Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References
to the “Company,” “HWH International Inc.,” “HWH,” “our,” “us” or “we”
refer to HWH International Inc. and its subsidiaries. The following discussion and analysis of the Company’s financial condition
and results of operations should be read in conjunction with the unaudited interim 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.
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 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. 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 consolidated
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.
Overview
HWH
International Inc. (“HWH”) and its consolidated subsidiaries (collectively, the “Company”) operate a food and
beverage (“F&B”) business in Singapore. The F&B business operates one café in Singapore.
The
Company is presently developing Hapi Marketplace, a business-to-consumer platform featuring diverse product categories, and Hapi Wealth
Builder, an educational program focused on wealth-building strategies. Both initiatives are being rolled out in phases, with digital
content development, partner collaborations, and regional infrastructure setup currently underway.
HWH
International Inc. was originally incorporated in Delaware on October 20, 2021 under the name Alset Capital Acquisition Corp. The Company
was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination with one or more businesses (the “Business Combination”). The Company consummated the Business Combination
on January 9, 2024 and changed its name from “Alset Capital Acquisition Corp.” to “HWH International Inc.” The
Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early
stage and emerging growth companies.
On
September 9, 2022, the Company entered into an agreement and plan of merger (the “Merger Agreement”) by and among the Company,
HWH International Inc., a Nevada corporation (the “HWH Nevada” or “Target”) and HWH Merger Sub Inc., a Nevada
corporation and a wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the Merger Agreement, the Business Combination
between the Company and the Target was effected through the merger of Merger Sub with and into HWH Nevada, with the Target surviving
the merger as a wholly owned subsidiary of the Company (the “Merger”). Upon the closing of the Merger (the “Closing”)
on January 9, 2024, the Company changed its name to “HWH International Inc.” The board of directors of the Company (i) approved
and declared advisable the Merger Agreement, the Ancillary Agreements (as defined in the Merger Agreement) and the transactions contemplated
thereby and (ii) resolved to recommend approval of the Merger Agreement and related transactions by the stockholders of the Company.
12
On
January 6, 2025, the Company announced the closing of its previously disclosed public offering of 632,500 shares of common stock,
par value $0.0001 per share (the “Shares”) (following the 1-for-5 reverse stock split; equivalent to 3,162,500 shares
pre-split) and 250,000 pre-funded warrants (following the 1-for-5 reverse stock split; equivalent to 1,250,000 warrants pre-split)
to purchase shares of common stock (“Pre-Funded Warrants”). The Shares and Pre-Funded Warrants were offered at a public
offering price of $2.00 per share and $1.9995 per Pre-Funded Warrant. The Pre-Funded Warrants were exercisable immediately upon
issuance and have an exercise price of $0.0001 per share. The gross proceeds to the Company from the offering were approximately
$1.76 million, before deducting placement agent fees and other offering expenses. Each of the amounts of warrants and shares and the
prices thereof in the foregoing paragraph are adjusted for a 1-for-5 reverse stock split of the Company’s stock split
effective on February 24, 2025.
On
November 14, 2025, the Company completed a merger pursuant to which the Delaware parent merged with and into its wholly owned Nevada
subsidiary, with the Nevada entity surviving. As a result, HWH International Inc., a Nevada corporation, succeeded to all assets and
liabilities of the former parent and became the publicly traded registrant. The transaction constituted a change in legal domicile only,
with each outstanding share converting on a one-for-one basis, and had no impact on the Company’s consolidated financial position,
results of operations, or cash flows. The Company is the successor issuer under Rule 12g-3 of the Securities Exchange Act of 1934.
Hapi
Marketplace. On November 4, 2024, the Company announced the launch of its business-to-consumer marketplace, Hapi Marketplace.
Hapi Marketplace features a selection of over forty-seven product categories including wellness, elderly care, auto accessories and more.
Launching first in the United States, we intend for Hapi Marketplace to expand in the near future to South Korea and Hong Kong, followed
by further expansion across Asia.
The
various aspects of the Hapi Marketplace will be launched in phases in different regions, each with their own timeline, depending on the
completion of logistical aspects for implementation (i.e., payment gateway systems, business licenses, banking set up, import licenses,
managerial resources, etc.) We are expanding the product range into robotics for consumer and commercial markets. As of December 31,
2025, this project was not launched yet.
Hapi
Cafés, which are, and will be, in-person, location-based social experiences, offer customers the opportunity to build
a sense of community with like-minded customers who share a potential interest in our products. The cafes are designed to operate sustainably
as standalone businesses. The cafes also seek to be an avenue to create awareness to and educate potential and existing customers about
the products and services of HWH, providing us with the chance to significantly increase our customer base as well as increase the amounts
spent by our customers on our affiliates’ products and services. Each of our cafés is a “Hapi Café.”
