Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
Form 10-K 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-K that are not statements of historical fact including, without limitation, statements
under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the
Company’s financial position, business strategy and the plans and objectives of management for future operations, may be deemed
to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”,
“believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended
to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results
may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not
limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including
competition from much larger competitors; technological advances and failure to successfully develop business relationships. Such forward-looking
statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s
management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors
detailed in our filings with the SEC.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and uncertainties.
Business
Overview
We
are a diversified holding company principally engaged through our subsidiaries in the development of EHome communities and other real
estate, financial services, digital transformation technologies, biohealth activities and consumer products with operations in the United
States, Singapore, Hong Kong, Australia, South Korea, the People’s Republic of China and Taiwan. We manage our three principal
businesses primarily through our 85.8% owned subsidiary, Alset International Limited, a public company traded on the Singapore Stock
Exchange (“Alset International”). Through this subsidiary (and indirectly, through other public and private U.S. and Asian
subsidiaries), we are actively developing real estate projects near Houston, Texas in our real estate segment. In our digital transformation
technology segment, we focus on serving business-to-business (B2B) needs in e-commerce, collaboration and social networking functions.
Our biohealth segment includes the sale of consumer products.
Additionally,
we have ownership interests outside of Alset International, including a 36.9% equity interest in American Pacific Financial, Inc., a
43.6% equity interest in DSS Inc. (“DSS”), an indirect 45.8% equity interest in Value Exchange International, Inc., a
29.0% equity interest in Sharing Services Global Corporation, and a 41.5% equity interest in New Energy Asia Pacific Company Limited. American Pacific Financial, Inc. is a financial network holding company.
DSS is a multinational company operating businesses with five divisions: product packaging, biotechnology, direct marketing, commercial
lending, and securities and investment management. DSS Inc. is listed on the NYSE American (NYSE: DSS). Value Exchange International,
Inc. is a provider of information technology services for businesses, and is traded on the OTC Expert Market (OTC: VEII). Sharing Services
Global Corporation (OTC: SHRG), is a publicly traded company dedicated to building shareholder value by developing or acquiring businesses,
products and technologies in the direct selling industry and other industries that augment the Company’s product and services portfolio,
business competencies, and geographic reach.
We
generally acquire majority and/or control stakes in innovative and promising businesses that are expected to appreciate in value over
time. Our emphasis is on building businesses in industries where our management team has in-depth knowledge and experience, or where
our management can provide value by advising on new markets and expansion. We have at times provided a range of global capital and management
services to these companies in order to gain access to Asian markets. We have historically favored businesses that improve an individual’s
quality of life or that improve the efficiency of businesses through technology in various industries. We believe our capital and management
services provide us with a competitive advantage in the selection of strategic acquisitions, which creates and adds value for our Company
and our stockholders.
Additionally,
the Company operates a portfolio of trading securities with the objective of generating profits from short-term fluctuations in market
prices. The portfolio is actively managed, and securities are bought and sold with the intent to realize gains from price movements within
a short-term horizon.
34
Operating
segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly
by the chief operating decision makers (the “CODMs”), or decision–making group, in deciding how to allocate resources
and in assessing performance. The Company’s chief operating decision makers are the two Co-CEOs, who review and assess the performance
of the Company as a whole. The Company reports its segment information to reflect the manner in which the CODMs review and assess performance.
The Company has four operating segments based on the products and services we offer, which include three of our principal businesses
– real estate, digital transformation technology and biohealth – as well as a fourth category consisting of certain other
business activities. In determination of segments, the Company, together with its CODMs, considers factors that include the nature of
business activities, allocation of resources and management structure.
The
primary financial measures used by the CODMs to evaluate performance and allocate resources are net income (loss) and operating income
(loss). The CODMs use net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations
and as part of the Company’s internal planning and forecasting processes. Information on net income (loss) and operating income
(loss) is disclosed in the Consolidated Statements of Income. Segment expenses and other segment items are provided to the CODMs on the
same basis as disclosed in the Consolidated Statements of Income.
The
CODMs do not evaluate performance or allocate resources based on segment assets.
Our
Revenue Model
Our
total revenue for the years ended December 31, 2025, and 2024, was $4,470,875 and $21,115,899, respectively. Our net losses for the years
ended December 31, 2025, and 2024, were $49,350,566 and $4,165,816, respectively.
We
currently recognize revenue from the sale of our subdivision development properties, rental homes, the sale of our biohealth products,
food and beverage business, and other activities. Sales of real properties accounted for approximately 0%, revenue from home rentals
accounted for approximately 52% and revenue from other activities accounted for approximately 48% of our total revenue in the year ended
December 31, 2025. Sales of real properties accounted for approximately 79%, revenue from home rentals accounted for approximately 14%
and revenue from other activities accounted for approximately 7% of our total revenue in the year ended December 31, 2024.
