalized construction expenses, finance costs and land costs are allocated to sales. We anticipate the total cost of revenues to increase as revenue increases. The gross margin increased from $375,663 to $7,415,355 in the three months ended June 30, 2022 and 2023, respectively. The gross margin increased from $1,213,350 to $7,653,010 in the six months ended June 30, 2022 and 2023, respectively. The increase of gross margin was caused by the increase in sales in the Black Oak Project. 9 The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments. 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 real estate in the first three and six months of 2023 compared to the same period of 2022 was mostly caused by the decrease rental related expenses. Increase in expenses in our other businesses is mainly caused by the increase in professional and consulting fees. Other Income (Expense) In the three months ended June 30, 2023, the Company had other expense of $10,922,902 compared to other expenses of $8,328,599 in the three months ended June 30, 2022. In the six months ended June 30, 2023, the Company had other expense of $13,156,354 compared to other expenses of $14,383,397 in the six months ended June 30, 2022. The change in realized and unrealized gain (loss) on securities investments and loss on consolidation of Alset Capital Acquisition Corp. are the primary reasons for the volatility in these two periods. Unrealized gain on securities investment was $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 securities investment was $17,652,880 in the six months ended June 30, 2023, compared to $10,766,390 loss in the six months ended June 30, 2022. Realized loss on security investment was $10,557,229 the three months ended June 30, 2023, compared to a loss of $2,918,668 in the three months ended June 30, 2022. Realized loss on security investment was $10,688,542 the six months ended June 30, 2023, compared to a 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 June 30, 2023 the Company had net loss of $5,813,406 compared to net loss of $9,982,861 in the three months ended June 30, 2022. In the six months ended June 30, 2023 the Company had net loss of $10,136,588 compared to net loss of $17,913,314 in the six months ended June 30, 2022. Liquidity and Capital Resources Our real estate assets have decreased to $39,445,204 as of June 30, 2023 from $54,618,729 as of December 31, 2022. This decrease primarily reflects the sale of properties in the Black Oak project. Our cash has increased from $17,827,383 as of December 31, 2022 to $28,827,961 as of June 30, 2023. Our liabilities increased from $4,827,221 at December 31, 2022 to $8,152,468 at June 30, 2023. Our total assets have increased to $168,441,811 as of June 30, 2023 from $153,490,336 as of December 31, 2022 mainly due to increase in cash held in Trust Account after the consolidation of Alset Capital Acquisition Corp. 10 The management believes that the available cash in bank accounts and favorable cash revenue from real estate projects are sufficient to fund our operations for at least the next 12 months. Summary of Cash Flows for the Three Months Ended June 30, 2023 and 2022 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 of $16,125,804 in the same period of 2022. Property sales from the Black Oak project in 2023 were the main reason for the cash provided by operating activities in 2023. Cash Flows from Investing Activities Net cash used in investing activities was $606,983 in the first six months of 2023, as compared to net cash used in investing activities of $8,308,426 in the same period of 2022. In the six months ended June 30, 2023 we invested $907,212 in marketable securities, issued $1,628,010 in loans to related parties and received $2,674,653 from repayment of 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 $602,161 in real estate improvements. Cash Flows from Financing Activities Net cash provided by financing activities was $3,416,971 in the six months ended June 30, 2023, compared to net cash provided of $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 caused by the proceeds from stock issuance of $3,433,921. During the six months ended June 30, 2022, we received $6,213,000 from conversion of related party note payable to common stock and we repaid $171,861 of debt. Impact of Inflation We believe that inflation has not had a material impact on our results of operations for the three months ended June 30, 2023 or the year ended December 31, 2022. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition. Impact of Foreign Exchange Rates The effect of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from Singapore to the United States and which were approximately $37 million and $51 million on June 30, 2023 and December 31, 2022, respectively, are the reason for the significant fluctuation of foreign currency transaction Gain or Loss on the Condensed Consolidated Statements of Operations and Other Comprehensive Loss. Because the intercompany loan balances between Singapore and United States will remain at approximately $37 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 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. 11 Seasonality The real estate business is subject to seasonal shifts in costs as certain work is more likely to be performed at certain times of the year. This may impact the expenses of our subsidiary Alset EHome Inc. from time to time. In addition, should we commence building homes, we are likely to experience periodic spikes in sales as we commence the sales process at a particular location. Item 3. Quantitative and Qualitative Disclosures about Market Risk As a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, the Company is not required to provide the information required by this Item.