We opened proof-of-concept Hapi Café locations in Seoul, the Republic of Korea and Singapore in May and July 2022, respectively,
and one more opened in Seoul, the Republic of Korea in May 2024. We plan to open additional Hapi Cafés as we beta test and further
improve our business concept. We intend to grow our customer base as we grow the number of Hapi Cafés around the world. Hapi Cafes
are positioned to be integral parts of HWH’s business model. In June 2024, the Company’s decision to close the café
under Alset F&B (PLQ) Pte. Ltd. (“F&BPLQ”) was driven by the unsustainable revenue it generated. In August 2025 and
September 2025, the Company’s decision to close the café under Ketomei Pte. Ltd. (“KPL”) and Hapi Café
Korea Inc. (“HCKI”), respectively, both were driven by the unsustainable revenue they generated. We believe it is more strategic
to refocus our efforts and resources on other F&B business ventures that have greater growth potential. On September 10, 2025, Alset
F&B Holdings Pte. Ltd., (the “Seller”), a Singapore subsidiary of the Company, entered into a sale and purchase agreement
(the “Sale and Purchase Agreement”) with Alset International Limited (the “Buyer”), pursuant to which the Seller
agreed to sell 70% of the outstanding shares of its subsidiary, Alset F&B One Pte. Ltd. (“Alset F&B One”) to the
Buyer in exchange for S$218,941 Singapore Dollars (equal to approximately $170,754 U.S. Dollars). Alset F&B One was incorporated
in Singapore on April 10, 2017, and operates a cafe in Singapore. It generated approximately $470,000 in revenue in 2024. Following this
sale, the Seller continues to own 20% of Alset F&B One as of December 31, 2025.
13
Hapi
Wealth Builder seeks to provide participants the opportunity to attend courses, workshops, and coaching sessions in person, fostering
a collaborative learning environment for those dedicated to learning investment in equities and wealth-building strategies. The team
has been diligently producing digital content for Hapi Wealth Builder and working to collaborate with the right partners to launch the
program and make it available to members. Hapi Wealth Builder will leverage the wealth of knowledge and experience of its leaders to
make wealth building accessible and effective for its members. Our unique community-centric approach will offer members tools for making
informed financial decisions while creating pathways for sustained growth.
On
October 31, 2024, we announced that the Company scheduled the launch of Hapi Wealth, a program dedicated to providing comprehensive education
in equity investment and wealth-building strategies. We are targeting a rollout in selected regions later in 2026 as well.
To
further support its mission, Hapi Wealth is opening its China headquarters, designed as a conducive environment for individuals to participate
in tutorials and workshops. The hub will offer participants the opportunity to attend courses, workshops, and coaching sessions in person,
fostering a collaborative learning environment for those dedicated to learning investment in equities and wealth-building strategies.
Our
Revenue Model
Our
total revenue for the years ended December 31, 2025 and 2024 was $866,926 and $1,253,577, respectively. Our net loss for the years ended
December 31, 2025 and 2024 was $2,657,929 and $2,765,767, respectively.
We
currently recognize revenue from food and beverage sales, which accounted for approximately 100% of revenue in the years ended December
31, 2025 and 2024.
From
a geographical perspective, we recognized 8% and 92% of our total revenue in the year ended on December 31, 2025, in South Korea and
Singapore, respectively, and 6% and 94% of our total revenue in the year ended on December 31, 2024, in South Korea and Singapore, respectively.
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 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 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.
14
Summary
of Critical Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
Company’s consolidated financial statements and related notes include all the accounts of the Company and its wholly owned subsidiaries.
They have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S.
GAAP”). All intercompany transactions have been eliminated in consolidation.
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 credit losses, recoverability and useful lives of property, plant and equipment, the valuation allowance
of deferred taxes, contingencies, and equity compensation. Actual results could differ from those estimates.
Revenue
Recognition and Cost of Revenue
Product
Sales: The Company’s performance obligation is to transfer ownership of its products to its customers. The Company generally
recognizes revenue when a product is delivered to the customer. Revenue is recorded net of applicable taxes, allowances, refund or returns.
The Company receives the net sales price in cash or through credit card payments at the point of sale.
If
any customer returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for such returned
product. Allowances for product returns are provided at the time the sale is recorded. This accrual is based upon historical return rates
for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months
following the original sale. Product returns for the years ended December 31, 2025, and 2024 were approximately $0.