From
a geographical perspective, we recognized 52% and 93% of our total revenue in the years ended December 31, 2025, and 2024, respectively,
in the United States. 1% and 0% of our revenue in 2025 and 2024, respectively, was recognized from our sales in South Korea. 42% and
7% of our revenue in 2025 and 2024, respectively, was recognized from our sales in Singapore. 5% and 0% of our revenue in 2025 and 2024,
respectively, was recognized from our sales in Taiwan.
We
believe that, on an ongoing basis, revenue generated from our property development business will decline as a percentage of our total
revenue, as we expect to experience greater revenue contribution from our rental business, digital transformation technology, biohealth
businesses, food and beverage business and future business acquisitions.
Matters
that May or Are Currently Affecting Our Business
In
addition to the matters described above, the primary challenges and trends that could affect or are affecting our financial results include:
●
Our
ability to improve our revenue through cross-selling and revenue-sharing arrangements among our diverse group of companies;
●
Our
ability to identify complementary businesses for acquisition, obtain additional financing for these acquisitions, if and when needed,
and profitably integrate them into our existing operations;
●
Our
ability to attract competent and skilled technical and sales personnel for each of our businesses at acceptable compensation levels
to manage our overhead; and
●
Our
ability to control our operating expenses as we expand each of our businesses and product and service offerings.
35
Summary
of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
Our
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). The 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.
Use
of Estimates and Critical Accounting Estimates and Assumptions
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, recoverability and useful lives of property and equipment, valuation of real
estate assets, allocation of development costs and capitalized interest to sold lots, the valuation allowance of deferred taxes, contingencies
and equity compensation. Actual results could differ from those estimates.
In
our property development business, land acquisition costs are allocated to each lot based on the area method, the size of the lot compared
to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total
expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price
of the sold lot compared to the expected sales values of all lots in the project.
If
allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable,
those costs would be allocated based on area method.
When
the Company purchases properties but does not receive the assessment information from the county, the Company allocates the values between
land and building based on the data of similar properties. The Company makes appropriate adjustments once the assessment from the county
is received. At the same time, any necessary adjustments to depreciation expense are made in the income statement.
Revenue
Recognition and Cost of Sales
The
following represents a disaggregation of our revenue recognition policies by segment:
Real
Estate
●
Property Sales. Part of the Company’s real estate business is land development. The Company purchases land and develops
it into residential communities. The developed lots are sold to builders (customers) for the construction of new homes. The builders
enter into a sales contract with the Company before they take the lots. The prices and timeline are determined and agreed upon in the
contract. 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 Lakes at Black Oak and Alset Villas projects, which
represented approximately 0% and 79% of the Company’s revenue in the years ended on December 31, 2025 and 2024, respectively, 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.
36
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 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 performance obligation. The builders do the inspections to make sure all conditions/requirements
are met before taking title of lots. The Company recognizes revenue at a point in time when title is transferred. The Company does not
have further performance obligations or continuing involvement once title is transferred. Revenue is recognized at a point in time.
●
Rental Revenue. The Company leases real estate properties to its tenants under leases that are predominately classified as operating
leases, in accordance with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and
revenue from the collection of lease termination fees.
Rent
from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease.
Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally,
at the end of the lease term, the Company provides the tenant with a one-year renewal option, including mostly the same terms and conditions
provided under the initial lease term, subject to rent increases.
The
Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented
within deferred revenues and other payables on the Company’s 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 years ended December 31,
2025 and 2024, the Company did not recognize any deferred revenue and collected all rents due.
●
Cost of Sales. Land acquisition costs are allocated to each lot based on the area method, the size of the lot comparing to the
total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected
development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the
sold lot compared to the expected sales values of all lots in the project.
If
allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable,
those costs could also be allocated based on area method, the size of the lot comparing to the total size of all lots in the project.
Cost
of rental revenue consists primarily of the costs associated with management and leasing fees to our management company, repairs and
maintenance, depreciation and other related administrative costs. Utility expenses are paid directly by tenants.
Other
Businesses
●
Food and Beverage . The Company, through Alset F&B One 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.
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. In the second quarter of 2024,
the Company ceased operations of its subsidiary Alset F&B PLQ.
37
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 (“Hapi Cafes”).
The
cafes are operated by subsidiaries of HCI-T, namely Hapi Café SG Pte. Ltd. in Singapore and Hapi Café Korea Inc. in Seoul,
South Korea. Hapi Cafes are distinctive lifestyle café outlets that strive to revolutionize the way individuals dine, work, and
live, by providing a conducive environment for everyone to relish the four facets – health and wellness, fitness, productivity,
and recreation all under one roof. On September 13, 2025, the Company ceased operations of its subsidiary Hapi Café Korea Inc.
In
2023 the Company incorporated new subsidiaries Guangdong LeFu Wealth Investment Consulting Co., Ltd. (f.k.a. Shenzhen Leyouyou Catering
Management Co., Ltd.) and Dongguan Leyouyou Catering Management Co., Ltd. in the People’s Republic of China. These companies will
be principally engaged in the food and beverage business in Mainland China.
Additionally,
through its subsidiary Hapi Group HK Limited (f.k.a. MOC HK Limited), the Company is focusing on operating café business in Hong
Kong. This business was acquired on October 5, 2022. During the acquisition, a goodwill of $60,343 had been generated for the Company.
The café was closed on September 16, 2024 and the goodwill was impaired during the year ended December 31, 2024.
The
revenue earned from Food and Beverage businesses for the years ended December 31, 2025 and 2024 were $1,641,605 and $1,507,715, respectively.
●
Remaining performance obligations. As of December 31, 2025 and 2024, there were no remaining performance obligations or continuing
involvement, as all service obligations within the other business activities segment have been completed.
Real
Estate Assets
Real
estate assets are recorded at cost, except when acquired real estate assets meet the definition of a business combination in accordance
with ASC 805, “Business Combinations,” which 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
did not capitalize construction costs in the years ended December 31, 2025 and 2024.
The
Company’s policy is to obtain an independent third-party valuation for each major project in the United States as part of our assessment
of identifying potential triggering events for impairment. Management may use the market comparison method to value other relatively
small projects. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant
and Equipment (“ASC 360”), the Company applies a fair value-based impairment test to the net book value assets on an
annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
The
Company did not record impairment on any of its projects during the years ended on December 31, 2025 and 2024.
The
Company did not have any real estate property under development as of December 31, 2025 or December 31, 2024.
38
Results
of Operations
Summary
of Consolidated Statements of Operations and Other Comprehensive Loss for the Years Ended December 31, 2025 and 2024
Years Ended December 31,
2025
2024
Revenue
$ 4,470,875
$ 21,115,899
Operating Expenses
(19,621,458 )
(25,232,975 )
Other (Expenses) Income
(33,767,897 )
102,046
Income Tax Expense
(432,086 )
(150,786 )
Net Loss
$ (49,350,566 )
$ (4,165,816 )
Revenue
The
following table sets forth period-over-period changes in revenues for each of our reporting segments:
Years Ended December 31,
Change
2025
2024
Dollars
Percentage
Real Estate
$ 2,829,270
$ 19,608,184
$ (16,778,914 )
-86 %
Digital Transformation Technology
172
-
172
100 %
Other
1,641,433
1,507,715
133,718
9 %
Total revenue
$ 4,470,875
$ 21,115,899
$ (15,645,266 )
-79 %
Revenue
was $4,470,875 and $21,115,899 for the years ended December 31, 2025 and 2024, respectively. The decrease in property sales in 2025 caused
lower revenue in this period.
In
late 2022 and early 2023, the Company entered into three contracts with builders to sell multiple lots from its Lakes at Black Oak project.
The sales contemplated by these contracts were contingent on certain conditions which the parties to such contracts had to meet and were
expected to generate approximately $23 million of funds from operations, not including certain expenses that the Company was required
to pay. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.1 million revenue. The sale of remaining
lots closed on January 4, 2024 generating approximately $5.0 million revenue.
On
November 13, 2023, the Company entered into two contracts with builders to sell multiple lots from its Lakes at Black Oak and Alset Villa
projects. The closing of these transactions depended on the satisfaction of certain conditions. The sale of the first 70 lots closed
on July 1, 2024 generating approximately $3.8 million and the sale of the 72 lots closed on October 10, 2024 generating approximately
$3.9 million. The sale of lots in Alset Villa project closed on December 17, 2024 generating approximately $3.8 million.
Revenue
from the rental business was $2,829,270 and $2,891,807 for the years ended December 31, 2025 and 2024, respectively. The Company expects
that the revenue from this business will continue to increase as we acquire more rental houses and successfully rent them.
The
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 independent categories. In the years ended December 31, 2025 and 2024, the revenue from other businesses was $1,641,433
and $1,507,715, respectively, generated mainly by Korean, Taiwanese and Singaporean café shops and restaurants.
39
Operating
Expenses
The
following table sets forth period-over-period changes in cost of sales for each of our reporting segments:
Years Ended December 31,
Change
2025
2024
Dollars
Percentage
Real Estate
$ 2,580,462
$ 12,034,348
$ (9,453,886 )
-79 %
Digital Transformation Technology
247
-
223
100 %
Biohealth
-
3,370
(3,370 )
-100 %
Other
641,206
744,906
(103,700 )
-14 %
Total cost of sales
$ 3,221,915
$ 12,782,624
$ (9,560,709 )
-75 %
Cost
of sales decreased from $12,782,624 in the year ended December 31, 2024 to $3,221,915 in the year ended December 31, 2025, as a result
of the decrease in the number of lots sold in the Lakes at Black Oak project. Capitalized construction expenses, finance costs and land
costs are allocated to sales.