Food
and Beverage: The revenue received from food and beverage business in the years ended December 31, 2025, and 2024 was $866,926 and
$1,253,577, respectively.
Cost
of Revenue: Cost of revenue consists of cost of procuring finished goods from suppliers and related shipping and handling fees.
Results
of Operations
Summary
of Statements of Operations for the Years Ended December 31, 2025 and 2024
Years Ended
December 31,
2025
2024
Revenue
$ 866,926
$ 1,253,577
Cost of revenue
407,199
651,721
Operating expenses
3,648,405
3,186,287
Other (income) / expenses
(578,221 )
181,336
Provision for income taxes
47,472
-
Net loss
$ 2,657,929
$ 2,765,767
15
Revenue
Revenue
was $866,926 and $1,253,577 for the years ended December 31, 2025 and 2024, respectively. Word of mouth, social media presence, and the
availability of meeting spaces are significant drivers of our revenue and revenue potential. Our revenue decreased in 2025 due to the
cessation of operations of cafes located in Singapore and Korea in August and September 2025, respectively.
Cost
of revenue
Cost
of revenue decreased from $651,721 in the year ended December 31, 2024 to $407,199 in the year ended December 31, 2025. The decrease
is a result of the cessation of operations of cafes located in Singapore and Korea in August and September 2025, respectively.
The
gross margin decreased from $601,856 in the year ended December 31, 2024 to $459,727 in the year ended December 31, 2025. The decrease
in gross margin is a result of the cessation of operations of cafes located in Singapore and Korea in August and September 2025, respectively.
Operating
expenses
Operating
expenses increased from $3,186,287 in the year ended December 31, 2024 to $3,648,405 in the year ended December 31, 2025, due to the
increase in general and administrative expenses from $2,805,890 in the year ended December 31, 2024 to $3,531,757 in the year ended December
31, 2025. The increase in general and administrative expenses in 2025 compared to 2024 was primarily due to the cost of a bonus of one
million shares of our common stock issued in 2025.
Other
non-operating (income) expense
Other
non-operating expenses was $181,336 in the year ended December 31, 2024 and non-operating income was $578,221 in the year ended
December 31, 2025. The increase in non-operating income is mainly due to a decrease in unrealized loss on convertible note
receivable and warrants – related party from $379,887 to $146,550 in the years ended December 31, 2024 and 2025, and $383,667
gain on disposal of subsidiaries in the years ended December 31, 2025.
Net
loss
Net
loss decreased from $2,765,767 to $2,657,929 in the years ended December 31, 2024 and 2025, respectively.
16
Liquidity
and Capital Resources
Our
cash has decreased from $4,341,746 as of December 31, 2024 to $2,085,918 as of December 31, 2025. Our liabilities decreased from $3,531,523
at December 31, 2024 to $1,883,133 at December 31, 2025. Our total assets have decreased from $6,408,722 as of December 31, 2024 to $4,567,858
as of December 31, 2025.
In the year ended December
31, 2025, we incurred a net loss, a loss from operations and negative cash flow from operating cafés during the period. These factors
raise substantial doubt about our ability to continue as a going concern.
The
Company believes that the available cash in the Company’s bank accounts, anticipated cash from operations, and financing availability
from related parties are sufficient to fund our operations for at least the next 12 months. The Company’s capital requirements
for the planned expansion are based on, among other items, geographical specific property costs, team requirements, and marketing steps
needed. Our expansion consists of plans to take over leases of existing Hapi Cafes we currently do not own, as we look to add more Hapi
Cafes over the next two years. There is no guarantee that we will be able to execute on our plans as laid out above.
On
April 24, 2024, the Company entered into a Credit Facility Agreement (the “Agreement”) with Alset Inc., a Texas corporation
and the Company’s indirect, majority stockholder, pursuant to which Alset Inc. has provided the Company a line of credit facility
(the “Credit Facility”) which provides a maximum, aggregate credit line of up to $1,000,000. As of December 31, 2025, there
are no outstanding amounts related to the Credit Facility, as the debt with Alset Inc. was converted to equity on September 24, 2024.
The remaining credit of $700,000 is available for draw as on December 31, 2025.
Pursuant
to the Agreement, the Company may request an advance (each, an “Advance”) on the Credit Facility. Each advance shall bear
a simple interest rate of three percent (3%) per annum. Each Advance and all accrued but unpaid interest shall be due and payable at
the first (1st) anniversary of the effective date of the Agreement. HWH may at any time during the term of the Agreement prepay a portion
or all amounts of its indebtedness without penalty. Each Advance shall not be secured by a lien or other encumbrance on any HWH assets,
but shall be solely a general unsecured debt obligation of the Company.