The
gross margin decreased from $8,333,275 to $1,248,960 in the years ended December 31, 2024 and 2025, respectively. The decrease of gross
margin was caused by the decrease in the number of lots sold in the Lakes at Black Oak project.
The
following table sets forth period-over-period changes in operating expenses for each of our reporting segments:
Years Ended December 31,
Change
2025
2024
Dollars
Percentage
Real Estate
$ 3,467,772
$ 1,793,188
$ 1,674,584
93 %
Digital Transformation Technology
590,995
616,403
(25,408 )
-4 %
Biohealth
1,366,561
1,076,095
290,466
27 %
Other
10,974,215
8,964,666
2,009,549
22 %
Total operating expenses
$ 16,399,543
$ 12,450,351
$ 3,949,191
32 %
The
increase of operating expenses in the twelve months ended December 31, 2025 compared to the same period of 2024 was mostly caused by
increase in bonus payments to executives and professional fees.
Other
(Expense) Income
In
the year ended December 31, 2025, the Company had other expense of $33,767,897 compared to other income of $102,046 in the year
ended December 31, 2024. The changes in realized and unrealized gain/loss on securities investment and impairment of equity method
investment are the primary reasons for the volatility in these two periods. Realized loss on securities investment was $3,208,972 in
year ended December 31, 2025, compared to $461,247 gain in the year ended December 31, 2024. Unrealized loss on securities
investment was $2,451,237 in year ended December 31, 2025, compared to $942,213 loss in the year ended December 31, 2024. Additionally, in 2025 the Company impaired $30,185,404 of equity method investment.
Net
Loss
In
the year ended December 31, 2025, the Company had net loss of $49,350,566 compared to net loss of $4,165,816 in the year ended December
31, 2024.
Liquidity
and Capital Resources
Our
real estate assets have decreased to $29,620,952 as of December 31, 2025, from $30,695,669 as of December 31, 2024. This decrease reflects
depreciation expenses on the rental properties.
Our
cash has decreased from $27,243,787 as of December 31, 2024 to $25,184,990 as of December 31, 2025. Our liabilities increased from $6,563,126
at December 31, 2024 to $6,923,965 at December 31, 2025. Our total assets have increased to $136,587,114 as of December 31, 2025 from
$96,761,977 as of December 31, 2024 due to purchasing equity investments.
40
On
April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T
Bank”) in the principal amount not to exceed at any one time outstanding the sum of $8,000,000, with a cumulative loan advance
amount of $18,500,000. The line of credit bore interest rate on LIBOR plus 375 basis points. SeD Maryland Development LLC was also provided
with a Letter of Credit (“L/C”) Facility in an aggregate amount of up to $900,000. The L/C commission is 1.5% per annum on
the face amount of the L/C. Other standard lender fees apply in the event the L/C is drawn down. The loan is a revolving line of credit.
The L/C Facility is not a revolving loan, and amounts advanced and repaid may not be re-borrowed. Repayment of the Loan Agreement was
secured by a $2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. On March 15,
2022, approximately $2,300,000 was released from collateral, leaving approximately $300,000 as collateral for outstanding letters of
credit. On December 14, 2023 and February 11, 2026, approximately $201,751 and $107,991, respectively, was released from collateral for
outstanding letters of credit.
On
November 13, 2023, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership, entered into two Contracts for Purchase
and Sale and Escrow Instructions (each an “Agreement,” collectively, the “Agreements”) with Century Land Holdings
of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of one of the aforementioned Agreements,
the Seller has agreed to sell approximately 142 single-family detached residential lots (the “Section 4 Agreement”) comprising
a section of a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” Pursuant to the other
Agreement, the Seller has agreed to sell 63 single-family detached residential lots (the “Alset Villas Agreement”) in the
city of Magnolia, Texas. In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of partially developed land near
Houston, Texas which was used to develop a community named Alset Villas (“Alset Villas”). Alset EHome was in the process
of developing the 63 lots at Alset Villas in 2023. The closing of the transactions described above depended on the satisfaction of certain
conditions. The sale of the first 70 lots closed on July 1, 2024 generating approximately $3.8 million and the sale of the 72 lots closed
on October 10, 2024 generating approximately $3.9 million. The sale of lots in Alset Villa project closed on December 17, 2024 generating
approximately $3.8 million.
Additionally,
the Company is entitled to receive certain developer reimbursements for the Lakes at Black Oak and Alset Villas projects.
The
management believes that the available cash on hand, available debt and equity financing are sufficient to fund our operations for at
least the next 12 months.
Summary
of Cash Flows for the Years Ended December 31, 2025 and 2024
Years Ended December 31,
2025
2024
Net cash (used in) provided by operating activities
$ (5,927,532 )
$ 5,156,047
Net cash provided by investing activities
$ 2,250,903
$ 17,468,306
Net cash provided by (used in) financing activities
$ 1,100,198
$ (21,419,083 )
Cash
Flows from Operating Activities
Net
cash used in operating activities was $5,927,532 in the year ended December 31, 2025, as compared to net cash provided by operating activities
of $5,156,047 in the same period of 2024. Purchase of trading securities was the main reason for the cash used in operating activities
during 2025. Property sales from the Lakes at Black Oak project in 2024 were the main reason for the cash provided by operating activities
in that period.
Cash
Flows from Investing Activities
Net
cash provided by investing activities was $2,250,903 in the year 2025, as compared to net cash provided by investing activities of $17,468,306
in the same period of 2024. In the year ended December 31, 2025 we invested $40,000 in investment securities, issued $2,325,489 in promissory
notes to related parties, purchased $175,464 of fixed assets, sold related party equity security investments for $4,184,575 and received
a repayment of a loan from related party of $607,281. In the year ended December 31, 2024 we invested $814,158 in investment securities,
issued $3,029,758 in promissory notes ($1,811,881 of which was to related parties) and withdrew $21,102,871 cash for redemptions.
41
Cash
Flows from Financing Activities
Net
cash provided by financing activities was $1,110,198 in the year ended December 31, 2025, compared to net cash used of $21,419,083 the
year ended December 31, 2024. Cash provided by financing activities in the year 2025 is primarily related to the issuance of Common Stock
of $2,614,983. Cash used in financing activities in the year 2024 is primarily related to the repayment of Class A Common Stock of $21,102,871
and repayment of note payable of $446,260.
Equity
Security Investments
Investment
Securities at Fair Value
The
Company commonly holds investments in equity securities with readily determinable fair values, equity investments without readily determinable
fair values, investments accounted for under the equity method, and investments at cost. Certain of the Company’s investments in
marketable equity securities and other securities are long-term, strategic investments in companies that are in various stages of development.
The
Company accounts for certain of its investments in equity securities in accordance with ASU 2016-01 Financial Instruments—Overall
(Subtopic 825- 10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) . In accordance
with ASU 2016-01, the Company records all equity investments with readily determinable fair values at fair value calculated by the publicly
traded stock price at the close of the reporting period.
Amarantus
BioScience Holdings (“AMBS”) is a publicly traded company. The Company does not have significant influence over AMBS as the
Company holds approximately 4.3% of the common shares of AMBS. The stock fair value is determined by quoted stock prices.
On
April 12, 2021, the Company acquired 6,500,000 common shares of Value Exchange International, Inc. (“Value Exchange International”
or “VEII”), an OTC listed company, for an aggregate subscription price of $650,000. On October 17, 2022 the Company purchased
additional 7,276,163 common shares of VEII for an aggregate purchase price of $1,743,734. On September 6, 2023, the Company converted
$1,300,000 of VEII loan into 7,344,632 common shares. After these transactions, the Company owns approximately 45.8% of VEII and exercises
significant influence over it. Our Chief Executive Officer, Chan Heng Fai, is also an owner of the common stock of VEII (not including
any common shares we hold). Additionally, certain members of our board of directors serve as directors of Value Exchange International.
The stock’s fair value is determined by quoted stock prices.
On
January 27, 2023, the Company and New Electric CV Corporation (together with the Company, the “Lenders”) entered into a Convertible
Credit Agreement (the “1 st Credit Agreement”) with VEII. The 1 st Credit Agreement provides VEII with
a maximum credit line of $1,500,000 with simple interest accrued on any advances of the money under the 1 st Credit Agreement
at 8%. The 1 st Credit Agreement grants conversion rights to each Lender. Each Advance shall be convertible, in whole or in
part, into shares of VEII’s Common Stock at the option of the Lender who made that Advance (being referred to as a “Conversion”),
at any time and from time to time, at a price per share equal the “Conversion Price”. In the event that a Lender elects to
convert any portion of an Advance into shares of VEII Common Stock in lieu of cash payment in satisfaction of that Advance, then VEII
would issue to the Lender five (5) detachable warrants for each share of VEII’s Common Stock issued in a Conversion (“Warrants”).
Each Warrant will entitle the Lender to purchase one (1) share of Common Stock at a per-share exercise price equal to the Conversion
Price. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant. On February 23, 2023, the Company’s
subsidiary Hapi Metaverse Inc. loaned VEII $1,400,000 (the “Loan Amount”). The Loan Amount can be converted into shares of
VEII pursuant to the terms of the 1 st Credit Agreement for a period of three years. There is no fixed price for the derivative
security until Hapi Metaverse converts the Loan Amount into shares of VEII Common Stock.