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern and do not contain any adjustments
that might be required should the Company be unable to continue as a going concern.
The
Company has obtained letters of financial support from Alset Inc., an indirect owner of the Company. Alset Inc. committed to provide
any additional funding required by the Company and would not demand repayment through twelve months from the issuance of these consolidated
financial statements.
Summary
of Cash Flows for the Years Ended December 31, 2025 and 2024
Years
Ended December 31,
2025
2024
Net
cash used in operating activities
$
(1,750,290
)
$
(1,819,262
)
Net
cash (used in) / provided by investing activities
$
(1,188,686
)
$
20,452,029
Net
cash provided by / (used in) financing activities
$
934,714
$
(15,597,681
)
Cash
Flows from Operating Activities
Net
cash used in operating activities was $1,750,290 in the year ended of December 31, 2025, as compared to net cash used in operating activities
of $1,819,262 in the same period of 2024. The decrease of cash used in operating activities in the year ended December 31, 2025 was due
to gain on disposal of subsidiary of $383,667 generated during disposal of HWH World Inc, and $292,890 in foreign exchange transaction
gain.
Cash
Flows from Investing Activities
Net
cash used in investing activities was $1,188,686 in the year of December 31, 2025, as compared to net cash provided by investing activities
of $20,452,029 in the same period of 2024. In the year ended December 31, 2025 we paid $780,000 for convertible note receivable –
related party, $280,000 paid for the loans to related party, and $85,872 for purchase of marketable securities. In the
year ended December 31, 2024 we paid $30,394 for purchases of property and equipment, $850,000 for convertible note receivable –
related party, $14,345 for investment in joint venture, $21,102,871 cash was withdrawn from Trust Account for redemptions and $243,897
cash withdrawn from Trust Account was available to the Company.
Cash
Flows from Financing Activities
Net
cash provided by financing activities was $934,714 in the year ended December 31, 2025, compared to net cash used in financing activities
of $15,597,681 in the same period of 2024. In the year ended December 31, 2025 we received $1,409,983 from issuance of common stock and
warrants and repaid $477,643 of note payable. In the year ended December 31, 2024 we received $2,330,252 from a related party, and repaid
$21,102,872 of class A common stock.
17
Nasdaq
Compliance
On
March 7, 2024, we received notice from Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, because the market value of our
common stock had been below $50,000,000 for the prior 37 consecutive business days, we no longer complied with the minimum market value
of listed securities (the “MVLS”) requirement for continued listing on the Nasdaq Global Market under Rule 5450(b)(2)(A)
of Nasdaq Listing Rules.
Nasdaq’s
notice had no immediate effect on the listing of our common stock on the Nasdaq Global Market. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(C),
we had been provided an initial compliance period of 180 calendar days, or until September 3, 2024, to regain compliance with the MVLS
requirement. To regain compliance, the Company’s MVLS was required to be at least $50,000,000 or more for a minimum of ten consecutive
business days prior to September 3, 2024. In that regard, on September 9, 2024, the Company received a notice from the Staff that the
matter of the MVLS deficiency was to be considered at the Company’s upcoming appeal with the Nasdaq Hearings Panel.
On
February 22, 2024, the Nasdaq Staff (the “Staff”) notified the Company that for the previous 30 consecutive trading days,
the market value of its publicly held shares had been below the minimum $15,000,000 required for continued listing as set forth in Listing
Rule 5450(b)(2)(C) (the “Rule”). Therefore, in accordance with Marketplace Rule 5810(c)(3)(D), the Company was provided 180
calendar days, or until August 20, 2024, to regain compliance with the Rule. In that regard, on August 27, 2024, the Company received
a notice from the Staff that the Company will be delisted from the Nasdaq Global Market, unless the Company requested an appeal of this
determination by September 3, 2024.
The
Company presented its compliance plan to the Panel at a hearing on October 15, 2024. On October 21, 2024, the Company received a notice
from the Panel granting the Company an extension to phase down its securities to the Nasdaq Capital Market and demonstrate compliance
with the market value of its publicly held shares and Stockholders’ Equity requirements as set forth in Nasdaq Listing Rules 5550(a)(5)
and 5550(b)(1).
On
September 4, 2024, the Company received written notice (the “Notice”) from the Listing Qualifications Staff of Nasdaq notifying
the Company that for the prior 30 consecutive business days prior to the date of the Notice, the Company’s bid price was below
the minimum $1 required for continued listing on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid
Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq provided the Company with 180 calendar days,
or until March 3, 2025, (the “Compliance Date”), to regain compliance with the Bid Price Requirement.