On
September 6, 2023, the Company converted $1,300,000 of the principal amount loaned to VEII into 7,344,632 shares of VEII’s Common
Stock. Under the terms of the 1 st Credit Agreement, Hapi Metaverse received Warrants to purchase a maximum of 36,723,160 shares
of VEII’s Common Stock at an exercise price of $0.1770 per share. Such warrants expire five (5) years from date of their issuance.
42
On
December 14, 2023, Hapi Metaverse entered into a Convertible Credit Agreement (“2 nd Credit Agreement”) with VEII.
On December 15, 2023, the Company loaned VEII $1,000,000. The 2 nd Credit Agreement was amended pursuant to an agreement dated
December 19, 2023. Under the 2 nd Credit Agreement, as amended, this amount can be converted into VEII’s Common Shares
pursuant to the terms of the 2 nd Credit Agreement for a period of three years. In the event that Hapi Metaverse converts this
loan into shares of VEII’s Common Stock, the conversion price shall be $0.045 per share. In the event that Hapi Metaverse elects
to convert any portion of the loan into shares of VEII’s Common Stock in lieu of cash payment in satisfaction of that loan, then
VEII will issue to Hapi Metaverse five (5) detachable warrants for each share of VEII’s Common Stock issued in a conversion (“Warrants”).
Each Warrant will entitle the Company to purchase one (1) share of VEII’s Common Stock at a per-share exercise price equal to the
Conversion Price. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant. At the time of this
filing, the Company has not converted the Loan Amount.
Our
Chairman, Chan Heng Fai and a 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, three other members of the Board of Directors of Alset Inc. are also members of the Board
of Directors of VEII (Wong Shui Yeung, Wong Tat Keung and Lim Sheng Hon, Danny). The Company currently owns a total of 21,179,275 shares
(representing approximately 45.8%) of VEII.
The
Company has a portfolio of trading securities. The objective is to generate profits on short-term differences in market prices. The Company
does not have significant influence over any trading securities in our portfolio and fair value of these trading securities are determined
by quoted stock prices.
The
Company has elected the fair value option for the equity securities noted below that would otherwise be accounted for under the equity
method of accounting. DSS Inc., HIPH World Inc. (f.k.a. American Premium Water Corporation and New Electric CV Corporation, “HIPH”),
Value Exchange International Inc., Sharing Services Global Corp. (“SHRG”) and Impact Biomedical Inc. (“Impact”)
are publicly traded companies and fair value is determined by quoted stock prices. The Company has (or had, in the case of Impact) 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 under fair value accounting.
The
Company has significant influence over DSS as we owned approximately 43.6% of the common stock of DSS as of December 31, 2025, and our
Chief Executive Officer, Chan Heng Fai, is an owner of additional common stock of DSS (not including any common or preferred shares we
hold). In addition, our Chief Executive Officer is the Chairman of the Board of Directors of DSS. Apart from Chan Heng Fai, two other
members of the Board of Directors of Alset Inc. are also members of the Board of Directors of DSS (Chan Tung Moe, our Co-Chief Executive
Officer, a son of Chan Heng Fai, and Lim Sheng Hon, Danny). The Company did not have a controlling interest and therefore the Company’s
investment would be accounted for under equity method accounting or we could elect the fair value option accounting.
The
Company has significant influence over HIPH as our Chief Executive Officer, Chan Heng Fai, is the majority owner of the common stock
of HIPH (not including any common shares we hold). The Company did not have a controlling interest and therefore the Company’s
investment would be accounted for under equity method accounting or we could elect the fair value option accounting.
The
Company has significant influence over SHRG as the Company holds approximately 29.0% of the common shares of SHRG, our Chief Executive
Officer holds a director and chairman position on SHRG’s Board of Directors and three of the directors of the Company are the directors
of SHRG. Additionally, our Chief Executive Officer is a significant stockholder of SHRG shares.
The
Company had significant influence over Impact as the Company held approximately 39.7% of the common shares of Impact as of December 31,
2024. The Company sold all its shareholding in Impact during first four months of 2025.
The
Company has elected the fair value options for the equity securities noted above that would otherwise be accounted for under the equity
method of accounting to better match the measurement of assets and liabilities in the Consolidated Statements of Operations. DSS, VEII,
SHRG and Impact are publicly traded companies and fair value of these equity investments is determined by the quoted stock prices. On
December 31, 2025 and 2024, the fair value (calculated by market trading prices on the end dates of the periods) of total held equity
stock of DSS, VEII, SHRG and Impact was $3,696,579 and $11,028,405, respectively.
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On
July 17, 2020, the Company purchased 122,039,000 shares, approximately 0.5% ownership, and 1,220,390,000 warrants with an exercise price
of $0.0001 per share, from HIPH, for an aggregated purchase price of $122,039. We value HIPH warrants under level 3 category through
a Black Scholes option pricing model and the fair value of the warrants from HIPH were $860,342 as of July 17, 2020, the purchase date
and $973 as of December 31, 2025 and 2024.
The
changes in the fair values of the investment were recorded directly to accumulated other comprehensive income (loss). Due to the inherent
uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these
investments existed.
Investment
Securities at Cost
Investments
in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes
in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on
a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss
is recognized in the consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair
value of the investment.
On
September 8, 2020, the Company’s indirect subsidiary, Hapi Robot Pte. Ltd. (f.k.a. Impact Biohealth Pte. Ltd.), acquired 1,666
shares, approximately 1.45% ownership, from Nervotec Pte Ltd (“Nervotec”), a private company, at the purchase price of $36,628.
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. As of December 31, 2024, the value of the
investment in Nervotec is $589, as the Company wrote off $37,287 of this investment. As of December 31, 2025, the value of the investment
is $0 as the Company written of the remaining balance.
On
May 31, 2021, the Company’s indirect subsidiary, UBeauty Limited, invested $19,609 in K Beauty Research Lab Co., Ltd (“K
Beauty”) for 18% ownership. 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.
On
April 25, 2024, the Company entered into a binding term sheet (the “Term Sheet”) through its subsidiary Health Wealth Happiness
Pte Ltd. (“HWHPL”) outlining a joint venture with Chen Ziping, an experienced entrepreneur in the travel industry, and Chan
Heng Fai, the Company’s Executive Chairman, as a part of the Company’s strategy of building its travel business in Asia.
The joint venture company (referred to here as the “JVC”) is known as HapiTravel Holding Pte. Ltd. The JVC was incorporated
in July 2024 and is owned by: (a) HWHPL holds 19% of the shares in the JVC; (b) Chan Heng Fai holds 11%; and (c) the remaining 70% of
the shares in the JVC are held by Chen Ziping.
On
April 23, 2025, the Company completed the sale of HWH World Inc.(“HWHKOR”) by Health Wealth Happiness Pte. Ltd. (“HWHPL”)
to AES Group Inc. (“AES”), a Korean entity. The sale was consummated under a term sheet signed on April 20, 2025, pursuant
to which the Company agreed to transfer its 100% equity interest in HWHKOR to AES. In exchange, AES agreed to issue new shares, representing
19.9% of the enlarged share capital of AES to the Company upon closing. Total of $384,356 gain was generated from this deal and recorded
in the Company’s statement of operations. The disposal of HWHKOR had immaterial effect on the Company’s consolidated financial
statements and the deconsolidation did not meet the criteria for presentation as discontinued operations under ASC 205-20.
There
has been no indication of impairment or changes in observable prices via transactions of similar securities and is still carried at a
cost.
44
Investment
Securities under Equity Method Accounting
The
Company accounts for equity investments in certain 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 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 be liable for the obligations of the investee or provide for losses in excess of the investment when imminent
return to profitable operations by the investee appears to be assured. Otherwise, the Company does not recognize its share of equity
method losses exceeding its carrying amount of the investment. Equity-method investment is reviewed for impairment by assessing if the
decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are
evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the 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 16.4% of American Medical REIT Inc. (“AMRE”),
a 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 CEO, is the executive chairman and director of AMRE. DSS, of which we own 43.6% and have significant influence over, owns 80.4%
of AMRE. Therefore, the Company has significant influence on AMRE. The Company’s share of losses from AMRE exceeded the carrying
amount of the investment, and as a result, the Company suspended recognition of additional losses. The Company will resume recognizing
its share of losses only to the extent that it subsequently becomes obligated to fund the investee’s losses or the investee returns
to profitability and the Company’s share of earnings exceeds its previously unrecognized losses.
American
Pacific Financial, Inc.
The
Company owns 36.9% of the shares of the common stock of American Pacific Financial, Inc., formerly known as American Pacific Bancorp,
Inc. (“APF”). APF is organized for the purposes of being a financial network holding company, focused on providing commercial
loans and on acquiring equity positions in (i) undervalued commercial bank(s), bank holding companies and nonbanking licensed financial
companies operating in the United States, South East Asia, Taiwan, Japan and South Korea, and (ii) companies engaged in—nonbanking
activities closely related to banking, including loan syndication services, mortgage banking, trust and escrow services, banking technology,
loan servicing, equipment leasing, problem asset management, SPAC (special purpose acquisition company) consulting, and advisory capital
raising services. The Company elected to apply the equity method accounting to its investment in APF, as the Company retains significant
influence over APF. During the year ended December 31, 2025 the investment loss was $1,812,898. During the year ended December 31, 2024
the investment loss was $3,205,094. As of December 31, 2025 and 2024, the investment in APF was $2,408,398 and $4,221,296, respectively.
Sentinel
Brokers Company Inc.