On
February 18, 2025, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation
with the Delaware Secretary of State to effect a 1-for-5 reverse stock split (the “Reverse Stock Split”). The Reverse Stock
Split became effective as of market open on February 24, 2025.
On
March 10, 2025, the Company received written notice (the “Compliance Notice”) from Nasdaq informing the Company that it has
regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Capital Market maintain a
minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from February 24, 2025 to March 7, 2025,
the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained
compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed. The Company remains listed on the Nasdaq Capital
Market.
Contractual
Obligations
As
of December 31, 2025, we did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase
obligations or long-term liabilities.
Underwriting
Agreement
On
February 3, 2022, the Company paid a cash underwriting discount of $0.20 per Unit, or $1,725,000.
18
In
addition, the underwriters, D. Boral Capital, LLC (“D. Boral Capital”) (formerly known as EF Hutton, LLC), were
entitled to a deferred fee of $0.35 per Unit, or $3,018,750 in the aggregate, however, on December 18, 2023, the Company entered
into a Satisfaction and Discharge of Indebtedness Agreement in connection with the Underwriting Agreement, under which in lieu of
the Company tendering the full amount, the underwriters accepted a combination of $325,000 in cash paid upon the closing of the
Business Combination, 149,443 shares of the Company’s common stock and a $1,184,375 promissory note as full satisfaction. This
agreement was effective at the closing of Business Combination on January 9, 2024. Additionally, the Company has granted D. Boral Capital
an irrevocable right of first refusal (the “ROFR”) to act as the sole investment banker, sole book-runner, and/or sole
placement agent, at D. Boral Capital’s sole discretion, for each and every future public and private equity and debt offering,
including all equity linked financing for a period commencing on the date of the satisfaction and ending twenty-four (24) months
after the closing of the Business Combination.
Merger
Agreement
As
previously disclosed, on August 1, 2023, the Company held the Special Meeting, at which the Company’s stockholders considered and
adopted, among other matters, a proposal to approve the Business Combination.
On
September 9, 2022, the Company entered into an agreement and plan of merger (the “Merger Agreement”) by and among the Company,
HWH International Inc., a Nevada corporation (the “HWH Nevada” or “Target”) and HWH Merger Sub Inc., a Nevada
corporation and a wholly owned subsidiary of the Company (the “Merger Sub”). Pursuant to the Merger Agreement, the Business
Combination between the Company and the Target was effected through the merger of the Merger Sub with and into HWH Nevada, with the Target
surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). Upon the closing of the Merger (the “Closing”)
on January 9, 2024, the Company changed its name to “HWH International Inc.”
The
transaction has closed, as all closing conditions referenced in the Merger Agreement have either been met or waived by the parties. Certain
closing conditions that have been waived by the parties, pursuant to the Merger Agreement include Section 8.1(i), which states “the
aggregate cash available to the Company at the Closing from the Trust Account (after giving effect to the redemption of any shares of
the Company’s Class A Common Stock in connection with the Company’s Proposals, but before giving effect to (i) the payment
of the Outstanding Alset Transaction Expenses, and (ii) the payment of the Outstanding Company Transaction Expenses), shall equal or
exceed Thirty Million dollars ($30,000,000); and 8.1(j), which states “upon the closing, the Company shall not have redeemed shares
of the Company’s Class A Common Stock in the Offer in an amount that would cause the Company to have less than $5,000,001 of net
tangible assets (as determined in accordance with Rule 3a51-1(g)(1) under the Exchange Act).”
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 or December 31,
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
effects of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from Singapore to South
Korea and which were approximately $0.7 million and $0.9 million on December 31, 2025 and December 31, 2024, respectively, are the reason
for the fluctuation in foreign currency transaction gains or losses which are included in the Consolidated Statements of Operations and
Other Comprehensive Income. Because the intercompany loan balances between Singapore and South Korea will remain at approximately $1
million over the next year, we expect this fluctuation of foreign exchange rates to still impact the results of operations in 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.
19
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.
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 would we be required to comply with the
independent registered public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as
defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to
other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent
registered public accounting firm attestation requirement.
Management
is responsible for the preparation and fair presentation of the financial statements included in this prospectus. 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.
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, 2025. 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, 2025, management determined that the following issues constitute as material weakness:
●
The
Company has limited accounting personnel, and as such, is unable to properly segregate duties relating to the Company’s internal
controls over financial reporting.
●
Well-defined
accounting policies and procedures have not been established and many financial close procedures, including period-end review and
reconciliations, did not occur on a timely basis or failed to identify material adjustments.
This
prospectus 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 prospectus.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise
required under this item.
20