The
Company’s indirect subsidiary, SeD Capital Pte Ltd (“SeD Capital”), owns 39.8 shares (8.8%) of the Common Stock of
Sentinel Brokers Company Inc. (“Sentinel”). 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 as our CEO holds
a director position on Sentinel’s Board of Directors. Additionally, DSS, of which we own 43.6% and have significant influence over,
owns 91.24% of Sentinel. During the years ended December 31, 2025 and 2024, the investment loss in Sentinel was $107,680 and $15,013,
respectively. Investment in Sentinel was $2,070 and $109,750 at December 31, 2025 and 2024, respectively.
45
New
Energy Asia Pacific Company Limited
On
May 22, 2025, the Company entered into the Stock Purchase Agreement dated with Chan Heng Fai, pursuant to which the Company purchased
from Mr. Chan all of the outstanding shares of New Energy Asia Pacific Inc. (“NEAPI”) for a purchase price of $83,000,000
in the form of a promissory note convertible into newly issued shares of the Company’s common stock. NEAPI owns 41.5% of the issued
and outstanding shares of New Energy Asia Pacific Company Limited (“New Energy”), a Hong Kong corporation. New Energy focuses
on distributing all-electric versions of special-purpose and transportation vehicles, charging stations and batteries. During the year
ended December 31, 2025, the Company recognized its equity in loss of investee in New Energy of $212,246.
During
the year ended December 31, 2025, the Company recognized an impairment charge of approximately $30.1 million related to its investment
in New Energy. The impairment was recognized after management determined that the decline in fair value below carrying value was other-than-temporary,
based on factors including:
● delays
in the execution and commercialization of New Energy’s taxi delivery projects;
● revised
cash flow projections, including slower ramp-up and longer implementation timelines; and
● changes
in market conditions in the distributed energy sector, including broader global geopolitical
uncertainty.
The
Company valued its investment using a discounted cash flow methodology based on updated assumptions. The impairment primarily reflects delays in execution and cash flow realization, rather than a fundamental change in
business outlook.
Accordingly,
the Company reduced the carrying amount of the investment to its estimated fair value of approximately $52.7 million as of December 31,
2025.
Investment
in Debt Securities
Debt
securities are reported at fair value, with unrealized gains and losses (other than impairment losses) recognized in accumulated other
comprehensive income or loss. Realized gains and losses on debt securities are recognized in the net income in the condensed consolidated
statements of comprehensive income. The Company monitors its investments for other-than-temporary impairment by considering factors including,
but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends
and other company-specific information.
Impact
of Inflation
We
believe that inflation has not had a material impact on our results of operations for the years ended December 31, 2025 and 2024. We
cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
Impact
of Foreign Exchange Rates
The
effect of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from Singapore to the
United States and which were approximately $28 million and $30 million on December 31, 2025 and 2024, respectively, are the reason for
the significant fluctuation of foreign currency transaction Gain or Loss on the Consolidated Statements of Operations and Other Comprehensive
Income. Because the intercompany loan balances between Singapore and United States will remain at approximately $28 million over the
next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in the year 2026,
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.
Controls
and Procedures
We
are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act.
Only in the event that we are deemed to be a large accelerated filer or an accelerated filer.
Management
is responsible for the preparation and fair presentation of the financial statements included in this Report. The financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s
judgment and estimates concerning effects of events and transactions that are accounted for or disclosed.
46
Management
is also responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial
reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable data.
Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including
the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control
over financial reporting can provide only reasonable assurance with respect to financial statement presentation. Further, because of
changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
In
order to ensure that our internal control over financial reporting is effective, management regularly assesses controls and did so most
recently for its financial reporting as of December 31, 2024. This assessment was based on criteria for effective internal control over
financial reporting described in the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO)
of the Treadway Commission. In connection with management’s evaluation of the effectiveness of our Company’s internal control
over financial reporting as of December 31, 2024, management determined that our Company did not maintain effective controls over financial
reporting due to having a limited staff. This limited number of staff prevents us from segregating duties within our internal control
system; and restricts our ability to timely evaluate the accuracy and completeness of our financial statement disclosures. Management
determined that the ineffective controls over financial reporting constitute a material weakness. To remediate such weaknesses, we plan
to appoint additional qualified personnel with financial accounting, GAAP and SEC experience.
This
Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this Report.
Nasdaq
Compliance
On
May 13, 2025, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)
notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30
consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on The Nasdaq Capital Market
under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
The
notification had no immediate effect on the listing of the Company’s common stock. In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A),
the Company was given a period of 180 calendar days from May 13, 2025, or until November 10, 2025, to regain compliance with the Minimum
Bid Price Requirement.
On
July 17, 2025, the Company received notice from Nasdaq that the Nasdaq Listing Qualifications Staff had determined that the Company regained
compliance with Nasdaq’s minimum $1 bid price per share requirement. While the Company has regained compliance with the Minimum
Bid Price Requirement, there can be no assurance that the Company will be able to maintain compliance with the Minimum Bid Price Requirement
in the future.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
Not
applicable to smaller reporting companies.
47